Data from Preqin shows that these venture capital funds have raised 3.1 billion dollars so far in 2022 for Southeast Asia and India, after hauling 3.5 billion last year.
However, funds from China-focused venture capitalists dropped sharply from 27.2 billion dollars in 2021 to just 2.1 billion dollars this year.
Amit Anand is a co-founder of Singapore-based Jungle Ventures. Anand told Nikkei that 50% of the investors he spoke to are trying to diversify away from China.
Venture capital funds raise money from a wide range of investors, from pension funds or university endowments to wealthy tycoons.
Southeast Asia and India become favorite destinations for venture capital and private equity funds as the regions have enjoyed fast growth of startups in recent years.
However, the size of these investments is quite small compared to big firms in China.
Japanese conglomerate SoftBank runs two Vision Funds worth about 155 billion dollars. The firm announced that it would reduce investments by half after a record quarterly loss.
Private equity firms and venture capitalists take a very close look at the regulatory crackdown from the Chinese regime. In addition, China’s recent strict Covid-measures make investors consider their investment in the country.
Private tutoring and tech are the two sectors that took a hard hit in the past two years. As startup firms in these sectors are often backed by venture capital funds, once they face crackdowns, investors will suffer potential losses. Last year SoftBank wrote down a 700 million dollars investment to 100 million dollars in Zuoyebang, the developer of a homework-help app.
Under new tougher regulations imposed on the tutoring sector last year, venture capitalist and private equity firms sought ways to exit after spending billions of dollars on the industry.
In the tech sector, giants such as Alibaba and Tencent also were victims of the regulatory crackdown, and their shares dropped sharply.
As a result of the crackdown, China-focused venture capital and private equity funds are now revising their strategies in the country. They are shifting to areas with less crackdown risk, such as semiconductors, renewable energy, or healthcare.