This latest fund was Quona’s third, and it far exceeded the firm’s initial target of $250 million. Quona started to raise the fund a year ago, taking an extra quarter to close the deal. Its last Fund 2 was announced in 2020 at $203 million. 

We spoke with , a co-founder and general partner at the firm, who confirmed that 75% of Quona’s existing LP base backed the new fund alongside new investors. Engel credited Quona’s success to both fund performance and the firm’s thesis to “radically improve access and quality of financial services to the unbanked.”

The firm operates in emerging markets across Latin America, India, Southeast Asia, Africa and MENA. Brazil and India are anchor countries with Mexico, Indonesia and South Africa secondary markets. These five countries represent three-quarters of Quona’s investment capital with people on the ground.  

“These countries have been really overlooked and ignored and underinvested in for many, many decades,” Engel said.

‘A thriving ecosystem’

Quona is always looking at newer market opportunities and seeks out markets with three crucial factors: an enabling regulatory environment; emerging low- and middle-income class; and mobile penetration and internet access to serve these markets. 

The firm has been in the top quartile performance for venture funds since its inception, a fact that demonstrates  “impact and profits don’t necessarily need to be mutually exclusive,” Engel said.

Engel co-founded the firm with and in 2015, spinning out from Massachusetts-based global nonprofit .

Quona invests an initial check size of $1 million to $5 million at Series A. As the firm has gained experience and conviction, it has started investing earlier at seed. It reserves funds for follow-on investments to support portfolio companies. The firm has an additional five partners with a total of 14 investment professionals.

“Everyone at Quona is trying to build something bigger than themselves, and this notion that our legacy really is to leave a thriving ecosystem,” said Engel. 

Quona’s portfolio companies have raised $4 billion in capital in total. Investments include: Brazil-based , which allows consumers to get loans against property; digital banking platforms from Mexico and from Jakarta; and South Africa-based mobile point-of-sale company . All of these companies target underserved markets.

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Mirroring what is going on in the public markets, investors slowed funding to private companies with only $21.2 billion for startups in the region. That is a 26% decrease from the second quarter and an astonishing 56% from the third quarter of last year.

As with the global numbers, the total funding amount marked the lowest investment since the first quarter of 2020, when the world was just entering into a pandemic and only $19.6 billion was raised by startups in the region.

Not surprisingly, deal flow also suffered, hitting its lowest level since the fourth quarter of 2020. Only 1,417 deals were announced in Q3, down 18% from last quarter and 22% from a year ago.

Late stage leads in drop

While all types of rounds were down from last quarter, the biggest drop was seen in late-stage and tech growth rounds. That trend is not unique to Asia, but it was certainly pronounced.

Large late-stage and growth rounds fell 42% from last quarter to $9.2 billion. That number also represents a 71% drop from Q3 last year when the total hit $32.2 billion.

Although there were some large deals—such as Singapore-based online shopping company closing a $912.5 million round from —deal flow also fell. Deal flow dropped nearly one-third from last year for the quarter with just 168 late-stage and tech growth rounds closed in Q3. That also is a decline of 18% from last quarter.

Early stage staggers

The drop in late-stage deals meant early-stage funding rounds actually saw more investment in the Q3 with $10.4 billion raised. However, that doesn’t mean things were completely positive for early-stage funding.

Early-stage deals fell 28% from Q3 last year to $10.4 billion. That was only a drop of 3% from the previous quarter, but well off the recent high of $17.2 billion in early-stage rounds we saw in Q4 of last year.

Early-stage deal flow did take a significant hit from last quarter, falling 22% to 497. That also is a drop of 16% from Q3 2021.

Seed stage uneven

Seed and angel rounds took a hit from last quarter, falling 23% to $1.6 billion—although that number actually is up 13% from the same quarter last year. While that may be a good sign, the amounts for such rounds are so small they do not really move the needle for overall funding in the region.

However, deal flow was down both from last quarter and year to year. Just more than 750 seed and angel deals were announced in Q3, a drop of 14% from last quarter and 23% from last year. It also is a far cry from the 1,174 deals announced in Q4 2021.

India crashes

So which countries in the region led to these numbers?

While nearly every major country saw their numbers fall, India took one of the most pronounced declines. Startups in the country raised only $2.9 billion in Q3, compared to $8.5 billion last quarter and $15.4 billion in Q3 2021.

