I've been closely monitoring the U.S.-China investment landscape, and I'm excited to share a comprehensive overview based on recent PitchBook data. Here are some key insights:
#Deals Both the U.S. and China saw declining trends in deal value and deal activity since peaked in 2021, yet China experienced a steeper decline.
#Fundraising The U.S.'s fundraising peaked in 2022 at 172.8 billion, but then experienced a 61% decline. China's projected modest rebound in fundraising activity has been accompanied by some market shifts, including a growing prevalence of mid-sized and RMB-denominated funds.
#Exit The robust performance of public markets is creating a misleading facade that masks underlying challenges. In the U.S., a sluggish exit market is squeezing unicorns (731 companies now hold the title, collectively valued at $2.4 trillion). Current multiples have shrunk significantly since many unicorns last raised funding. Not only will it be tough to exit under these conditions, but it will be similarly challenging to raise more private capital. China was projected to reach 145B exits, it doubled U.S.'s performance but shows signs of a slowdown as well, considering 2023 was expected to be the year to boom.
#ForeignInvestment Only 10% of deals in H1 2023 involved an investor headquartered outside China, highlighting the insulated nature of Greater China's venture markets.?On August 9, 2023, the Biden administration issued an executive order prohibiting U.S. VC firms from investing in Chinese startups operating in high-tech sectors, including semiconductor, quantum computing, and AI. Close scrutiny and regulatory cases bring more?challenges for foreign investors?to put a substantial amount of capital to work in the Chinese market.?Meanwhile, Chinese government has also created additional hurdles for foreign VC through its tech crackdown and restrictions on foreign IPOs, reflecting a protective stance towards high-interest sectors, although Beijing has recently softened its approach.
#DealbySector The U.S. pie?showcases a more diversified investment landscape with software leading at 39.1%, while China's investments are heavily concentrated in advanced manufacturing, accounting for 57% combined.
#DealbyRegion In the U.S., the Bay Area maintains its dominance, accounting for 26.5% of deal activities and nearly half of the total deal amount. Conversely, the Yangtze River Delta region, encompassing Shanghai, Jiangsu, and Zhejiang, collectively secured over 40% of the country's investments, challenging Beijing's traditional stronghold.
#Investment #Crossborder #Entrepreneurship #Startup #Technology #VC
