Asia

Across the region, VC investment trends were quite mixed during Q2’25. China and Australia both experienced drops in VC investment — from $6.4 billion to $4.7 billion and from $672 million to $483 million respectively quarter-over quarter. Meanwhile, India, Japan, and Singapore each experienced significant upticks in investment. VC investment in India rose from $2.8 billion to $3.5 billion, while in Japan it rose from $927 million to $1.5 billion, and in Singapore it rose from $525 million to $1.3 billion.

VC investment in China fell to $4.7 billion across 813 deals in Q2’25 — levels not seen in over a decade. The pullback reflects a perfect storm of uncertainties, including geopolitical tensions, constantly shifting tariff policies with the US, and less than ideal domestic market conditions. Given these uncertainties many VC investors in China held back from making major deals this quarter, particularly in sectors focused on cross-border trade, traditional energy, and transportation.

VC deals that were completed in China during Q2’25 primarily focused on companies with real revenue streams and startups with operations aimed primarily at the domestic market given their relative isolation from global trade policies. During the quarter, AI-enabled autonomous logistics vehicles company Zelos Tech raised $300 million, semiconductor manufacturer Yangtze Memory raised $219 million, and smart mobility company SAIC Mobility raised $178 million. 

Japan continued to stand out among VC markets in Asia in Q2’25; during the quarter, it was the only major jurisdiction to see deal volume increase, albeit modestly — from 299 deals in Q1’25 to 333 deals in Q2’25. VC investment in Japan also rose over the same period, from $927 million in Q1’25 to $1.5 billion in Q2’25. AI and deeptech attracted the most attention from VC investors in Japan in Q2’25, who also showed increasing interest in applied AI solutions in areas like healthcare, robotics, and automotive.

During Q2’25, there was some tightening of funding at the later deal stages, likely driven by investor caution given the uncertainty in the VC market globally. Startups in a strong position to win in their industries continued to raise funds successful, while others have found it more difficult. This has led to some flat and down rounds. 

While companies like Deep Seek and China’s technology giants — like Alibaba and Tencent continued to invest in and push their AI activities forward, VC investment in AI model and infrastructure companies cooled down somewhat in China during Q2’25; instead, VC investors and corporates have increasingly focused on more practical applications of AI, such as AI-driven industry solutions.

In Hong Kong, for example, the financial services sector has been quick to embrace AI solutions; many financial institutions in Hong Kong have already incorporated AI into some of their real time activities, including customer service response. It is also increasingly being applied to more complex areas — such as data analysis and compliance checks.

Over the last couple of quarters, the Japan VC ecosystem has experienced some changes; while large VC funds with proven track records have been able to establish funds of ¥10 billion or more, smaller VC funds have struggled — causing some polarization on the funding front. At the same time, there has been an increasing focus on open innovation by corporates and capital and business alliances.

During Q2’25, the announcement of tariffs by the US drove a shift in funds away from export-oriented companies to firms focused on the domestic market. This shift in focus helped lift the TSE’s Growth 250 index to its highest level in over a year.

The exit market in Hong Kong reopened somewhat during Q2’25 as market conditions turned more favourable, interest rates remained relatively low, and the IPO market continued to experience growth. These factors, combined with a growth in valuation multiples has increased the attractiveness of Hong Kong as an IPO destination; during Q2’25, there was a robust lineup of companies intending to go public in Hong Kong, in addition to a number of companies listed in the Chinese Mainland looking to host secondary listings in Hong Kong.