The third quarter Not so good for Chinese startups looking to raise money. The data shows that for tech companies in the country, Q3 2022 was the worst time to raise venture capital since Q1 2020, far less capital than the rest of 2020 and 2021, or most of 2018 and 2019.
China is not alone in seeing capital inflows to its domestic startup scene slow, but recent news puts the country-specific data into a new context: Given today’s Chinese tech share selloff, there is new pressure on the valuations of tech companies in the country. And that can affect startup fundraising.
If China’s fundraising falls 10% in Q4 2022 from Q3 2022 — measured in dollar terms, not the number of funding events — we’ll see startups face their slowest quarter since early 2018, according to CB Insights data. The sharp decline would make Q4 2022 the nadir in the nation over the past five years.
Why are Chinese tech stocks suffering today? Shares of major and minor Chinese technology companies fell today after the Chinese Communist Party’s five-yearly debacle, after the country’s onshore share sales were at least somewhat interrupted. This time, the current Premier of China, Xi Jinping, not only has five more years in office, but has also strengthened a cabinet of like-minded allies.
The context is clear: Xi’s method of governing China is still superior. And investors in tech companies, still licking the wounds from the Xi-led regulatory crackdown — which includes some reasonable proposals such as dismantling some anti-competitive practices along with some less misleading policies — are unsettled.
The result? Bleeding (US stock prices subject to change at time of publication)
