Venture capitalists invested a record $37 billion into China startups last year, more than double the previous year’s tally, helping China emerge as a legitimate challenger to the US for leadership of the technology industry, Bloomberg reported.
Venture firms invested in 1,555 China deals, according to London consultancy Preqin, although the fourth quarter saw the pace of deals slow.
In 2015, Chinese venture deals more than doubled to $37 billion from $15 billion in 2014, which was a tripling of the $4.5 billion in 2013. Preqin said last year was a banner year globally with venture funding rising 45% to a record $135.8 billion.
China’s venture boom created some of the world’s most valuable startups, including smartphone manufacturer Xiaomi, ride-hailing service Didi Kuaidi and peer-to-peer lender Lu.com, officially called Shanghai Lujiazui International Financial Asset Exchange.
China is narrowing the gap with the US, the birthplace of modern venture capital. The value of US deals hit $68 billion last year, up from $56 billion, according to Preqin.
“In the next five years, there will be more innovation, more invention, more entrepreneurship happening in China, happening in Beijing than in Silicon Valley,” Travis Kalanick, founder of San Francisco-based Uber Technologies, the world’s most valuable startup, said last week at a Beijing conference. “We gotta play our A-game in order to compete with the best.”
Bloomberg said there are concerns that too many startups have been set up in certain sectors in China, triggering costly price wars to win customers.
In the fourth quarter, venture investors pulled back, doing only $7.8 billion in deals, down from about $13 billion in the third quarter.
It was a similar story across Asia, which peaked at $18 billion in the third quarter, nearly matching the $18.5 billion in the US. Then in the fourth quarter venture investments fell by nearly half to $9.4 billion, according to Preqin. It fell at a slower pace in the US to $12.7 billion.
“I wouldn’t say the VC boom has come to an end,” Mingchen Xia, a principal at private-equity firm Hamilton Lane Advisors told Bloomberg. “But, in general, the activity will be more rational than in the last two years.”