China remains a top destination for venture capital (VC) investment in Asia, with total capital invested in the country increasing to USD 3.6 billion in 2017 Q1, from USD 3.5 billion in the previous quarter, finds Venture Pulse, KPMG’s quarterly global report on VC trends.
Philip Ng, Partner and Head of Technology, KPMG China, says: “China-based companies have been very active in VC investments in their pursuit of growth and innovation. China, on the other hand, also possesses a vibrant tech start-up community, which makes it a popular destination for VC investments.”
Investors in Asia were cautious, with a noticeable decline in the total number of VC deals to 258 from 403 deals in 2016 Q4. However, there were also a number of unicorns. This was led by China’s Ofo, which raised USD 450 million and was the largest bike-sharing investment round on record globally, the analysis finds.
Other fundraisings in China that were in the top 10 global VC deal rankings were a USD 600 million deal by Shanghai-based electric vehicle startup NIO, a USD 360 million Series A funding by self-service courier firm Hive Box Technology, and a USD 350 million transaction from video sharing and live broadcasting app developer Kuaishou Technology.
Lyndon Fung, Partner, US Capital Markets Group, KPMG, says: “2017 is poised to be an impressive year for VC investments in China. It will be interesting to see how capital is deployed by investors, but Q1 has already offered several clues. We see several indicators that investors may be placing their confidence in larger scale investments.”
Globally, the number of VC transactions continue to fall with 2,716 deals completed in 2017 Q1 compared to 3,201 in 2016 Q4. Even though deal activity declined for the fourth consecutive quarter, VC investments grew to USD 26.8 billion in 2017 Q1 from USD 23.8 billion in the previous quarter. In Asia, VC investments increased to USD 5.6 billion from USD 5 billion in the previous quarter.
In terms of sectors, 2017 Q1 saw a significant amount of interest in medtech globally, particularly in the US, Israel and Canada. The Asian medtech market, on the other hand, is still maturing and has yet to achieve a strong presence. However, the potential of the Asian medtech market is significant due to its large consumer base. In China, for example, the report notes support for healthcare research and technology in the coming years.
Chinese VC investments in foreign startups are expected to continue in areas such as deep tech (including AI, cognitive learning, Internet of Things, and blockchain), environmental and healthcare technologies. Significant technology investments are expected in the coming quarters in areas such as air pollution, healthcare and the needs of an aging population. More activity is also expected in the education sector.
Deep tech areas such as artificial intelligence, big data, cognitive learning and robotics are expected to continue to receive strong attention and backing in China and other jurisdictions. Healthcare technologies, fintech, and e-commerce are also expected to be strong sectors in Asia in Q2 and beyond.
Egidio Zarrella, Partner, Clients and Innovation, KPMG China, concludes: “Chinese companies are innovating and technology is the obvious choice to develop new sales channels and respond to customer needs, while reducing costs in both headcount and working capital.”
The Q1 2017 edition of the Venture Pulse report produced by KPMG Enterprise’s Global Network for Innovative Startup, analyzes the latest global trends in venture capital investment data and provides insights from both a global and regional perspective. KPMG Enterprise has expanded the scope of Venture Pulse; this edition of the quarterly series provides in-depth analysis on the lifecycle of venture capital investments across the Americas, EMA and ASPAC, including a look at investment activity such as valuations, financing, deal sizes, mergers & acquisitions, exits, corporate investment and industry highlights.
KPMG China operates in 16 cities across China, with around 10,000 partners and staff in Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 152 countries and regions, and have 189,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies.
Quarterly global report on VC trends published by KPMG Enterprise.