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Greater China Venture Capital Activity Snapshot – February 2014

by Joel Coulson

  • 17 Feb 2014
  • PE
  • VC

Over the last few years there have been concerns over the state of the Chinese venture capital market. But despite fundraising dropping over the course 2013 in comparison to previous years, recent developments, such as changes in IPO restrictions and the emergence of a stabilized growth rate in early 2014, could provide an encouraging boost to the industry for the coming year ahead. 

Preqin’s Venture Deals Analyst shows 214 venture capital deals in the Greater China region during 2013 carrying an aggregate value of $2.3bn, which is an 11% decrease in number of deals but an overall decrease of 15% in aggregate value on the 2012 activity. 

When breaking this data down further into quarters, it shows a rather sporadic fluctuation: 57 deals at an aggregate value of $709mn in Q2, in Q2 there were 34 deals at an aggregate value of $310mn, 58 deals at an aggregate value of $397 in Q3 and in Q4 there were65 deals at an aggregate value of $852mn. 

A potential reason to explain such an uptake in Q4 compared to Q2 and Q3 could be due to the loosening of restrictions on new IPO listings in the Greater China region, announced in Q4 2013, that are to be implemented across a 10 year span making IPO’s a lot more attractive to venture capitalists and providing investors with an exit strategy in the future. It is interesting to note that during 2013, Series A Investments saw the most activity in regards to investment types. In Q4 2013 there were 14 Series A Investments with an aggregate value of $72mn, and throughout the year Series A represented 27% of all recorded stage activity. 

In 2013, venture capital backed exits were up 24% on 2012 but venture capital backed IPO’s were down 13%. This could be explained by the new legislation thus encouraging investors to hold onto their investments longer until the legislation is fully implemented or to exit through different avenues; trade sales were by far the largest exit strategy in 2013, representing 45% of all exits and an increase of 17% on the raw number of trade sales in 2012. 

Currently, in 2014, Venture Deals Analyst has identified four venture capital backed exits in Greater China, 2 of which being IPO’s, compared to 0 venture capital backed IPO’s in January 2013. In terms of deals, Preqin’s data shows 15 investments in January 2014, at an aggregate value of $476mn, showing that the number of deals are down by 32% on the same month in 2013. 

The biggest deal in 2014 YTD is a USD 130 million Series A funding round of Renrendai, a peer-to-peer online lending platform, led by Shanghai based Trustbridge Partners.

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