China Deals Barometer Report: Venture fundraising hits nine-month low of $2.9b in Feb

Privately-held firms headquartered in mainland China, Hong Kong, Macau, and Taiwan raised a meagre $2.9 billion from venture investors in February. The fundraising value, down 12.5% month-on-month (MoM), was the lowest since May 2023.

While some of the drop can be attributed to the week-long Lunar New Year holidays in February, the weakness in fundraising shows that the venture capital market is still grappling with the challenges of a difficult exit landscape, geopolitical tensions, and macroeconomic uncertainties.

The 163 private equity and venture capital deals recorded in February were 40.7% less than those in January, and also the lowest since March 2022, according to proprietary data compiled by DealStreetAsia.

On a year-on-year basis, the monthly deal count was 26.2% less than in February 2023, while the funding value was 56.2% less than the $6.6 billion recorded a year ago, reflecting a serious downturn. 

Megadeals account for almost 58% of the total funding

February saw the completion of only one deal worth over $500 million. In total, there were six megadeals—transactions valued at at least $100 million—that amassed around $1.7 billion in total, or 57.5% of the total deal value.

In the biggest megadeal in February, Shanghai municipal government-backed Shanghai Spacecom Satellite Technology (SSST) pocketed 6.7 billion yuan ($933 million) in a Series A funding round for the construction of a low-orbit satellite constellation. Led by the National Manufacturing Transformation and Upgrading Fund, the funding round saw the participation of CAS Capital, Guosheng Capital, and Hengxu Capital (affiliated with SAIC Motor Corp).

The second-largest deal was sealed by pig-farming firm SciGene. Tongwei Agricultural Development, a subsidiary of Shanghai-listed photovoltaic new energy firm Tongwei, paid 1.65 billion yuan ($229.3 million) for a 30% stake at SciGene. The transaction valued the firm at 5.5 billion yuan ($764.2 million).

In another megadeal, Unitree Robotics, a maker of quadruped robots, secured 1 billion yuan ($139 million) in a Series B2 round participated by the likes of Chinese food delivery giant Meituan, deeptech venture capital firm Source Code Capital, and CITIC Securities-affiliated Goldstone Investment.

The remaining three megadeals happened across industries like semiconductors, pharmaceuticals, and automobiles.

Deals in the Series A and earlier stages remained an investor favourite in February. Series A and earlier stages recorded the completion of 84 deals, or 51.5% of the month’s deal count, while the $1.6 billion capital raised at this funding stage accounted for 53.9% of the deal value. 

In contrast, there was little activity in late-stage financing. The fundraising of Chinese biopharmaceutical firm Evopoint Biosciences was the only deal that took place in the Series E stage in the month. Led by Tencent Investment and Shanghai-based state investor Guoxin Investment, the firm snapped 700 million yuan ($97.4 million) in the round.

Megadeals of February 2024

Space tech deals raise the most funds

Thanks to the megadeal sealed by SSST, aerospace was the top industry in terms of deal value. Private rocket developers including Galactic Energy and Orienspace have sealed big rounds in December 2023 and January 2024 respectively.

China expects to make around 100 space launch missions in 2024, up from the 67 launches conducted in 2023, state media reported on February 27.

Meanwhile, chip-making firms topped in terms of deal count, with the completion of 32 deals. 

Wuhu-based Semiconductor Integrated Display Technology (SIDTEK), which engages in the production of micro-OLED display products, a critical component of near-eye electronics devices that require tiny and high-resolution displays, notched over 1 billion yuan ($139 million) in a Series A funding round.

The round roped in several state-affiliated investors including Wuhu Construction Investment, Sichuan Manufacturing Industry Fund, and Meishan Tianfu Guidance Fund.

However, except for SIDTEK’s megadeal, which accounted for 39% of the total $322.5 million semiconductor funding, big-ticket investments were scarce in the sector.

Shenzhen Capital Group tops investor list

The Shenzhen Capital Group, an investment firm based in southern China’s Shenzhen City, was the most active investor in the month, injecting $210.7 million into five privately owned firms.

Set up in 1999 by the Shenzhen municipal government and commercial shareholders, the firm oversees 473.9 billion yuan ($65.8 billion) in assets under management (AUM). As of 2023, the firm has injected 107.2 billion yuan ($14.9 billion) into 1,785 firms, of which 263 went public across 17 capital markets worldwide, according to the company website. 

CAS Star, a Chinese investment firm that focuses on early-stage hard tech startups, was the most active investor by deal sum, despite injecting capital into three firms. The firm, led by co-founding partner Mi Lei, a hard-tech industry veteran and researcher at the Xi’an Institute of Optics and Precision Mechanics of the Chinese Academy of Sciences (CAS), made itself to the top of investor list thanks to its participation in the megadeal of Shanghai Spacecom Satellite Technology. 

Top Investors of February 2024

Note: In our monthly analysis for February 2024, 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.