electronic Global Trade Credit Platform/eGTCP's Blog: More entrepreneurs in China get funding, but investors are becoming critical

According to a report, a third of start-ups found their investors in the first half year, but venture capitalists were more cautious when it came to funding bigger amounts.

The number of start-ups established in the period fell by 74 percent from the previous year to 230, while investors were more selective about larger funding deals, the report noted.

Industry participants said the decline in the number of start-ups and the level of success in getting big funds could be attributed to a more measured approach on the part of both entrepreneurs and venture capitalists.

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“Now, people are more rational about establishing start-ups compared with the situation two years ago, when entrepreneurs were strongly supported by national policies and favoured by venture capital firms,” said Sam Liang, founder of the three-year old education company Debai.

“And investors are also cautious in selecting projects now as most of the promising projects such as bike-sharing service providers have already been flooded with money,” added Wang. “There are less deals worthy of a big bet.”

Of the 230 new companies, 48, or 21 percent, were in the corporate services business, mainly artificial intelligence, big data and cloud computing, an area traditionally favoured by venture capitalists. They were followed by culture and entertainment firms, which made up 15 percent, and e-commerce and education companies, which accounted for 8 percent each.

China takes gold in race to develop billion dollar start-up ‘unicorns’

In terms of the overall funding for e-business companies, not just start-ups, in the period, there were 1,519 deals, with the transport industry attracting the lion’s share of the money, taking 90.5 billion yuan (US$13.7 billion) or 37 percent of the total.

That was due largely to sharing service providers including bicycle-sharing services Ofo and Mobike, while Didi Chuxing, China’s ride-hailing service giant, raised US$5.5 billion in April this year.

“Entrepreneurial opportunities have been reducing in the transport industry and medical and property services now that these industries have entered a period of rapid development,” said Zheng Kejun, the main author of the report.

“Education and agriculture, however, still provide many entrepreneurial opportunities as their development is in a very early stage.”

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