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
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 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.”