China Deals Barometer Report: Startup fundraising hits six-month high at $6.7b in Feb

February proved to be a record month for dealmaking in the Greater China market as startups raised $6.7 billion, the highest monthly deal value since September 2022. 

Thanks to one megadeal that contributed to almost half of the monthly financing, the total fundraising in February was 23.1% higher than in January when startups had raised over $5.4 billion. The month’s deal count of 222 marked a 16.2% increase from 191 deals in the previous month, according to proprietary data compiled by DealStreetAsia.

The lifting of COVID-19 restrictions charged up PE-VC activity, which translated to significant year-over-year (YoY) growth. The deal count in February more than doubled from the same month in 2022, while the deal value ricocheted by 99.7%. 

Startups in Greater China collectively sealed 413 deals worth $12.1 billion in the first two months of 2023. The deal count represented an 89% increase over the same period in 2022, while the deal value went up 58%.

COFCO Fortune’s $3.1b deal props up fundraising 

COFCO Fortune, a subsidiary of China’s largest food manufacturer COFCO Group, snapped up $3.1 billion in a strategic investment, making it the top megadeal of the month. The firm owns China’s major food labels such as dairy product manufacturer Inner Mongolia Mengniu Dairy Group and wine brand Greatwall.

The firm secured fresh funding from investors including China’s National Council for Social Security Fund, which manages the country’s national pension fund. The megadeal alone contributed to 46% of the month’s total financing. 

In another megadeal in February, Zeekr, the electric vehicle (EV) brand of China’s Geely Automobile Holdings, closed $750 million in a funding round that valued the brand at $13 billion. 

The fresh funding, which was earmarked to support Zeekr’s technology research and global expansion, saw the participation of new investors including Amnon Shashua, the CEO and founder of autonomous driving technology firm Mobileye Global, and the Guangzhou city municipal government’s investment arm Yuexiu Industrial Fund. 

Solar cell and module manufacturer SolarSpace emerged as the third-biggest fundraiser of the month with the completion of its Series B and Pre-IPO rounds at $442.5 million. SolarSpace, which secured capital from investors including EBI Investment, Sinochem Capital, and Yingke PE, planned to invest the proceeds in the construction of manufacturing facilities as well as R&D.

February saw the completion of six megadeals or investments at a size of $100 million or above. Their fundraising sum of over $4.8 billion accounted for 72.5% of the month’s total financing. 

Investments at Series A and earlier funding stages remained dominant, while dealmaking remained stagnant in companies closer to a public listing. The 124 deals in the earliest funding stages accounted for more than half of the deal count in February. 

In contrast, Series E and later funding stages only clocked three deals that accounted for 1.4% of the month’s total funding. This was very similar to January when only three investments were made at this funding stage, which translated to 1.6% of the month’s total funding. 

List of megadeals (Feb 2023)

Semiconductor remains investors’ favourite

Semiconductor firms have continued to ride on the tailwind, as the country strives for self-reliance in chipmaking amid intensifying crackdown from the US. Startups in the industry sealed 27 deals to remain as the most favoured sector in February.

Tian Yu Semiconductor Energy, which manufactures silicon carbide epitaxial wafers – a key ingredient in high-power devices – is one example. The firm bagged $176.7 million in a funding round to expand its production capacity and to prepare for its initial public offering. 

However, except for Tian Yu’s megadeal, big-ticket investments were absent in the sector, wherein chip startups bagged only $471.1 million in the month. This also applies to the energy storage sector, the second most-invested industry in February, which saw 25 firms raising a total of $214.1 million. 

Thanks to COFCO Fortune’s $3.1 billion, the food sector saw its fundraising total cross over $3 billion to become the best-funded industry of the month. With only six deals, the sector came twelfth in terms of deal count.

Automobile and parts ranked as the second most funded industry, with the fundraising sum amounting to $867.8 million for 21 venture deals. This was largely driven by Zeekr’s $750 million deal, as the value of the remaining transactions was at $14.5 million or smaller.

Addor Capital tops the list 

Addor Capital, which invests in early- to growth-stage startups in the health sector, emerged as the top investor in February, landing a total of seven deals worth $30.5 million. 

The firm, which also invests in clean technology, new materials, advanced manufacturing, consumer services, culture, and technology, media, and TMT, recorded about 121.8 billion yuan ($17.5 billion) in total assets under management (AUM) as of January 2022. It has backed 1,135 startups, 221 of which are listed on stock exchanges at home and abroad.

Yuexiu Industrial Fund, the investment arm of Guangzhou city municipal government, emerged as the second top investor. The firm has backed a total of six deals worth $977 million. Founded in 2011, Yuexiu Industrial Fund specailises in equity investment, mezzanine investment, FOF management, and quantitative investment. 

Shunwei Capital, which manages over $3 billion, also invested in six transactions, but the total value of these deals amounted to only $92.3 million.

List of top investors (Feb 2023)

Note: In our monthly analysis for February 2023, 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.