Q4’23 Venture Pulse Report – Asia

VC investment in China hit a seven-year low during 2023. Despite the softness in the market, priority sectors continued to attract large funding rounds in Q4’23, including semiconductors (Changxin Xinquio — $2 billion, cleantech (HuaSun Energy — $274 million), and AI and autonomous driving (Didi Autonomous Driving $149 million). Sector-specific applications of AI also garnered some interest during Q4’23, although most companies focused on these kinds of offerings are still very early-stage.

VC investors continued to show robust interest in Japan’s evolving startup ecosystem during 2023, with an increasingly diverse range of startups attracting investment; during Q4’23, space technology firm Astroscale, alternative meat company DAIZ, and B2B invoicing and billing firm LayerX attracted some of the largest deals of the quarter.

While VC investment fell year-over-year, the country performed very well relative to other jurisdictions that saw much larger declines. Japan’s stock market hit a thirty-three year high during the year, while the valuations of Japanese VC-backed backed companies held relatively steady. The Japanese government continued to be quite supportive of the developing VC ecosystem; under a government program to support startups, there has been increasing investment from LPs into the VC market, including private-public joint funds. Japan also gained increasing attention from international investors looking to obtain stakes in promising startups at more reasonable prices than elsewhere in the world.

In Hong Kong, Fintech continued to be a key focus for the government throughout 2023. In August, the Hong Kong Monetary Authority released a Fintech Promotion Roadmap aimed at smoothing the path towards greater digitalization across the industry. The roadmap outlined key activities to be undertaken over the next year focused on key areas (i.e., wealthtech, insurtech, greentech), and key technologies (i.e., AI and blockchain) ². The HKMA followed the release of the roadmap with a competition focused on green fintechs — the winners of which were announced at an HKMA-sponsoed Green and Sustainable Banking Conference in December³. 

VC investment in the Asia-Pacific region is expected to remain quite soft heading into Q1’24, although there will likely continue to be solid investments in areas like artificial intelligence, deeptech, cleantech, and alternative energy.

VC investment in Japan will likely remain more resilient than other jurisdictions during Q1’24 as the ecosystem continues to evolve and grow. VC investors in Japan are expected to be particularly focused on both ESG solutions and deeptech solutions focused on sectors like spacetech, biotech, and automated driving. Interest in fintech is also expected to grow in Japan, particularly related to the development of retail products for general consumption.