Is Singapore's venture capital funding starting to decline?

THE year 2019 has been a big one for initial public offerings (IPOs), with Uber, Lyft, Pinterest and Slack receiving some of the highest valuations. But these big IPOs have distracted the media from a bigger story: venture capital (VC) funding is declining, particularly seed funding for new startups.

VC funding in China fell first, with a 40 per cent decline in VC investments in the second half of 2018, compared to the first half, and those for biotech and artificial intelligence (AI) also fell. The declines continued into 2019 with investments in fintech falling more than 90 per cent between Q4 2018 and Q1 2019, even with many startups trying to launch IPOs in the US before the favourable reception to IPOs ends there, as it did in China in late 2018. These declines in VC funding reflect decreases in the capital raised by VCs, which began falling in 2016. The capital raised in Q1 2019 was less than 10 per cent that of 2015 on an annualised basis.

In the US, VC funding fell almost 40 per cent between Q4 2018 and Q1 2019. Even funding for AI, a technology with huge expectations, dropped about 35 per cent between Q3 2018 and Q1 2019. Amazingly, even while this drop was occurring, the US media focused on competition between the US and China, a battle whose importance will decline as VC funding for AI falls in both countries and as expectations for AI fall.