China Deals Barometer Report: At $5.5b, startup fundraising strikes 4-month high in Dec

Dealmaking continued to warm up in December, as the Greater China market completed a total of 234 investments, up 6.4% from November. 

Deal count in December 2022 showed a significant jump compared to the corresponding month of 2021, which recorded 185 transactions, according to proprietary data compiled by DealStreetAsia.

With almost $5.5 billion raised, December’s deal value hit a four-month high, recording a 41% growth over the previous month. However, it was nearly 40.3% lower when compared to December 2021.  

In total, 2022 saw startups conclude a total of 2,290 deals, up 21% from 2021. But the total capital raise of $53.2 billion was 39.2% less than the $87.4 billion recorded in 2021. 

Investors expect PE-VC deal activity to pick up in 2023 after China dismantled its stringent zero-COVID policy on December 7.

Megadeals as the major contributor to funding 

Megadeals, referred to as investments worth at least $100 million, were one of the major contributors to the December deal value. The month logged a total of nine megadeals raising nearly $3.2 billion, accounting for 58% of the total financing.

In spite of the 10 megadeals in November, the total mega deal value in December surged 43.3% over the $2.2 billion clocked in the previous month. State Fuel Cell Technology Corporation (SFCC), a Chinese developer of hydrogen fuel cell vehicles, topped the list raising 4.5 billion yuan ($647.6 million) in a Series B round. 

There were eight other deals in the range of $100-500 million that collectively gathered over $2.5 billion, up 66.7% from $1.5 billion one month earlier. Xi’an ESWIN Material Technology, the integrated circuit (IC) and solutions unit of Beijing ESWIN Technology Group, secured the second-largest deal in December. The firm raised 4 billion yuan ($575.7 million) in its Series C round led by CNBM New Materials Fund, making it the largest-ever venture round raised by a semiconductor firm in China. 

The third-largest deal was made into Chint Group‘s affiliate Zhejiang Chint Anneng Power System Engineering Co Ltd, a digital energy firm providing rooftop photovoltaic (PV) systems for households in rural China. The firm gathered nearly 4 billion yuan ($574.8 million) across two funding rounds. Parent firm Chint Group is a Chinese conglomerate with businesses across new energy and electrical equipment in over 140 countries and regions worldwide.

As investments continue to flow into sectors including new energy vehicles (NEVs), semiconductors, and renewable energy, Aerospace Times Feihong Technology Co (ATFTC) emerged as the only electronic warfare drone maker on the list. ATFTC, a subsidiary of the state-owned China Aerospace Science and Technology Corp, secured 3.8 billion yuan ($552.1 million) from a slew of investors such as Guokai Manufacturing Transformation and Upgrading Fund, CITIC Securities, and Yuexiu Industrial Fund.  

The Series B stage accounted for the lion’s share of deal value in the month with startups garnering $2.2 billion in total, or 39.8% of the overall financing in December. 

Series A and earlier funding stages led in terms of deal count. At 111, early-stage deals accounted for  47.4% of the total deal count. As the largest Series A fundraiser, Sany Heavy Truck, a truck manufacturer affiliated with China’s Sany Heavy Industry, raised almost 1 billion yuan ($145 million) to invest in the R&D of its new-energy heavy-duty trucks.

Only three pre-IPO transactions took place in December amid the stock market volatility.

List of megadeals (Dec 2022)

Semiconductor remains an investor favourite

Semiconductor firms collectively raised nearly $1.2 billion in December, up 219.3% from $369 million in the previous month; while the 42 deal count signified a major month-over-month (MoM) growth of 68%.

China remains the world’s largest semiconductor market, as monthly sales of chips in the country stood at $13.4 billion in November 2022, or 29.4% of the global sales, according to the World Semiconductor Trade Statistics (WSTS) The US was the second largest market, with a monthly sales of $12.1 billion, or 26.7% of the global sales. 

Moore Threads, a Chinese semiconductor player that develops graphics processing units (GPUs), raised 1.5 billion yuan ($215.2 million) in a Series B round led by China Mobile Digital New Economy Industry Fund and China’s domestic insurer Hexie Health Insurance, making it one of the megadeals of the month. 

The medical devices industry logged a total of 28 deals but it only raised a combined $482.9 million. 

State-linked investors top list 

CICC Capital, the global private equity (PE) platform of China International Capital Corporation Limited (CICC), and its affiliates emerged as the top investor in December, landing a total of eight deals worth $536.5 million.  

In spite of investing in only six companies, China’s state-owned carmaker SAIC Motor and its affiliates continued to back a slew of hard tech and deep tech sectors. The Shanghai-based automotive group, which primarily invests through three affiliated investment companies, namely SAIC Capital, Hengxu Capital, and Shang Qi Capital, collectively invested about $1.2 billion in December.

State Development & Investment Corporation (SDIC), one of China’s largest state-owned investment holding companies, notched the third spot as it invested in six venture deals worth $857.5 million.

Top investors (Dec 2022)

Note: In our monthly analysis for December 2022, we have put together detailed charts of prominent deals, active investors, deal stages, and the most attractive sectors that have bagged the maximum venture dollars in the Greater China region.

Our database only considers deals officially announced by the related investee, investor(s), and/or financial advisor, while information based on market rumours and news reports citing sources is excluded.

For a more detailed analysis, and to enable comparison between primary and secondary markets, DealStreetAsia has started tracking deals of all sizes since April 2020, as against considering only transactions worth more than $10 million earlier.

We have also introduced a standardised system for industry classification. It currently includes over 50 industries, as well as over 45 new economy and high-tech verticals, which will progressively increase to adapt to local market conditions in our closely watched regions of Greater China, Southeast Asia, and India.