Venture interest in Chinese companies remains muted after slow 2022

Welcome to the second quarter, friends. It’s time to take stock of just what went down in the first three months of the year, which means a deluge of venture capital data and yet another earnings cycle.

I want to start our formal Q1 2023 venture lookback with China. PitchBook recently dropped some numbers relating to venture capital funding in China for 2022, and I’ve augmented it with a quick scan of Chinese Q1 data from the same source.

The resulting picture is one of a country that’s seeing markedly smaller venture capital investments at a slower pace than has been the case for a few years.


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Early 2023 data does little to dispel that impression.

In the coming days, we’ll carve into global venture data and dig deeper into what’s happening in Europe, North America, Asia and Africa. Today, let’s focus on China, which is replete with tech companies popular outside its borders, and its economy, which is still finding its footing in the wake of erstwhile-draconian COVID restrictions. To work!

Steeper than the Streif

Startups in the country raised $69.5 billion last year, down sharply from the $136 billion recorded in 2021, according to PitchBook’s Greater China 2022 digest. That was also the country’s lowest figure since 2017; it’s even less than what the country racked up in 2016, for reference.

In contrast, 2022 saw venture tallies in the United States falling from 2021’s highs, but still making it the second-best ever 12 months for the U.S. China, it seems, is seeing a sharper decline in overall funding activity than TechCrunch’s home market.

Back to China: Deal volume declined along with dollar volume last year from 7,486 venture rounds in 2021 to 6,186 rounds last year. Unlike the value of those deals, the number of deals closed was slightly better, besting figures from 2019 and 2020, for example.

Why are Chinese venture capital numbers falling? It’s partly because VCs themselves are not raising as much money as they used to. According to PitchBook, there were just 273 Chinese funds raised last year, for a total of $44.5 billion. That’s markedly less than the 775 funds in 2021, which raised $90.8 billion. Both years’ results were off all-time highs for venture capital, which set records in China back in 2017, when 1,238 funds raised $115.7 billion.

For China’s VCs, last year was therefore a letdown compared to 2021, and an even larger disappointment when compared to recent local maximums. Fewer dollars over time will yield less investment over time, meaning that won’t be a huge shock to see lower total venture investment in 2022 and, perhaps, 2023.

This is when we put on our gumshoes and look ahead of PitchBook’s official results. A quick and dirty pull of PitchBook data this morning indicates that Chinese venture capital results in the first quarter are going to be loosely on par with recent periods. There is no recovery in sight, in other words, from China’s recent venture capital troubles.

On one hand, that’s not so good. On the other, it could be worse.

Another issue facing China is declining international interest in investing in the country. PitchBook notes that in 2021, some 17% of deals in the country included dollars from outside the country. That figure slipped to 15.1% last year, which is around the lowest it’s been since 2019. If that figure had ticked up in 2022, we might have been able to argue that perhaps extra-Chinese capital could boost the country’s companies this year. That makes it harder to draw many bullish conclusions.

In a country busy emerging from a period of serious economic impediments and whose government is making some overtures to engender business confidence, the lackluster venture results of 2022 and what we can see of 2023 show how much work there is yet to do to rebuild its startup momentum.

The Chinese government has shifted emphasis away from its digital economy and toward more hard-science work, like chip manufacturing. Perhaps we need to dive more deeply into China’s most recent data to get the fullest picture of what’s going on inside its venture ecosystem, to avoid mistaking the aggregate view as complete.

Still, for our first real look back at the start of the year, the data thus far is not incredibly encouraging.