China’s once-booming venture capital scene is grappling with its latest setback as the coronavirus outbreak derails fundraising for companies in the region.
In the past month and a half, venture capital activity in China—both in terms of the number of deals and the money raised by startups—has fallen more than 60% compared with the same period last year, according to PitchBook data.
“It’s very difficult to be able to get things done,” said Drew Bernstein, co-managing partner at Marcum BP, an accounting firm that advises Chinese companies. “It would be hard for me to imagine a business in China that’s not affected by this.”
From the start of the year through Feb. 12, venture capital activity in China fell from 340 to 144 deals, and the capital raised declined from $4.3 billion to $1.4 billion, when compared to the same period last year. The drop-off was particularly pronounced following the Lunar New Year in late January.
Even before the outbreak, the venture landscape in China suffered from waning confidence in the domestic startup scene. After years of red-hot funding activity, investors were shaken by the poor post-IPO performance of several tech companies, including electric car maker NIO and smartphone manufacturer Xiaomi.
“The valuations of a lot of companies got cut” after going public, said Ted Chan, a data analyst at PitchBook. “Investors were seeing that happen and got more careful about investing.”
Past outbreaks, such as SARS in 2003 and the 2016 Zika virus, both weighed on public and private investment activity. In the case of Zika, the amount raised through venture deals in South and Central America declined by a third, according to PitchBook data.