Last year was a standout year for Indian startups, but this year tells a very different story.

China’s numbers also were down significantly quarter to quarter. Chinese startups saw only $9.6 invested last quarter, compared to $18.5 billion in the same quarter of 2021. The number also is down from the $9.8 billion invested in Q2 and a dramatic drop from the record $27.9 billion investors poured into startups in Q4 2021.

Exits

With the public markets wobbly nearly everywhere, Asia also did not see a robust IPO market. The biggest IPOs in the region involving VC-backed startups included two on the :

• China-based health care solutions provider raised approximately $506 million in a September IPO.
• China-based biotech firm raised nearly $293 million in a July IPO.

M&A dealmaking was also down, as only about 60 deals involving VC-backed startups were announced—a decrease of about 25% from last quarter. The biggest deals announced in the third quarter in Asia were:

• In August, acquired China-based health care organization for $1.5 billion as more big tech firms continue to move into the health care space.
• That same month, e-commerce platform bought online fashion retailer for $335.2 million.

Takeaways

What more really needs to be said?

Venture and growth—especially late-stage growth—funding is down nearly everywhere. Tension between China and the U.S.and Europe likely did not help funding numbers in the region, nor did China’s continued regulation ramp-up on tech firms.

Mix into that the public market tumult and overall economic gloom, and you have a down market globally, as well as in North America, Europe and most certainly Asia. 

It is odd that India’s numbers dropped so far considering some signs indicate it has weathered the overall down global economy well. However, perhaps the venture numbers show that is changing.

Last year saw a record of more than $175 billion invested into startups in the region. That robust market seems much further away than just nine months ago.

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of Oct. 3, 2022.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

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led the round, which also included participation from , , and “Fortune 500 companies in Asia and the United States,” according to the . The financing brings Club Factory’s to a known $220 million, according to Crunchbase data. Interestingly, its last raise was in February 2018. (I say interestingly because it’s unusual for companies to raise the same amounts in their Series Cs and Ds.)

In the fall of 2013, then 25-year-old left his job at Facebook to start Club Factory. According to the company’s , Lou “never expected to work in fashion, but a passion for great products and frustration with the lack of transparency in price, led him to build Club Factory.”

The company claims to sell “trending items” for 50 to 80 percent less than what they would go for on other popular e-commerce sites such as Wish, eBay and Amazon. It does this by letting customers shop directly from factories it finds with its patented big data technology.

In September, KrAsia that India had become Club Factory’s biggest market. According to the publication, Club Factory had “pipped Snapdeal in terms of monthly active users (MAU) to rank third behind and ,” which is based in India.

According to , Club Factory has seen more than 10x growth in the past six months for its Indian SME business largely due to its zero-commission strategy, “where the sellers are able to transfer the cost-benefit to the users.”

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Integrated into the daily life of most Chinese people with smartphone access, WeChat is used to book appointments, pay bills, schedule deliveries, and .

As of Q4 2016, the behemoth under Tencent 889 million users. Though some of its users are international, the number is more than half of the Chinese population (approximately ).

Although micropayments for content have not yet taken off in the U.S., it’s possible that WeChat’s successful micropayment strategy could provide a template—despite obstruction from the iPhone’s creator. So to gain some understanding, we dug into the features of WeChat official accounts, and chatted with a few bloggers that are part of the ecosystem.

What Are WeChat Official Accounts?

WeChat’s official accounts can be broken down into three types: service, enterprise, and subscription. (China Channel gives you a good of how they work). To compare micropayments to Medium, we are going to focus on WeChat’s subscription tier.

Subscription accounts share a mix of daily news, opinion columns, and personal blogs. A subscription account can also serve as a content marketing tool for companies and a distribution channel for publications.

Anyone can start a subscription account, but not all accounts are branded with the “original” tag. How an account becomes original and what impact censorship has on content types remain unclear; however, patterns indicate that the “original” tag is given to accounts that put out high-quality posts and frequently engage with readers. In return, original subscription accounts are provided with safeguards against plagiarism.

Access to advanced widgets is also offered, including commenting and the ability to receive microtransactions. At the bottom of each post, readers can donate an amount of their choosing to a writer. Below is what the tipping interface looks like from my own subscription account. The red button means to reward:

Once the tips are processed, the account owner will receive a notification specifying the donor’s WeChat name (often not real names) and amount tipped.

