Venture capitalists are continuing to invest in China, with USD964m put into 59 deals during the third quarter, up 22 per cent from USD790m invested in 73 deals during the same period of 2
Venture capitalists are continuing to invest in China, with USD964m put into 59 deals during the third quarter, up 22 per cent from USD790m invested in 73 deals during the same period of 2007, according to Dow Jones VentureSource. Over the first nine months of this year, China-based companies have raised USD3.29bn in venture capital, beating the previous full-year record of USD2.88bn set in 2001.
‘It’s clear that venture capital investors are still eager to put money into this emerging marketplace and, in many areas, they’re actually accelerating the pace of their investments,’ says Jessica Canning, global research director for Dow Jones VentureSource.
‘Already this year, the business and financial services, consumer goods and consumer services industries – three areas closely tied to emerging economies due to their focus on retail, manufacturing, media and advertising – have set annual investment records.’
According to Dow Jones VentureSource, China’s consumer services industry accounted for USD267m in investment with nine deals completed in the third quarter, up 57 per cent from USD170m in 15 deals during the same period last year. So far in 2008 the industry has seen a record USD731m invested in 37 deals, including USD143m invested in four deals for retail companies in the third quarter.
The business and financial services industry saw 13 deals completed in the third quarter, garnering USD254m, a 38 per cent increase over the USD184m put into the same number of deals during the same period last year.
The industry as a whole has seen a record USD712m invested in 44 deals thus far in 2008, with the business support services sector producing the vast majority of deal activity and investment, including 10 deals and USD238m in the third quarter.
China’s information technology industry saw investment decline 17 per cent to USD230m in from USD277m in the third quarter of 2007, while the deal count dropped from 29 to 18. The largest drop was for the Web-heavy information services sector, where investment fell 32 per cent to USD128m from USD188m and the deal count fell from 17 to eight. Nevertheless, the information services sector has enjoyed a record USD1.1bn in investment so far in 2008.
‘Larger deals drove investment in the third quarter as the median size of a venture deal in China remained at USD10m, the highest on record and the most of any region we track, including the US,’ Canning says. ‘We also saw the vast majority of deals and capital investment go to companies that are already generating revenues or are profitable.’
While the majority of capital, some USD640m, went to companies raising second or later-stage rounds, smaller early-stage deals were more numerous. Seed and first rounds made up 63 per cent of all venture rounds in China in the third quarter, while second rounds made up 22 per cent of the deal count and later-stage rounds accounted for 15 per cent.
