Venture capital (VC) deals in China once again lead global investment activity in Q3 2018, accounting for seven of the 13 largest VC financings globally and nine of the top 11 financings in Asia-Pacific, finds Venture Pulse, KPMG’s quarterly analysis of VC trends.
Overall, VC-backed companies in the Asia region raised USD 17.6 billion across 391 deals in Q3 2018, including eight of the top ten deals globally. Total venture capital investment in Asia remained strong with year-to-date investment totaling USD 77 billion, surpassing Asia’s annual total of USD 63 billion in 2017.
Q3 2018 was a record quarter for venture-backed exit activity in both China and the Asia region as a whole, largely due to high IPO prevaluations. Hong Kong’s IPO market also remained strong as new listing rules allowed pre-revenue biotech firms and companies with variable voting rights to list on the Hong Kong Stock Exchange. Irene Chu, Partner, Head of New Economy and Life Science, Hong Kong, KPMG China, says: “We anticipate continued strength in terms of the number of companies going public during the final quarter of the year, although recent volatility in the market and global trade tensions could weigh in on investor sentiment and valuation.”
While Singapore accounted for the largest deal in Asia this quarter with a USD 2 billion raise by ride hailing company Grab, China continued to be a key driver for VC investment and market activity in the region. Bitcoin mining equipment manufacturing company Bitmain drew a significant amount of attention this quarter, first with its USD 1 billion series B round, then by filing for an IPO on the Hong Kong Stock Exchange in September.
Other top deals included electric vehicle manufacturer Xpeng Motors and audio streaming platform Ximalaya which both raised over USD 596 million. Also notable in the deal rankings were automotive retail platform Souche.com and ride sharing conglomerate Didi Chuxing, which took in USD 578 million and USD 500 million respectively in late-stage VC.
Egidio Zarrella, Partner and Head of Clients and Innovation, KPMG China, says: “Asia will continue to see a lot of VC investment over the next few quarters. Of all of the areas of investment, AI stands out as the most prominent in the eyes of VC investors. Not only is it applicable across many sectors and industries – from healthtech to manufacturing, but it is seen as particularly critical for the future of financial services – helping to avoid money laundering and prevent fraud.”
New energy vehicles have become increasingly attractive to VC investors in China over the past year. During Q2 2018, Byton raised approximately USD 500 million, while Singulato Motors raised USD 474 million. Another electric vehicle manufacturer, Dearcc, also raised USD 298 million in pre-series A funding in Q2 2018. These investments were followed in Q3 2018 by a USD 596 million raise by
Xpeng Motors – an auto startup focused on developing battery-powered technologies.
Chinese investors have also placed bets on other automotive ancillary services. During Q3 2018 for example, automotive maintenance provider Tuhu raised USD 450 million to improve user experience and improve standardization across services.
Autonomous vehicles continue to draw significant investment from corporates in Q3 2018, with most forging partnerships with OEMs in order to move initiatives forward. In September, the Beijing Municipal Government issued license plates to seven companies – including subsidiaries of Tencent, Baidu, and Didi Chuxing – for autonomous vehicle testing, highlighting the speed at which the technologies are evolving in the region.
Philip Ng, Partner, Head of Technology, KPMG China, says: “Autotech continues to attract attention from VC investors in China – from autonomous vehicles to ride sharing. VC investors are keenly interested in new and competitive options such as electric vehicles, battery power and charging infrastructure.”
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