According to , 10.7 percent of WeChat users have used the tipping feature. Out of those, 37 percent say that they tip from one ($0.15) to ten yuan ($1.5) per month. Four percent tip more than 100 yuan ($15). If we do the math, tipping translates into at least $52 million in aggregate per month.

For context, Medium subscribers a five-dollar monthly fee, which is then distributed to content producers. Per Medium’s Partner Program email, shared by Martin Bryant on , the claps program has shown promising numbers:

The highest-performing author on Medium's Partner Program earned $1,342.54 in the first two weeks of September. Average was $68.44

— Martin Bryant (@MartinSFP)

Whether Medium turns claps into a full-scale ecosystem remains to be seen. And on both WeChat and Medium, readership and donations are concentrated to a few accounts with large followings.

, who blogs about tech entrepreneurship and career development, has around 10,000 followers. The author told Crunchbase News that though “tipping feature [encourages] writers to produce good content,” only “ones that update daily with high-quality content” have the potential to become self-sufficient through micropayments.

According to Zhu, one of his articles on using code to standardize resumes got 15,374 clicks and 2174.44 yuan (almost $330) in tips. That was hard earned money, however. Zhu admitted that the article took him days to write and edit, something that he cannot do on a daily basis.

Not all has been sunshine and roses for WeChat, thanks to Apple’s determination to maintain its foothold in China.

The Apple-WeChat War

Tipping was introduced by WeChat . However, in April, Apple forced WeChat to the feature on its iOS app, officially initiating the to grab the China market. Apple’s In-App Purchase (IAP) guidelines collecting funds through means other than its own payment system, which made WeChat’s tipping feature a violation.

In response, some writers have included payment QR codes in their posts, or hoped for more traffic from Android users. But the impact of the removal was still among the content community, most of whom try to make a living off of their subscription accounts.

“When the tipping feature shut down, my goal of subsidizing my living costs fell through,” Can Yu, who runs a book review subscription account, told Crunchbase News. “While I still included a payment QR code at the bottom, I felt that reader engagement went down a lot without the donation button.”

However, a few days ago, months of discussions and anxiety among writers have finally been answered. Apple its IAP guidelines, allowing peer-to-peer donations. In this case, writers would be allowed to receive tips from their readers again. However, WeChat is required to make donations optional and cannot take a cut from the proceeds. The change might have been the fruit of Tencent CEO Pony Ma’s with Tim Cook prior to the iPhone 8 launch.

While everything seems to be back to normal, another conflict is looming. This January, WeChat mini programs, which are essentially apps housed within the all-powerful app. Some speculate that mini programs will eventually real apps and possibly become new revenue streams for writers.

Lessons From WeChat

In the U.S., blog platforms social elements, and chat apps mobile payment systems. We cannot help but wonder why WeChat has succeeded in micropayments.

First, articles published on subscription accounts can be sent to friends directly or shared on Moments (similar to your Facebook or Twitter feed). The built-in community makes distributing content much easier, something that Medium has been .

Second, to process a micropayment on WeChat, you don’t need to type in your credit card information or log into Paypal. Users, most of whom already have money deposited in their WeChat wallet, can reward writers with just a few taps on the screen.

WeChat’s everything-in-one characteristic may be geographically unique, as China already has . Therefore, Medium claps probably won’t catch up with WeChat tips anytime soon. But for those interested in scaling micropayments in the U.S., there are some lessons worth gleaning from China’s mobile giant.

iStockPhoto / BrianAJackson

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To be clear, we are not implying that creating a successful startup requires an American university degree or that an education in the U.S. is superior to anywhere else. However, we wanted to know how a U.S. education influences founders who were born and raised in Asia and why they chose to base their businesses in their home countries.

To satisfy our curiosity, we dug up companies with the most funding that met the criteria of Asia-based startups with U.S.-educated founders. Where these founders come from may not surprise you, but their reasons for relocating go beyond .

Charting The People And Their Startups

Among the top ten most funded companies in Asia with founders schooled in the U.S., five have already raised over a billion, and all have made .

