China poised for first time to attract more venture capital than US for early-stage start-ups in 2018

2018 is likely to go down as the “Year of the Red Unicorns,” when for the first time China beats the US in attracting the most global venture capital for early-stage start-ups, private equity data provider Preqin said.

Already in the first half of the year, China outpaced the US in venture capital for promising privately held companies worth at least US$1 billion, raising US$56 billion versus US$42 billion, according to “The Year of the Red Unicorns” study by Preqin and graduate business school INSEAD.

China is home to some of the hottest unicorns in the world, sparking multibillion-dollar funding rounds this year for companies such as Ant Financial, bike-sharing start-up Mobike and Ping An Healthcare. Five of the world’s top 10 most valuable unicorns are Chinese.

The Preqin-INSEAD study tracks 321 unicorns, of which one third – or 98 – were Chinese and half – or 162 – were US. This means that, despite fewer in number, China’s unicorns tend to be highly valued by their investors.

“The success of the red unicorns has spurred a culture of entrepreneurship in China, inspiring millions of young Chinese to follow suit [as they are] encouraged by government efforts to support innovation and entrepreneurship,” the report said.

The study comes out at a dramatic moment when the world is witnessing a flare-up between China and the US that is putting a spotlight on their rivalry in next generation tech innovation. The chief financial office of Chinese telecom giant Huawei has been detained in Canada over US fraud allegations that she covered up her company’s links to a firm that tried to sell equipment to Iran in defiance of sanctions.