Digi-Capital has worked as an adviser to technology companies for some time, using its analytics platform to produce an Augmented Reality (AR)/Virtual Reality (VR) report. This has shown that investment in computer vision and AR from China has surged to $3.9 billion (USD), while North American AR/VR market investment fell from almost $1.5 billion in Q4 of 2017 to less than $120 million in Q3 of 2018.
Digi-Capital says that the deal value in dollars invested provides a fairly clear picture of what the focus of investment has been over the past 12 months. Global investment hit a quarterly record over $2 billion in Q4 of 2017 before dropping back to $1 billion in Q1 of 2018. Since then, deal value has steadily climbed to reach a new record high of $2 billion in Q3 of 2018.
Digi-Capital Managing Director, Tim Merel, said “Deal volume (the number of deals) declined steadily by 10% per quarter over the last 12 months, and was around two-thirds the level in Q3 2018 that it was in Q4 2017. Most of the decline happened in the US and Europe, where VCs
increasingly stayed on the sidelines by looking for short-term traction as a sign of long-term growth. The biggest casualties of this short-termist approach have been early stage startups raising Seed (deal volume down by more than half) and some Series A (deal volume down by a quarter) rounds. This trend has been strongest in North America and Europe, but even Asia has not been entirely immune from some early stage deal volume decline.”
The report shows that American investors have chosen to stay on the sidelines, while Chinese investment has grown in confidence. In Q4 of 2017, North American investment was almost triple Asian investment, but by Q3 2018 North American quarterly investment fell over 90%.
Chinese venture capitalists have been concentrating on the long-term potential of areas such as computer vision and AR, with late-stage Series C or Series D funding rounds for companies in these areas being supported by Chinese VC investors.