China’s ‘easy’ money days over as value of venture capital deals plunges 67.5 per cent in January
- Investments for the month totalled US$4.3 billion, representing a 67.5 per cent year-on-year slide and 31.7 per cent month-on-month slump
- Some see the slump as a necessary ‘correction’ amid tighter regulation and slowing economic growth
The Chinese venture capital market collapsed in January, with both the value and number of deals down more than 60 per cent year on year according to new data, though some see the slump as a necessary “correction” amid tighter regulation and slowing economic growth.
Investments last month totalled 29.4 billion yuan (US$4.3 billion), representing a 67.5 per cent year-on-year slide and 31.7 per cent month-on-month slump, according to a report released Monday by China-based researcher Zero2IPO.
A similar year-on-year fall was seen in the total number of deals, which fell 63.5 per cent to 286.
More than half of the investment deals last month were for early-stage, series A and B financing rounds, with the hottest targets being business services instead of the previously dominant consumer sector, according to a separate report by Zero2IPO.
The easy money is now over, according to Joe Tsai, Alibaba Group’s executive vice-chairman. “Entrepreneurs [in China] had it too easy raising gigantic billion-dollar rounds of capital and multibillions in valuation,” Tsai said at the Thomson Reuters Breakingviews Predictions 2019 event on Friday. “[A correction] will happen and it’s healthy.” Alibaba owns the South China Morning Post.