China dominated the top ten list:

To give you a more in-depth perspective, we picked three companies representing different countries to dive into:

1. , China’s version of Yelp, has raised $4.3 billion to date. It’s backed by some of the most well-known VCs such as Sequoia China, DST Global, and Tencent Holdings. Since its inception in 2003, the startup has expanded from providing consumer reviews to offering group promotions, restaurant reservations, and delivery service. Founder and CEO , born and raised in China, graduated with an MBA from the Wharton School.
2. became the darling of Southeast Asia’s ride-hailing market after from Didi Chuxing and Softbank. The Uber rival has raised $3.4 billion and is currently . Its co-founder and CEO , originally from Malaysia, received a dual degree in Economics and Public Policy from the University of Chicago and went on to graduate from Harvard Business School.
3. , an online marketplace platform based in India, has raised $1.6 billion from investors including its e-commerce predecessors Alibaba and eBay. CEO , born in India, graduated from University of Pennsylvania with a dual degree in business and engineering.

To complete the picture of total funding amounts, we charted company distribution by country. The chart is limited to Asia-based companies whose founders were born in Asia, yet received their higher education from American institutions.

42 percent of Asian companies with U.S.-educated founders reside in India. China ranks as the second most popular location, where 25 percent of startups headed by U.S.-educated founders are headquartered. Others hail from Singapore and other, smaller Asian nations.

It came at no surprise that India and China took up most of the pie since the two countries to the U.S. As (lagging behind the U.S. and the U.K.), India also surpasses China in terms of startup numbers.

Founder Perspective

Crunchbase News had the opportunity to chat with an entrepreneur who makes up part of our dataset. Jason Gui, Co-Founder and CTO of , was born in Shenzhen, China. He attended high school in New Zealand, and graduated from the University of Pennsylvania in 2013 with a dual degree in mechanical engineering and marketing from the Wharton School.

His startup branched off from his senior design project, a pair of glasses that vibrates and helps drivers stay alert behind the wheel. Upon winning the and receiving feedback, Gui’s team decided to commercialize the device.

Gui has long been active in the entrepreneurship circle, dabbling with various projects at school and attending meetups in Philadelphia. Before Vigo, Gui started a video show called , featuring Chinese students studying abroad in the U.S.

“The overall education in the U.S. is a lot more freeform and entrepreneurial. It encourages you to innovate and test out your own ideas,” said Gui. “All of the opportunities and resources that Penn and Philly offered paved the way for [building my startup].”

After graduating from college, Gui attended ’s accelerator program in Shenzhen. When the three-month program ended, he flew back to San Francisco and set up an office there. Since then, Gui has been flying back and forth and coordinating between Vigo’s Shenzhen and San Francisco office.

But unlike his friends, who went back to China for bigger market opportunities, Gui returned due to the nature of his business. Though Gui’s company targets mostly U.S. and European markets, manufacturing and hiring in China makes a lot more economic sense for them. Gui also noticed that China has a lot of capital flowing, and those investors are looking for high-quality investments headed by China-affiliated talent overseas.

“Aside from the $150,000 from HAX, the $700,000 we raised in our seed round in 2014 all came from Chinese investors,” Gui told Crunchbase News. “I spent like six or seven months raising capital in San Francisco, but it didn’t work out. When I came back to China, I finished raising within a month or two.”

Doing business in China was all well and good, but Gui did experience some level of culture shock.

“In the U.S., when you are meeting an investor, you are probably meeting them in the office or at Starbucks. You sit down, talk about your company and they’ll get back to you later. In China, when you ask to meet an investor, they are like: ‘oh it’s my birthday tomorrow, come to my birthday party and we can discuss it there.’ ”

The unpredictability of China’s VC community also took Gui some time to adjust. Chinese VCs, though willing to invest, are fast-evolving and unregulated.

“We had five or six top-tier investors who signed term sheets and didn’t invest. There were like internal conflicts within the VC firm, [and other] random events beyond our control. It’s not like the U.S. where VCs have been around for 20 or 30 years,” Gui analyzed.

Despite the nuances in dealing with Chinese investors, Gui found setting up a location in his home city a positive move for his company after all.

To Stay Or Not To Stay?

Applying to U.S. colleges is already for international students in Asia, most of whom after graduation. However, trends indicate that you may want to consider leaving the saturated Silicon Valley tech market, and relocating to your home country, if you decide to start your own company.

Methodology

We excluded companies that already got acquired or went public. In other words, we only looked at private companies in Asia with founders schooled in the U.S.

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