Billion-dollar deals drive Q1 startup funding in Greater China to $20.1b

Billion-dollar deals drive Q1 startup funding in Greater China to $20.1b

Shanghai, China. Photo by Hyunwon Jang on Unsplash

Fundraising by Greater China startups hit a two-year high in the first quarter of 2024, a sign that bodes well for the ailing private investment landscape plagued by the retreat of US investors, prolonged geopolitical risks, and macro market uncertainties.

Capital raised by startups headquartered in mainland China, Hong Kong, Taiwan, and Macau reached $20.1 billion in Q1, up 86.7% quarter on quarter (QoQ), according to the latest report from DealStreetAsia – DATA VANTAGE. However, the deal volume in Q1 dropped 7.5% from the previous quarter, partly due to China’s week-long Lunar New Year holiday in February.

Startup fundraising rose by 36.6% year over year, while the deal count was nearly on par with the same period in 2023, per Greater China Deal Review: Q1 2024.

Funding raised by Greater China-based startups per quarter

A paradigm shift that has been underway in recent years grew more prominent in the quarter as China’s state-backed investors took an even more dominant position in tech innovations and startup funding. All of Q1’s 10 most active investors, including Addor Capital, CAS Star, and China International Capital Corp (CICC), are controlled or backed by the state.

Boosted by billion-dollar deals, mega deal value in Q1 crosses $14.6b

Mega deals, defined as deals worth at least $100 million, raked in over $14.6 billion in total to account for 72.8% of the total proceeds raised in the Jan-March period.

The proceeds from mega deals in Q1 almost tripled from the previous quarter, mainly due to three billion-dollar investments completed in March. The top fundraiser was Chinese real estate major Dalian Wanda’s shopping mall operation unit, which raised a whopping $8.3 billion from a consortium led by PAG.

The other two billion-dollar fundraisers were ChangXin Technology Group, the holding firm of ChangXin Memory Technologies (CXMT), which was in the process of raising almost 10.8 billion yuan ($1.5 billion), and premium electric vehicle (EV) brand IM Motors, with its 8 billion yuan ($1.1 billion) Series B round.

19 mega deals account for 72.8% of total financing in Q1

However, at 19, the number of mega deals declined by 9.5% sequentially to hit its lowest since Q1 2020.

Amid a challenging exit environment and Beijing’s move to tighten scrutiny of onshore IPOs, big-ticket fundraising by late-stage and IPO-ready companies may continue to be tepid in the following quarters.

Onshore IPO market plummets, despite recovery of US listings

IPOs by Greater China companies continued a three-quarter downward slide in the first quarter. A total of 37 IPOs raised approximately $3.3 billion in Q1, marking five-year lows for both the number of listings and the total proceeds raised.

The number of IPOs was down 37.3% sequentially, while the total proceeds more than halved.

The onshore IPO market in mainland China is expected to slow considerably in 2024 due to tightened listing rules. This has led to companies scrapping their listing plans in droves, with some turning to offshore markets such as Hong Kong and New York.

Chinese IPOs in the US maintained their recovery path in Q1, but geopolitical risks and uncertainty over the US interest rate hike cycle continue to weigh on sentiment.

Chinese firms completed five small-cap US IPOs in the quarter, compared to three in the previous quarter. However, Q1’s aggregate IPO proceeds of $36 million were only one-fourth of the $144 million raised in Q4 2023.

IPO activity by Chinese firms drops to five-year low in Q1

Source: Dealogic; DealStreetAsia – DATA VANTAGE

The Greater China Deal Review: Q1 2024 report has extensive data on:

  • Quarterly and yearly startup funding trends
  • Top deals of Q1 2024
  • Most favoured industries by venture investors
  • Top IPOs by Greater China firms in Q1 2024 and pending large-cap IPOs
  • Insights from prominent China-focused private market investors

The report is available exclusively to DealStreetAsia–DATA VANTAGE subscribers. Subscribe/upgrade your subscription now to access our entire set of reports. Still not sure? Opt for a one-month trial for only $208.

Edited by: Deepshikha Monga

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief
Subscribe to Newsletter

This is your last free story for the month. Register to continue reading our content