Greater China Deals Barometer Report: Startup funding shows signs of recovery in July as deal count grows

Investors ramped up transactions in July as the Greater China market closed 184 deals, up 17.2% from June. The deal count, which hit a three-month high, shows signs of revival after the 9.2% month-over-month decline in deal volume in June. 

At almost $2.9 billion, the monthly deal value was on par with the previous month, according to proprietary data compiled by DealStreetAsia. 

Despite the signs of a rebound, the venture funding scene is still far from the peak achieved a year before. The deal value in July 2024 logged a 32% drop from the same month last year, while the deal count slipped 10.2%.  

The good news is that a gradual recovery is underway. The first seven months of 2024 saw the completion of 1,458 deals raising almost $29.9 billion. Venture investors committed 7.1% more capital during the said period, although the deal count was 9.2% less than the same time last year. 

GenAI in top gear 

Chinese generative artificial intelligence (GenAI) startup Baichuan Intelligent Technology snapped the biggest venture deal of the month, making it the only megadeal that secured over $500 million in funding in July.   

The GenAI firm pocketed 5 billion yuan ($691.4 million) in a Series A funding round, as the firm expands the use cases of its large language models (LLMs) amid intense domestic competition, roping in Chinese internet juggernauts including the likes of Alibaba Group, Tencent Holdings, and Xiaomi Corp, as well as two state-affiliated investors. 

The GenAI frenzy, which was started by ChatGPT in November 2022, has since led to several Chinese names including MiniMax, Moonshot AI, and Zhipu AI racing to launch their large language models (LLMs) and snap up mega funding from investors. 

However, investors have warned that consolidation is inevitable, alongside a rising cautious sentiment towards the hype as AI chip shortage and geopolitical tension continue to drag on the industry. 

Despite the scarcity of billion-dollar deals, Baichuan’s investment was part of the six megadeals —investments worth at least $100 million— that took place in July. The remaining five deals were completed in pharmaceutical, space tech, energy storage, automobile, and semiconductor, aligning with the country’s pursuit of becoming a deep tech powerhouse.

At 87 deals, early-stage investments continued to dominate the country’s venture scene, accounting for 47.3% of the total deal count while collectively raising $1.1 billion, or 39.7% of the total startup funding.

In contrast, late-stage dealmaking activity recorded only two deals at Series E or later stages. Intelligent manufacturing company Keber Technology was the only firm that raked in pre-IPO funding, roping in carmaker SAIC Motor-affiliated Shang Qi Capital among its investors. 

Analysts have recently predicted that Hong Kong’s IPO market could recover in the second half of 2024, while the A-share IPO activity would remain muted in the short term. According to a PricewaterhouseCoopers report, around 80 companies will list in Hong Kong in 2024 and hit a fundraising level of HKD 70 to 80 billion. That could bode well for the late-stage dealmaking scene going forward. 

List of megadeals (July 2024)

Pharma deal in limelight 

July saw the completion of one rare megadeal in the pharmaceutical sector, despite an ongoing venture funding slowdown in the sector. State-owned Shenzhen Investment Holdings Capital has agreed to invest up to 1.6 billion yuan ($220 million) into a wholly-owned subsidiary of Hong Kong-listed Luye Pharma Group as part of the latter’s plan to boost its oncology drug business. 

Besides the rare megadeal in the pharmaceutical sector, the month saw semiconductor and biotech take the lead in deal count, with the completion of 29 and 20 transactions respectively.  

Chinese chipmaker ICleague Technology was the largest deal in the semiconductor sector, securing “several billions of yuan” in a Series B funding round; while MoonBiotech, which develops microbial products, bagged 300 million yuan ($41.3 million) in an extended Series C funding round to become the largest biotech deal of the month.

SDIC Venture Capital tops investor list

State Development & Investment Corporation (SDIC), one of China’s largest state-owned investment holding companies, and its affiliates, invested $97.3 million across eight deals, making it the top fundraiser of the month.  

Puhua Capital was the second-most active investor by deal count. Founded in 2004, the Hangzhou-headquartered venture capital investment firm, which counts the likes of Tiktok-owner Bytedance, autonomous driving firm Pony.ai, and solar technology developer Anhui Huasun Energy among its portfolio companies, manages over 27 billion yuan ($3.8 billion) in assets, as of April 10. 

Most active investors in China (July 2024)

Note: In our monthly analysis for July 2024, we have put together detailed charts of prominent deals, active investors, deal stages, and the most attractive sectors that have bagged the maximum venture dollars in the Greater China region.

Our database only considers deals officially announced by the related investee, investor(s), and/or financial advisor, while information based on market rumours and news reports citing sources is excluded.

For a more detailed analysis, and to enable comparison between primary and secondary markets, DealStreetAsia has started tracking deals of all sizes since April 2020, as against considering only transactions worth more than $10 million earlier.

We have also introduced a standardised system for industry classification. It currently includes over 50 industries, as well as over 45 new economy and high-tech verticals, which will progressively increase to adapt to local market conditions in our closely watched regions of Greater China, Southeast Asia, and India.