Greater China fundraising slows in Q1 2022 as PE-VC interest in megadeals wanes

Startup financing in Greater China got off to a slow start in 2022 as geopolitical uncertainties and the COVID-induced economic slowdown resulted in volatile stock markets that made investors apprehensive about exits.

Privately-held companies headquartered in Greater China — i.e., mainland China, Hong Kong, Macau, and Taiwan —raised a combined $12.3 billion from 363 deals in the first three months of this year. Quarterly deal value reduced by 46.9% from $23.2 billion in the previous quarter, and it also represented a sharp decline of 50% in comparison with the $24.1 billion recorded in Q1 2021.

Exits through initial public offerings (IPOs) remain difficult for most venture investors, dampening appetite for investments in late- to pre-IPO-stage deals.

Globally, 321 IPOs raised $54.4 billion in Q1 2022, with IPO volume falling 37% and the IPO proceeds down 51% year-on-year (YoY), according to Ernst & Young. Facing market volatility, many startups are reconsidering their listing plans and fundraising strategies, potentially leading to hesitation by risk-averse investors.

“We always think exits will come naturally alongside the development of our portfolio companies… The governments in China and the US are both making concessions in attempts to resolve disputes in listing regulations,” said Wei Cao, partner, BlueRun Ventures China.

Megadeals, i.e. deals worth $100 million or more, underwent a drop from the previous quarter as many investors paused signing off on big cheques initially planned for pre-IPO companies.

Q1 2021 booked the completion of 35 megadeals raising approximately $6.4 billion in total. The number of megadeals decreased by 35.2%, while the total capital raised more than halved from $15.9 billion as compared with Q4 2021. 

The past two quarters turned out to be a difficult period for startups seeking to attract megadeal investors. In Q4 2021, the number of megadeals had declined to 54 from 69 in Q3.

There were no $1 billion deals in Greater China in Q1 2022, whereas there were four such deals in the previous quarter.

Investors’ retained interest in early-stage deals was the silver lining of the market slowdown. Series A continued to be the most favoured funding stage, especially by investors behind startups across the fields of semiconductor, biotech, pharmaceuticals, software, and consumer products where nascent players are actively raising capital to fund their early product R&D. 

The earlier the funding stage, the more active the dealmaking scene. As Series A topped at 189 deals, Series B ranked second with the completion of 81 investments. It was followed by Series C, Series D, and Series E, which booked 38 deals, 14 deals, and six deals, respectively.

The Greater China Deal Review: Q1 2022 report has extensive data on:

  • Top PE-VC deals of Q1 2022
  • Top sectors that attracted investors
  • Insights from prominent investors on the fundraising scene

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