China Deals Barometer Report: At $4.8b, PE-VC dealmaking rebounds to hit four-month high in June

Dealmaking activity in Greater China rebounded to a four-month high in June as 231 startups raised a combined $4.8 billion, a 75.7% month-on-month (MoM) jump, according to proprietary data compiled by DealStreetAsia. 

The deal count of 231 in June marked a growth of 17.3% from the prior month, the data showed.

In terms of a year-on-year (YoY) comparison, the deal volume in June dropped by 5.7% over the same month last year, while the deal value increased slightly by 2.7%.

When it comes to the first six months of this year, startups in Greater China collectively secured $25.7 billion across 1,253 venture deals. The deal value booked a 8.8% growth over the same period in 2022, while deal volume spiked 29.4%.

Megadeals make up almost 60% of deal value

There were 13 megadeals — transactions worth at least $100 million — in June, compared with only five in the previous month. The 13 big-ticket deals raised a combined $2.9 billion, which was up 93% from May’s $1.5 billion, and accounted for 59.4% of the total startup financing in June 2023.

Anhui YOFC Advanced Semiconductor Company (YASC), which engages in the R&D and manufacture of third-generation semiconductor products using materials including silicon carbide (SiC) and gallium nitride (GaN), was the top scorer of the month. 

As the largest semiconductor deal in China this year, the firm notched 3.8 billion yuan ($562.3 million) in a Series A financing round, participated by a slew of notable state-affiliated investors such as CNBM New Materials Fund and CICC Capital. 

Third-generation semiconductors such as silicon carbide, known as SiC, are equipped with better energy efficiency compared with silicon, which is crucial when it comes to lowering carbon emissions. They are becoming increasingly crucial in sectors including new energy vehicles and mobile communication industry, as China strives for self-reliance in chipmaking amid intensifying crackdown from the US.

The second-largest deal of the month was secured by ESWIN Computer Technology, a Chinese provider of artificial intelligence of things (AIoT) chips and services, which secured 3 billion yuan ($421 million) in a Series D financing round co-led by two state-owned investment platforms — Beijing Financial Street Capital Operation Group and Guoxin Venture Capital. 

In another semiconductor megadeal in June, Jiangsu Xinhua Semiconductor Technology also snapped 1 billion yuan ($140.5 million) in a Series B funding round participated by CNBM New Materials Fund, CCB Investment, and Oriza-Rivertown Capital, among others.

Investments at Series A and earlier funding stages continued to dominate the fundraising scene, accounting for 58.4% of the month’s total deal count. The early-stage deals amassed $1.8 billion, or 37.3% of the total deal value.  

In contrast, Series E and later funding stages only booked two venture deals worth $29 million, which shows that investors remain picky with late-stage bets.

Energy storage bags highest number of deals

China’s 2060 carbon neutrality target has prompted companies from the new energy to energy storage and management sectors to turbocharge the country’s energy transition. Energy storage, in particular, saw heightened investor interest with 31 venture deals worth $533.5 million — the most favoured sector in June in terms of deal count. In one of the biggest deals in this sector, Sunwoda Electric Vehicle Battery (EVB) bagged 1.65 billion yuan ($228.3 million) in an equity financing round. 

Unsurprisingly, semiconductor ranked first in terms of deal value, with the completion of 29 venture deals worth $1.3 billion. 

Software was the second most-funded sector, sealing 16 deals worth $658.8 million. A total of three megadeals took place in the sector, including Light Year, a nascent artificial intelligence (AI) company, which was acquired by Chinese food delivery giant Meituan. The deal consisted of almost $233.7 million in cash and over 366.9 million yuan ($50.7 million) worth of debt, per exchange filing. 

In another megadeal in the sector, Singularity AI Technology Limited, was acquired by Kunlun Tech via its holding subsidiary Star Group Interactive Inc. Kunlun Tech was planning a $400-million capital injection into its subsidiary to acquire all the equity of the AI firm via share issue. 

CICC Capital & affiliates top investors’ list

CICC Capital, the flagship private equity (PE) unit of Chinese investment bank China International Capital Corp Ltd (CICC), and its affiliates were the top investors of June, participating in nine deals alongside other investors. The nine startups raised a total of $671.7 million. 

In July, the firm closed a new blind-pool equity investment fund at 4.2 billion yuan ($579.2 million) to focus on the technology industry, roping in capital commitments from privately-run financial institutions, listed companies, tech firms, as well as China’s government guidance funds and state-owned companies, the firm said in a statement. 

Oriza Holdings, a state-owned investment firm in eastern China’s Suzhou City, ranked second last month with investments in six deals alongside its affiliates. 

June also saw venture capital powerhouse Sequoia split into three independent entities — Peak XV Partners, which will focus on India & Southeast Asia, HongShan to focus on China, and Sequoia Capital representing the US and Europe. The split-up did not seem to hinder HongShan‘s dealmaking activity, which injected capital into five startups in June. 

Note: In our monthly analysis for June 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.