Artificial intelligence and autotech are key areas of investment
Mainland China recorded robust venture capital (VC) activities in Q3 2017, with artificial intelligence (AI) and autotech key areas of investment, finds Venture Pulse, KPMG’s quarterly global report on VC trends.
Continuing the momentum in Q2 2017, companies in Mainland China attracted USD 10.2 billion of VC investments from 95 deals between July and September, with a number of mega-sized deals recorded. Mainland China accounted for half of the top 10 global VC financings, and 10 out of the top 12 deals in Asia. These included the USD 2 billion fundraising by news aggregator Toutiao and USD1.6 billion raised by electric vehicle manufacturer BAIC BJEV.
The report highlights that AI, robotics, and other tech-enabled next-generation sectors in China are attracting significant investment, and the pace is expected to continue.
Egidio Zarrella, Partner and Head of Clients and Innovation, KPMG China says: “AI has been the hottest topic for VC investors for several quarters. The question is how it can be integrated into commercialised products. Industries such as financial services and healthcare are concentrating on AI as a means to transform data analytics, but the possibilities are almost endless when it comes to the applicability of AI. There is no doubt it will continue to be a trend for years to come.”
Application of AI in facial recognition technologies is gaining traction, and more rounds of fundraising in the sector are expected in Q4 2017.
Philip Ng, Partner and Head of Technology, KPMG China, says: “AI has the potential to transform service delivery in China – we have already seen AI being adopted rapidly in public security, fintech, autotech, consumer products, and healthcare sectors. There are also increasingly larger AI deals closed this quarter and we expect more sizable deals to be closed in the next few quarters.”
Tech giants in China are also looking at ways to build their AI capabilities in-house. Many companies are investing significantly to boost their technology capabilities as well as expanding the size of their AI teams. In many cases, the technology and talent are acquired globally, according to the report.
In addition, the report has identified education technology to join fintech and autotech as a key industry to look out for due to its potential to open up education channels over the internet.
Globally, the number of VC deals dropped to 2,672 in Q3 2017, the lowest since 2011. However, total investment remained strong at USD39.4 billion, which was the fourth-highest quarter since 2010.
The continued decline in the number of deals, particularly at the early stages of fundraising, reflects the cautionary nature of investors. Many investors are conducting significant due diligence even at the seed and angel funding stages, the report noted.
Still, VC investments are expected to remain relatively steady in Q4 2017. Corporate investments, which are becoming increasingly important, will remain strong throughout the remainder of the year and well into 2018, with numerous traditional companies across jurisdictions looking to invest in innovation.
Zarrella concludes: “AI will continue to dominate the headlines as the technology becomes integrated into other sectors and companies begin to realise monetisation opportunities. With fintech activity ripe across Asia, from the digital currency movements in Japan to the transformation of payment methods in India, investors will continue to support initiatives aimed at digitising the banking and financial services sector.”
The Q3 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.