China Drives Record Venture Capital Dealmaking in Asia

The boom in venture capital activity in Asia reached new heights in Q2 2017: the quarter saw 2,166 venture capital deals worth a record $47 billion, including the $5.5bn financing of Didi Chuxing, which became the largest venture capital deal ever, according to Preqin.

In 2017 YTD, Asia accounts for 31% of venture capital deals, and 47% of global deal value. North America is the next most active region, accounting for 42% and 41% respectively.

However, fundraising has not grown at the same rate in recent quarters. Activity reached a quarterly peak of $11bn in Q3 2014, but saw a low of just $1.8bn in Q1 2017.

Similarly, quarterly exit activity has remained level in the past 18 months. Seventy-four exits were made in Q1 2016 for a combined $4.8bn, but quarterly totals have not exceeded $1.4bn since then.

Asia remains not as sought-after by VC investors

This may partially explain why Asia remains not as sought-after by venture capital investors. Two-thirds (66%) of investors will target North America in the coming 12 months, and the same proportion will seek investments in Europe. By contrast, just 47% of investors are targeting Asia in the next 12 months.

This proportion is growing, however, and 51% of venture capital fund managers report that they are seeing increased interest from Asia-based investors.

This investor interest is served by 198 Asia-focused venture capital funds currently in market, which are seeking a combined $69bn. These include the CNY 300,000mn China State-Owned Capital Venture Investment Fund, which is seeking to become the largest venture capital fund ever.

“In the past few years, Asia has seen a rapid expansion in the number and value of venture capital financings made in the region,” says Felice Egidio, Head of Venture Capital Products. “This has been driven primarily by activity in Greater China, with some companies becoming very large entities on par with the largest venture capital-backed companies in the US.”

“This expansion reflects the rapid growth of several major economies in the region, which provides a wealth of new investment opportunities for venture capital fund managers.”


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