(Yicai) Sept. 18 -- The founder of Chinese market research firm IT Juzi and other industry insiders are disputing the accuracy of the data used in a report in the foreign media that claims that the number of new startups in China plummeted 98 percent in 2023 from 2018, and they point to the difficulties in measuring China's dynamic entrepreneurial landscape.

Venture capital funding in China has dried up, leading to a sharp decline in new company formations, the Financial Times reported on Sept. 12. Last year there were just 1,202 startups set up in China compared with 51,302 in 2018, the report said, citing data from IT Juzi.

“The cited data is inaccurate,” Wen Feixiang, founder of Beijing-based IT Juzi, said on social media on Sept. 14. “Although this may represent the number of new companies we recorded in 2023 over a specific period, it does not equate to the total number of startups."

IT Juzi selectively includes companies in its database and the figures do not cover all new firms set up, Wen said. There are challenges with regard to the timely data collection of newly established companies, which can lead to the underreporting of numbers, she added.

By contrast, Li Jinxiang, founder of quantitative investment data platform Rhino Data, told Yicai that around 10 million new companies were formed in 2023, a surge of 48 percent from 2018’s 6.8 million.

But there are fewer companies receiving venture capital investment, Li said. Some 12,666 firms received investment from private equity companies last year, a dive of 36 percent from 2018.

And only 30 percent of these 12,666 firms publicly disclosed the investment, Li said. The financing raised by the remaining 70 percent was identified through data mining. "Many people don't notice these undisclosed funding events, and without access to professional databases, the investment climate feels colder," she added.

"A lot of investment these days is concentrated in B2B enterprises in the advanced manufacturing, new energy, and healthcare sectors. These companies have less incentive for public relations compared to the consumer internet boom before 2018," Li said.

There were 3,033 fundraisers in the first half, a drop of 37.6 percent from the same period last year, according to figures from Zero2IPO Group. One company raised CNY60 million (USD8.4 million), but excluding this case, the total investment amount raised over the period was CNY196.7 billion (USD27.7 billion), a dive of 38.7 percent year on year.

Venture capital firm Tiantu Capital’s losses widened more than seven times in the six months ended June 30 from a year earlier to CNY748 million (USD105.4 million). While net profit attributable to shareholders slumped 281.5 percent to losses of CNY740 million.

But despite the downturn in angel funding, some sectors are showing promise. The advanced manufacturing and new energy sectors accounted for 35 percent of all fundraisers last year, triple the proportion in 2018 and this trend is set to amplify this year.

And there is more large-scale financing. In the first six months, there were 26 venture capital investment rounds with a scale of CNY1 billion or above, according to PEdaily Research data. They raised a total of CNY64.9 billion (USD9.1 billion), accounting for 33 percent of the total investment in the market, an increase of 1.6 percentage points year-on-year.

Editor: Kim Taylor