There’s a lot less money flowing around in Asia’s private markets. High interest rates, geopolitical tensions, and weakness in China, the region’s largest and most important economy, have crimped risk appetites across venture capital firms.
2024 proved to be even worse. Just over 27% all deals happened in Asia last year, the lowest share in over a decade, according to the Q4 2024 PitchBook Global Venture First Look released Tuesday.
Asian deal activity is down 42% compared with peak levels in 2021. By comparison, global deal activity fell 37% over the same period.
The global market posted mixed results in 2024, according to PitchBook. The value of all global VC-backed deals in 2024 was $368.5 billion, a 5% increase from the year before. But VC fundraising declined by 20% to hit $170 billion, a level not seen since 2016.
Trouble in China
China, which traditionally drives half of Asia-Pacific deal activity, saw a “material decline,” in 2024, according to Kyle Stanford and Nalin Patel, lead venture capital analysts for PitchBook. The two blame China’s struggling economy, as well as geopolitical tension with Washington, which has “curtailed activity by U.S.-headquartered firms.”
Washington has steadily increased the pressure on China’s tech sector with a series of new regulations, including export bans on advanced chips and chipmaking equipment and—perhaps most concerning for investors—a ban on U.S. investment into advanced Chinese technology, like AI and quantum computing.
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Some high-profile venture capital firms, like Sequoia Capital and GGV Capital, have since split into separate U.S.- and Asia-based organizations, in part owing to these geopolitical tensions.
China’s sluggish economy is making things worse. Weak consumption, as well as leftover jitters from Beijing’s crackdown on the tech sector in 2021 and 2022, is hurting investor confidence. Even China funds with money to spare are reportedly forced to look abroad, including in the U.S., for opportunities.
Chinese officials in places like Guangdong province are now proposing a new term—“bold capital”—to “invest early, invest in smaller projects, and focus on technology,” according to the South China Morning Post.
But it’s not just China
Southeast Asian markets are also struggling with a lack of funding and exit opportunities. Southeast Asia as a whole only had 121 IPOs last year. Singapore, the region’s financial hub, had just four. Southeast Asian startups are instead looking to U.S. markets for their public debuts.
But even those exits don’t always work out. In December, Singapore-based property platform PropertyGuru was delisted from the New York Stock Exchange, after a $1.1 billion deal to take the company private from EQT Private Capital Asia. PropertyGuru debuted via a special purpose acquisition company (SPAC) in 2022, with a valuation of $1.8 billion.
PitchBook estimates that just under a fifth of VC-backed exits in 2024 came from Asia-based companies. “Many markets are still too young to develop a healthy exit environment,” Stanford and Patel wrote.
Asia’s poor record of exits had a knock-on effect on fundraising. Last year was the “lowest year for new commitments” since 2018, according to Stanford and Patel.
PitchBook points to at least one bright spot in Asia: Japan, where “many IPOs within the country have helped drive returns to investors.” The country’s stock markets boomed in 2024, as the end of years of deflation and policies to support shareholder value sent shares soaring to levels not seen since Japan’s boom times in the 1980s.