E-92: AI Investments Drive Global Startup Funding in Q2 2024

Investors worldwide showed a better risk appetite in the last three months, particularly for AI projects.

Global startup funding rose to touch US$79 billion in the second quarter of 2024—up 16% quarter-over-quarter and 12% year-on-year—as per the latest data released by Crunchbase.?

Funding in Q2 2024 was among the highest since Q1 2023. Venture capitalists wrote several US$100 million plus checks, contributing to the overall rise in startup funding. And that’s probably because they had much-needed liquidity, thanks to larger M&A deals that rose in the quarter, notes Crunchbase.?

AI was the biggest driver that moved money this quarter. Investments in AI startups surged to US$24 billion from April to June, more than doubling from the previous quarter. In fact, AI startup funding represented 30% of all dollars invested.

With investors rushing not to miss out on lucrative AI deals, AI emerged as the most funded sector for the first time since the launch of ChatGPT despite the concerns about revenue and high valuations. Notably, there were six billion-dollar funding rounds in Q2 2024, of which five went to AI companies.?

Healthcare and biotech was the second-largest sector, raising US$17 billion. Hardware companies, largely due to AI infrastructure and semiconductor investments, raised US$11 billion. Financial services companies follow closely, raising US$9.8 billion.

Still, AI will likely continue to dominate investors’ mind space and the share of the wallet. And that’s because the AI race has got all the more heated.?

OpenAI ’s ChatGPT has just got another strong rival from SenseTime. At the World AI Conference in Shanghai recently, the Chinese AI startup introduced its latest AI model, SenseNova 5.5, which it claims to be comparable to OpenAI’s GPT-4.

Touted to be China’s first real-time multimodal AI model, SenseNova 5.5 boasts improved mathematical reasoning and English proficiency and can identify and describe objects, provide feedback on drawings, and summarize text instantly.?

SenseTime 商汤科技 is currently offering 50 million free tokens and free migration support from OpenAI’s services to attract users. This comes as OpenAI blocks users in China from accessing its services starting July 9, 2024, amid the US-China tensions.?

In fact, SenseTime is not the only Chinese company to jump at the opportunity. Baidu, Zhipu AI, and Tencent Cloud are also trying to grab ChatGPT users in the country by offering free tokens and migration services.?

US sanctions, some experts believe, are fuelling Chinese companies to build AI models that reportedly match or exceed GPT-4. A new survey by SAS Institute and Coleman Parke found that Chinese organizations are leading in the adoption of generative AI, with 83% of them either running initial tests or having fully implemented the technology. This puts China well ahead of other countries, with the United Kingdom following at 70%, the United States at 65%, and Australia at 63%.

Beyond the LLMs—large language models that run services like ChatGPT and Claude—there is a rising interest in AI-powered robots, led by the US and China. So much so that the total addressable market for humanoid robots is now projected to reach US$38 billion by 2035, up more than sixfold from a year-old projection of US$6 billion.

Since these robots can now leverage LLMs to understand language and make decisions, companies like Nvidia, Microsoft, Tesla, and Amazon are pouring billions of dollars into developing intelligent humanoids that can perform human tasks.

On that note let’s dive into this week’s recap.?

Buzzing Deals??

? Singapore-based fintech firm Validus Group has received US$17.57 million in debt financing from Dutch lenders Oikocredit and FMO. Founded in 2015, Validus is an all-in-one digital SME financing platform that offers loans, corporate cards, and payments and expense management in markets like Indonesia, Singapore, Thailand, and Vietnam. To date, Validus has disbursed more than US$2 billion in loans to small businesses across Southeast Asia. The company will use the new financing to expand the reach of its Indonesian subsidiary, Batumbu, among local SMEs and address the persistent SME funding gap in the country.?

? Singapore-based agri-fintech platform AgriG8 has bagged an undisclosed investment from Better Bite Ventures and The Trendlines Group. Founded in 2021, AgriG8 aims to make it attractive for lenders to invest in climate-resilient farming. Through its digital platform CropPal, it gamifies the ways farmers can reduce their greenhouse gas emissions to access financing. With the new funding, AgriG8 aims to decarbonize rice production in Asia, helping farmers cut methane emissions by up to 55%.?

? Singapore-based governance, risk, and compliance (GRC) operating and investing platform Xcelerate has received a debt financing of up to US$52 million from Orion Capital Asia. It offers comprehensive GRC solutions to its clients, with a strategy to grow both organically and through acquisitions. Xcelerate Global will utilize the recent funding to refinance existing debt and make acquisitions while consolidating its position in Asia Pacific and the UK.

