- China, along with the US, has dominated global venture capital allocation for years.
- New data indicates this is on the wane.
- An analyst told Insider this is because Chinese startups are now “post-venture” but also impacted by geopolitical tensions.
- See more stories on Insider’s business page.
Venture capital investment into China may have peaked, according to new data from Dealroom and Sifted.
The country traditionally dominates venture capital investment alongside the US, but the “Startup cities in the Entrepreneurial Age” report shows China’s share has been shrinking annually since 2016.
You can see the change in the chart below:
We’re only halfway through the year, but China’s share of global VC currently stands just above 10%.
In 2020, its share was 17.3%.
And at its peak in 2016, its share stood above 30%.
The trend for 2021 looks to be one of decline once again.
There may be a number of factors at work.
The US has, particularly since the Trump administration, began scrutinizing incoming investment from China into its domestic tech firms. That freeze in relations may also be impacting capital flow the other way, to some extent.
“Geopolitical tensions have impacted the international growth plans of Chinese startups, as well as inward investment,” Dealroom CEO Yoram Wijngaarde told Insider, though he added that “major VC players like Sequoia continue to hunt for Chinese opportunities with teams on the ground.”
China may also be currently experiencing fewer mega-rounds, with firms that would have been early- or growth-stage five or six years ago — such as TikTok parent ByteDance, ride hail giant Didi Chuxing, and group commerce firm Pinduoduo — now established giants who don’t need to raise big venture capital rounds.
“While capital deployment in China peaked a few years ago, startup value has boomed,” said Wijngaarde. “A number of major of business-to-consumer players have consolidated their positions, reaching post-venture maturity.”
The rise of Europe
The other change reflected in the graph is increasing venture capital allocation to Europe.
The bloc now commands above 18% of all VC funding in 2021 so far. In 2020, the figure was 14.8%, and in 2011 was below 10%.
That is reflected in anecdotal evidence gathered by Insider, with founders and local VC players noting an influx of capital to continent, most notably from the US.
The US still commands the lion’s share of VC funding. US startups accounted for 51.9% of venture capital allocation in 2020. The rate stands at 52.6% in 2021 so far.
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