Venture capital investment in the Asia-Pacific region fell to its lowest level in more than a decade last quarter, with a 32% drop to US$12.9 billion, according to a report by KPMG. This decrease reflects weaker activity in key markets such as China, India, and Japan, with the total number of deals shrinking by 15% to 2,149. In contrast, venture capital investments in the United States surged to US$91.5 billion, capturing 72% of the global total, driven by substantial investments in artificial intelligence (AI) companies.
The US saw record-breaking deals, including a US$40 billion investment in Microsoft-backed OpenAI, amid the ongoing AI race. Meanwhile, venture capitalists in Asia-Pacific became more cautious, with geopolitical tensions exacerbated by the looming threat of a tariff war under a potential return of US President Donald Trump. Trump’s April 2 announcement of reciprocal tariffs, particularly targeting China, increased uncertainty in the market, which led to a slowdown in investments.
China was hit hardest, with venture capital funding plunging 45% to US$6 billion. Other major markets also saw declines, though less severe: India’s funding dropped 8% to US$2.4 billion, and Japan saw an 18% decrease to US$900 million. However, Singapore stood out as the region’s bright spot, with venture capital investments almost doubling to US$1.7 billion, driven by a US$1.2 billion investment in data-center operator DayOne.
Despite the caution in overall investment, AI remained a key area of interest for investors in Asia. However, deal sizes were smaller compared to the US, where companies like Anthropic and Infinite Reality raised billions. For example, Chinese companies Neolix Technologies and Univista each secured US$137 million, while Hong Kong-based InSilico Medicine raised US$100 million.
Exit activity across the region remained sluggish, totaling just US$6.6 billion, the lowest since 2015. This was attributed to a delayed recovery in the initial public offering (IPO) market, as investors remained hesitant. With the IPO market recovery pushed further into the future, many companies may turn to mergers and acquisitions as a more stable exit strategy. As a result, venture capital firms may need to adjust their investment priorities in the coming months.
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