Date
23 January 2017
China's once red-hot venture capital market is not immune to the country’s economic slowdown. Photo: Internet
China's once red-hot venture capital market is not immune to the country’s economic slowdown. Photo: Internet

Why China’s venture capital party is over at least for now

China’s slowing economy is beginning to take its toll on the venture capital (VC) market and the impact is not limited to Chinese startups.

Many technology, media and telecommunications companies are facing consolidation pressure, investors are becoming choosier and the mainland VC market is cooling, Bill Li of Walden International told a recent seminar hosted by the Asian Venture Capital Journal.

Valuations remain expensive and investors are more closely scrutinizing actual operating numbers, the Hong Kong Economic Journal reports, citing Infinity Venture Partners’ Akio Tanaka.

Mainland capital has flowed into India in search of “treasure”, but as China sneezes, India could catch a cold due to its reliance on China funds, said Rahul Khanna, whose Trifecta Capital primarily invests in Indian projects.

While venture capitalists are becoming more cautious and picky about China, their role is gradually being eclipsed by mainland tech behemoths.

Startups are finding it much harder to grow without the support of big players such as Alibaba, Tencent or Baidu.

In essence, more VC funds are like scouts who search for potential startups, incubate them and prepare them to become acquisition targets of large tech firms, the report said.

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RA

EJ Insight writer

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