2017: A record year for tech funding in China

STARTUPS and tech giants in China raked in a record US$58.8 billion from investors last year – an increase of more than US$2 billion from 2016, according to data from Tech in Asia.

This surge in investments in 2017 came despite fewer funding rounds than previous years, which resulted in a record-breaking average round of US$33.6 million each time.

Ride-hailing giant Didi Chuxing received 2017’s largest single investment, worth US$5.5 billion. The Chinese startup managed to raise US$9.5 billion in total in 2017, which the company plans to invest into AI, a self-driving car research lab and its expansion plans beyond mainland China.

These plans are shown to be going full-steam ahead, with recent announcements relating to the company’s acquisition of a Brazilian ride-hail app in order to get their foot in the fast-growing Latin America market, which Uber dominates at present.

How did different sectors do in relation to funding?

Just as it did in 2016, the logistics and transportation sector attracted the most funding in 2017 at US$16.8 billion according to Tech in Asia‘s data. This is perhaps not surprising considering the success of Didi and bike-sharing startups, namely Mobike and Ofo.

Coming in at second in regards to funding success is the e-commerce sector, receiving US$12.7 billion. A big player in this field is Meituan Dianping, China’s largest group-buying and restaurant reviews service. In October, it was announced the company raised US$4 billion in a series C round from a group of investors led by existing backer Tencent.

Tencent, a leading Internet company in China best known for its popular platforms QQ and WeChat, was reported as the most active corporate investor in Asia’s tech startups.

Next came China’s fintech startups raising US$4.8 billion.

In fourth place was the hardware sector at US$2.6 billion, with general Internet services being placed fifth, accumulating US$2.5 billion in funding.

Surge in investor interest in mature startups

Tech in Asia‘s data revealed a surprising resurgence in investments into more mature startups, particularly for series D investments.

According to the data, investment was up from around US1.5 billion in 2016 to roughly US$7 billion in 2017.

Though funding for these more “mature” startups is shown to fluctuate significantly across the years, Azeem Azhar, author of the Exponential View newsletter, predicts this trend will continue on a global level in 2018.

“More money will flow into technology but it will be concentrated at later stages. Following Softbank’s lead, funds bigger than $5 billion will abound now that the investment case of platform monopolies is well understood. These will seek to back emerging winners at a regional and global level – look at Careem and Didi in ride-sharing, for example,” he wrote.

“This may create funding gaps at earlier stages in the market, as already evidenced by the seed capital slowdown in Europe and the US.”

This slowdown also appears to be happening in the Chinese market.

For these young startups looking for seed funding for initial growth, ICOs (otherwise known as coin offerings) seem to be the way forward.

In the first half of 2017, China saw 65 coin offerings raising more than US$394 million. But September’s ban on ICOs put a halt to this funding.

Despite the shutdown, Edith Yeung, partner and China boss at US-based 500 Startups told Tech in Asia she believes blockchain and cryptocurrencies remain a “significant trend for the Chinese startup environment”.

“I do believe China will make a huge comeback in the virtual currency space,” she said.

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