VC investment in China’s AI startups drops in H1 2019
The growth in China’s investment in artificial intelligence ventures over the past few years has been nothing less than explosive. China is now home to more ‘AI unicorns’ than anywhere else in the world (statistics differ greatly, but CB Insights counts six out of the top 11 unicorns in its top AI startups list, while some others put the count much higher).
According to ZDNet, China’s funding of AI startups grew from about $1 billion in 2016 to more than $8 billion in 2018, accounting for 44 percent of all global AI startup funding (with the U.S.’s accounting for 41%).
However, investment in China AI ventures has slowed greatly compared to last year. According to new numbers from China Money Network, the total deal value of $5.6 billion during the first six months of 2019 (until mid-June), compared a total value of $15.7 billion during 2018 (yes, 2018 figures do vary!). Sure, there’s still a chance that deal flow and total investment will increase during the second half of the year, but it does appear to be a much slower start to the year (and this follows a dramatic slowing during second half of 2018).
The slow-down is borne out by the stats in KPMG’s Venture Pulse for Q1 2019, which shows that VC investment — across all categories — in Asia fell dramatically during the first quarter, from $16.9 billion in Q4 2018 to $13 billion in Q1 2019 (being the lowest quarterly total since Q1'17). The volume also continued the downward trend that began in Q3 last year.
China Money Network calculates that the number of mega rounds — venture deals greater in value than US$100 million — fell from 26 mega deals in 2018 to just four in 2019 (up until mid-June).
It’s well known that China’s economy has slowed and the ongoing US dispute with China on trade can’t have helped either. No investor likes to deal with a broad range of new risks. As pointed out by KPMG, some China VCs are undoubtedly sitting on portfolio investments waiting for the right time to exit.
Given the massive growth in Chinese AI investment during 2018 and the cooling venture capital activity during the past year, it’s an interesting time to ask AI industry heads what their vision is. China Money Network asked 10 industry leaders from China’s AI sector to give their predictions for the next ten years. You can download the report here.