Q4 2019 Investment in Chinese Internet Startups Down 32% QoQ, 52% YoY
CAICT, 1/10/20
Against a backdrop of increased domestic and international economic pressure, capital markets for Chinese internet startups saw a major tightening in Q4 2019, with the total amount of investment and financing disclosed for the quarter coming to USD 6.84 bln, down 32.3% QoQ and 51.5% YoY, according to Chinese government data. The Policy and Economics Research Institute of the China Academy of Information and Communications Technology (CAICT), a department of China's Ministry of Industry and Information Technology (MIIT), also reported that the total number of investments during the quarter came to 403, down 21.6% QoQ and 28.5% YoY.
Investment & Financing of Internet Startups in China
| Period | Investment Total (USD Bln) | QoQ Change | Number of Deals | QoQ Change |
|---|---|---|---|---|
| 2018 Q4 | 14.1 | 564 | ||
| 2019 Q1 | 7.93 | -43.8% | 471 | -16.5% |
| 2019 Q2 | 7.81 | -1.5% | 510 | 8.3% |
| 2019 Q3 | 10.10 | 29.3% | 514 | 0.8% |
| 2019 Q4 | 6.84 | -32.3% | 403 | -21.6% |
The proportion of the investment and financing in China's internet startups in Q4 2019 that went to early stage ventures dropped considerably, with seed round and Series A investments combined comprising 73.0% of the total, down 1.1 percentage points from Q3 2019 and down 5.9 percentage points from Q4 2018.
Breakdown of China Internet Investment Deals by Round
| Period | Seed | Series A | Series B | Series C | Series D | Series E or Above |
|---|---|---|---|---|---|---|
| 2018 Q4 | 51.1% | 27.8% | 12.8% | 4.9% | 2.0% | 1.4% |
| 2019 Q1 | 52.0% | 24.1% | 12.9% | 6.4% | 3.1% | 1.4% |
| 2019 Q2 | 47.1% | 28.7% | 14.0% | 6.8% | 2.5% | 0.9% |
| 2019 Q3 | 46.7% | 27.4% | 15.6% | 7.5% | 1.6% | 1.1% |
| 2019 Q4 | 35.7% | 37.3% | 17.7% | 5.6% | 3.5% | 0.3% |
The top segments in Q4 2019 by total number of deals were:
| Segment | # of Deals |
|---|---|
| Enterprise Services | 92 |
| E-commerce | 62 |
| Internet Finance | 61 |
| Online Education | 44 |
| Online Medical & Health | 23 |
| Online News/Information | 17 |
| IT Services | N/A |
| Information Security | N/A |
| Online Travel | N/A |
| Online Advertising/Marketing | N/A |
| Online Music & Video | N/A |
| Local Life | N/A |
| Social Networking | N/A |
| Online Real Estate | N/A |
| Application Infrastructure | N/A |
| Online Gaming | N/A |
| Sports, Culture, & Entertainment | N/A |
| Software Tools | N/A |
| Other | N/A |
| Search Engines | N/A |
| E-government | N/A |
One segment that saw a particularly dramatic increase in total investment compared to Q3 2019 was IT Services, garnering USD 3.78 bln in Q4 2019. The main driver of investment growth in this segment was the record-breaking USD 3.7 bln Series A funding landed by Beijing-based customized internet data center service provider Tenglong Holding Group in December. Tenglong's Series A accounted for 97.4% of total funding in this segment and 53.8% of total funding across all internet segments in China during Q4 2019.
Keywords: Q4 2019 Internet funding investment MIIT CAICT national statistics
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