Quarterly venture capital fundraising in China fell to its lowest in 12 quarters but still managed to own six of Asia’s top 10 deals.

First-quarter VC fundraising raising dropped to $8.9 billion from 481 deals in China compared to $18.7 billion from 1,021 deals in the fourth quarter of 2019, according to a recent KPMG report. Still, the world’s second-largest economy managed to take most of the top ten deals by size, driven by investor demand in areas like education technology, life sciences and biotech, and logistics. 

The top deals of the quarter were China’s live video streaming firm Kuaishou and Indonesia’s ridesharing giant Go-Jek, which both raised $3 billion. 

Accelerated Digital Adoption

According to Egidio Zarrella, partner and head of clients and innovation at KPMG China, the coronavirus pandemic is «the black swan event of our time» and has acted as a catalyst for accelerated digital adoption by the general public. 

This has been especially the case in China evidenced by diverse digital fundraising at the top. In addition to Kuaishou, edtech companies Yuanfudao ($1 billion) and YueXueTang ($100 million) were both notable examples.

«[The coronavirus] is causing changes that will propel us further into the digital age,» Zarrella added. «Traditional organizations that have been lagging behind are going to go through a massive shift because they have no other choice. They are seeing their weaknesses in a big way —and the world will be changed because of it.»

Q2 Outlook

The report expects investor demand to stay subdued in the second quarter but notes potential growth in specific areas such as artificial intelligence due to the use of monitoring and tracking capabilities during a health crisis.

«Given that China was the first to respond to the COVID-19 crisis, they will be the one to watch heading into Q2 and Q3’20 as it could be a bellwether for how other economies around the world could recover once the COVID-19 crisis has lessened,» added KPMG China’s partner and head of technology Philip Ng.

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