Asia Venture Capital: Less Disruptive, More Additive

“Changes call for innovation, and innovation leads to progress.” — Li Keqiang

December 2, 2016

Over the past year and a half, US private valuations within venture capital (VC) have begun to retreat, the number of tech IPOs has fallen, and “tourist” VCs (i.e., hedge funds, public asset managers, and corporate groups that dabble only when market conditions are favorable) are focusing on their core markets. While American and European investors have carefully trimmed their stakes in start-ups and announced the end of the Age of the Unicorn, investors in China, India, and Southeast Asia (SEA) are just scratching the surface of this opportunity.

Over the past decade, Asia VC has become harder for sophisticated global investors to ignore. From next to nil at the turn of the millennium, Asia VC has grown swiftly alongside the region’s major economies to become, by some measures, larger than its American counterpart. An affluent consumer class and the rise of the internet and mobile technologies have converged to create a flourishing start-up community. The combination of these themes with abundant talent, capital, and liquidity has allowed Asia VC to blossom. This paper provides an overview of the sector’s development and suggests ways for investors to understand the role it plays in their broader portfolios.

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