Q1 2020 Investment in Chinese Internet Startups Down 28% QoQ
CAICT, 4/09/20
As the COVID-19 pandemic battered both domestic and overseas economies, capital markets for Chinese internet startups tightened dramatically in Q1 2020, with the total amount of investment and financing disclosed for the quarter coming to USD 5.09 bln, down 28.1% QoQ and 36.3% 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 funding and financing deals for Chinese internet startups during the quarter came to 282, down 35.0% QoQ and 41.6% YoY.
Investment & Financing of Internet Startups in China
| Period | Investment Total (USD Bln) | QoQ Change | Number of Deals | QoQ Change |
|---|---|---|---|---|
| 2019 Q1 | 7.99 | N/A | 483 | N/A |
| 2019 Q2 | 7.96 | -0.4% | 524 | 8.5% |
| 2019 Q3 | 10.10 | 26.9% | 523 | -0.2% |
| 2019 Q4 | 7.08 | -29.9% | 434 | -17.0% |
| 2020 Q1 | 5.09 | -28.1% | 282 | -35.0% |
The proportion of the investment and financing in China's internet startups in Q1 2020 that went to early stage ventures rose slightly, with seed round and Series A investments combined comprising 75.7% of the total, up 2.1 percentage points from Q4 2019 but down 0.3 percentage points from Q1 2019.
Breakdown of China Internet Investment Deals by Round
| Period | Seed | Series A | Series B | Series C | Series D | Series E or Above |
|---|---|---|---|---|---|---|
| 2019 Q1 | 51.3% | 24.7% | 13.1% | 6.5% | 3.3% | 1.2% |
| 2019 Q2 | 45.9% | 29.9% | 14.1% | 6.6% | 2.6% | 0.9% |
| 2019 Q3 | 47.1% | 27.8% | 15.1% | 7.3% | 1.8% | 0.9% |
| 2019 Q4 | 36.3% | 37.3% | 17.1% | 5.8% | 3.3% | 0.3% |
| 2020 Q1 | 39.0% | 36.7% | 13.9% | 6.4% | 3.6% | 0.4% |
The top segments in Q1 2020 by total number of deals were:
| Segment | # of Deals |
|---|---|
| Enterprise Services | 54 |
| Internet Finance | 54 |
| Online Education | 38 |
| E-commerce | 24 |
| Information Security | 18 |
| Online Music & Video | 13 |
| Online Medical & Health | N/A |
| Online Gaming | N/A |
| IT Services | N/A |
| Online Advertising/Marketing | N/A |
| Application Infrastructure | N/A |
| Online News/Information | N/A |
| Online Travel & Mobility | N/A |
| Local Life | N/A |
| Other | N/A |
| Social Networking | N/A |
| Online Real Estate | N/A |
| Sports, Culture, & Entertainment | N/A |
| Software Tools | N/A |
| Search Engines | N/A |
| E-government | N/A |
Two segments that saw particularly dramatic increases in total investment compared to Q4 2019 were online real estate and online education, which comprised USD 2.57 bln and USD 1.29 bln, respectively, of the USD 5.09 bln in total investment and financing disclosed in Q1 2020.
In Q1 2020, China had only 6 internet startup investment and financing deals for which funding exceeded USD 100 mln each, for a combined USD 3.885 bln, comprising 76.3% of total investment and financing for Chinese internet startups during the quarter. Of these 12, the top 3 alone accounted for a combined USD 3.50 bln in funding, or 68.8% of total funding of internet startups in China for the quarter.
Keywords: wireless VC financial services online healthcare mobile healthcare online video SNS online gaming e-commerce information security funding investment online advertising online real estate online travel online education e-government online music MIIT IT services local life CAICT Q1 2020 enterprise services online search online information service national statistics
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