Asian tech deals slow as novel coronavirus epidemic spreads

When China sneezes, the world catches the cold.

The ill effects of Covid-19 – the disease caused by the novel coronavirus identified last year in Wuhan, China – is spreading like wildfire across industries. So far, it has triggered a slump in the travel sector and disrupted the manufacturing supply chain, causing gadget makers such as Apple to downgrade earnings outlooks.

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And with funding for Asian technology startups in January down 52% year over year, venture capital firms fear dealmaking will further slow down. With much of China in lockdown to contain the continued spread of Covid-19, deals in the mainland saw a massive decline last month.

Despite this, the outbreak’s full impact remains to be seen, as the deals that were reported in January had already been sealed weeks earlier. While some VCs such as East Ventures have yet to see much effect on their portfolio, others – including Silicon Valley-based Patamar Capital and MDI Ventures – are seeing delays in fundraising activities.

“If the fund or startup only has money left for three weeks, then this will impact fundraising or company operations,” says Willson Cuaca, co-founder and managing partner at East Ventures. “Our startups don’t have this issue.” The firm’s limited partners (LPs), he adds, are long-term partners, which makes travel for face-to-face meetings unnecessary.

Disclosure: East Ventures is an investor in Tech in Asia.

Willson Cuaca of East Ventures / Photo credit: East Ventures

Patamar Capital, on the other hand, says it might have to extend the timeline for its ongoing fundraising due to the novel coronavirus outbreak.

“We are talking to some investors who are not based in Asia, and because there are travel advisories, there have been some delays,” says Dondi Hananto, a Jakarta-based partner at Patamar Capital. “We will probably stretch it to the end of the year, but hopefully we can close it before that.”

Aldi Hartanto, the vice president of investments at MDI Ventures, says that fundraising efforts from LPs have also slowed.

“Our main country destinations for the [LP] roadshow are China, Japan, and South Korea, which have been quite exposed by coronavirus,” he says. The firm plans to mitigate the impact of the outbreak by targeting LPs in Singapore and Indonesia, while South Korea and other markets will be covered by co-general partners based in those areas.

Hartanto suggests that LP fundraising, along with investments in regional startups and growth-stage rounds, are the activities most affected, as they rely more heavily on global capital. Most VCs, he says, are limiting international travel, while saving face-to-face meetings or office visits only for final decisions (everything else is done mostly via phone or video calls).