Chinese VC Investors Continue to Actively Look to Acquire Overseas

Global funding into venture capital (VC)-backed companies declined in 2016 Q3, however Chinese VC investors continue to actively look to acquire overseas, finds recent KPMG analysis.

Global VC investment in Q3 declined 14 percent from the previous quarter, to USD24.1 billion, the lowest quarterly funding total since 2014 Q3. Global deal activities, however, climbed slightly from Q2 to 1,983, according to Venture Pulse, the quarterly global report on VC trends published jointly by KPMG International and CB Insights.

In China, 84 VC investment deals were recorded in the third quarter totalling USD3.9 billion, compared to 79 deals and USD5.7 billion three months earlier.

Lyndon Fung, Partner, U.S. Capital Markets Group, KPMG China, “It’s becoming more of a buyer’s market in China. There’s less bidding going on and VCs are taking more time to evaluate each company. Investment committees are asking deal teams to put personal funds into projects to ensure they have a real stake in a company’s success.”

Irene Chu, Partner and Head of the High Growth Technology and Innovation Group, KPMG China, adds: “Chinese VC investors are focusing on markets outside of China, taking advantage of government incentives.

In particular, Chinese companies have recently acquired or invested in technology companies in Israel, Canada and the UK. Israel based companies have been especially keen to work with tech VC funds in China in order to promote their technologies to the Chinese market for their mutual benefit.”

Over the next few quarters, Asia based VC investment is likely to remain focused on technology enablement – using technology to help improve service or product quality or to make them more accessible for individuals.

The healthcare sector is poised to be a big winner in this regard, both in terms of providing accessible primary healthcare and in terms of making processes like booking appointments and writing prescriptions easier for both doctors and patients, according to the report.

Investment in entertainment and media technologies is also expected to rise heading into 2017.

Chu concludes: “In Asia, the next wave of innovation will be about building globally competitive companies. To excel, companies need to understand how foreign businesses are run including their different cultures and management styles.”

 

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