Market performance was varied across the region, with the focus shifting from China and with some bright spots emerging. For instance, APAC saw a decline in private market deal value by a 14%, and total deal count down 20% which, while still sharp, is slightly more moderate than other regions.8 Exits in the region remain challenging, with India being a bright spot as it was the lone market to see an increase in exits, while Australia and New Zealand saw some sizeable third quarter transactions.
While China has historically been a single source of strength for the region based on the exponential growth of the consumer internet segment during the prior hype cycle, recent changes have largely closed that market to North American and European investors, with a 77% decline in fundraising year-over-year through Q3.9 While we anticipate fundraising and investing in China’s US dollar vehicles to remain lower in the region during 2024, the story on the ground is more nuanced. With regional sovereign wealth funds showing increased interest in the market, local RMB-denominated vehicles are continuing to see greater activity heading into 2024.
The region is undergoing dramatic shifts that are creating near-term growth opportunities in other markets like Japan, Korea, and India, particularly, in 2024. For example, Japan’s venture capital ecosystem has been growing over recent years, centered around cities such as Tokyo and Osaka. The number of venture capital-backed companies in Japan has increased six-fold since 2015, while activity levels in 2023 were on pace to exceed those of 2020.10 In India, we are seeing more interesting growth buyout opportunities on the large-end, as well as a vibrant domestic equity markets driving more interest in new-economy businesses to support the venture capital lifecycle. Similarly, while transaction value was down in the first half of the year, we are seeing more buyout opportunities in Japan, where the private market penetration has historically been relatively low, which makes for potentially exciting prospects given the above dynamics.11