? Chinese autonomous driving company developing eco-friendly robot trucks KargoBot has received US$83.3 million in Series A from China International Marine Containers, Ordos Venture Capital, and Shenzhen Investment Holdings. The company is building a hybrid driverless solution that combines human and machine intelligence to overcome corner cases and operational challenges unsolved by other robo-truck solutions. KargoBot will use the funding to accelerate the commercialization of its Level 4 self-driving freight formation technology.

? Singapore-based advanced manufacturing service provider Hi-P has secured US$74.1 million in funding from Temasek-backed 65 Equity Partners. The capital will come from Local Enterprise Fund, 65 Equity Partners’ joint US$740.8 million fund with the Singapore government to develop local companies. 赫比国际 provides advanced manufacturing, assembly, testing, and packaging services for customers like Amazon, Apple, and Dyson. 65 Equity Partners will get a seat on Hi-P’s board of directors, and the two firms with work on accelerating growth and sustainability. The company will also use this funding partially to prepare for a potential public listing in Hong Kong or the US in the future.?

? Vietnam-based creator economy startup METUB has secured US$15.5 million from a private equity fund managed by Morgan Stanley Investment Management. METUB is a leading digital media and entertainment platform, which enables creators to produce and distribute content and offers brands services to deliver successful content partnership and influencer marketing campaigns. The company aims to make it possible for content creators to turn their passion into a professional career.

? Indonesian aqua tech startup Aruna is reportedly raising a fresh investment of US$5-7 million from AC Ventures, East Ventures, and a Japanese debt fund, as per a DealStreetAsia report. However, Aruna might be closing the investment at a much lower valuation compared with the US$200 million reported in 2022. Aruna streamlines the supply chain of fishery products by connecting over 55,000 small-scale fishermen to the global market through technology. Aruna provides high-quality seafood from local fishermen to clients in domestic and global markets, individual or wholesale. It also offers a diverse range of value-added seafood products.

More Dry Powder For Asia

This past week, a couple of Asian VCs announced fund closing, even as limited partners remained cautious due to a prolonged liquidity crunch.?

? Shanghai-based VC firm LongRiver Investments has closed its inaugural USD fund at US$385 million to back early-stage tech startups. Founded in 2022, the investor focuses on healthcare, new energy, and high-end manufacturing sectors. While its primary focus has been China, 江远投资 is open to nurturing promising companies overseas.?

? South Korean venture capital firm Atinum Investment has just announced closing its flagship global fund at US$624 million. With this close, the VC firm is all set to sharpen its focus on Southeast Asia.?Established in 1988, Atinum Investment backs startups that have entered the growth phase. Its focus areas entail deep tech, SaaS, content, games, materials, and service platforms, biotech, medical or healthcare companies. Some of its recent deals include trenbe , Linq, MedInTech , and Klook .?

Meanwhile, more dry powder is building up for climate companies in Southeast Asia.?

? Norfund , the Norwegian Investment Fund for developing countries backed by the Norwegian Government, will earmark US$500 million for Southeast Asia from its climate fund. So far, the impact investor was focused on South Africa and India. For context, the Norfund-managed Norwegian Climate Investment Fund has set aside US$1 billion for emerging economies over five years since 2022.?Overall, Norfund has two investment mandates. First, to invest in sustainable development projects that create jobs and improve livelihoods, and second, to support the transition to net zero in emerging markets.

? American VC firm GEF Capital Partners has raised US$380.2 million so far from US investors for its latest climate-focused private equity vehicle for South Asia. As per the latest regulatory filings, the South Asia Growth Fund III has secured commitments from 14 investors. Incorporated in March 2018 as a spinoff from Global Environment Fund, a leading player in global sustainability and environmental investing since 1990, GEF Capital Partners backs companies that have developed solutions to help address climate change and pollution mitigation. Its investments span clean energy, energy efficiency, waste, water, and resource efficiency sectors.

? Parallelly, Singapore-based venture capital and private equity firm Clime Capital is on track to close its second Southeast Asia-focused clean energy fund at the target of US$175 million in the fourth quarter this year, as per a DealStreetAsia report. With a focus on the transition to clean energy in Southeast Asia, Clime Capital identifies and creates investment opportunities that contribute towards alleviating climate change risk, alleviating infrastructure gaps, and building sustainable economies and societies.

And that’s the wrap for this edition of #ICYMI, our weekly curated highlights from the Asian tech ecosystem. Subscribe to receive it every Thursday and stay updated on the noteworthy tech developments you might have missed during the week. Like this newsletter? Share it with your friends and colleagues here.