China’s conveyor belt of ‘unicorns’ is slowing down

  • China’s ability to produce valuable new start-ups, or “unicorns”, has plummeted compared with 2018, according to research, as a deepening economic slowdown hits the country’s tech heartland and venture capital fundraising dries up.
  • In 1H19, only 36 new start-ups with a valuation of at least USD1bn were fostered in China, accordin0g to Shanghai-based research company Hurun Report, a 30% fall y/y.
  • It is also a stark climbdown from 2018, where Hurun data showed Chinese unicorns were being created at a rate of one every 3.8 days. China has been home to some of the world’s biggest unicorns over the past several years, including ByteDance, Didi Chuxing and Alibaba’s Ant Financial.
  • But the start-up frenzy that gripped the world’s second-biggest economy has begun to cool, coinciding with a fundraising “capital winter” that has seen the number of venture capital deals falling by roughly half in 3Q19 to 702, the lowest quarterly count since 2014, according to data from Preqin.
  • As financing has been hit, driven by a government crackdown on risky lending and the burst of a funding bubble, entrepreneurs who had been wary of cutting valuations to raise money have been forced to lower their expectations, said Wang Qingrui, an independent internet industry analyst.
  • Local venture capital firms that raise money and invest in CNY have been hit hardest, said William Bao Bean, a partner at SOSV Investments in Shanghai.

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