China Deal Review: Health-tech startups take lead, snag $1.4b in Q4

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Chinese startups have raised at least $4.866 billion across 111 venture capital investments in the fourth quarter of 2019, according to proprietary data compiled by DealStreetAsia.

This is our first China VC market quarterly review of venture capital transactions worth at least $10 million in the Greater China region between October 17 and December 24, 2019.

Please find below detailed charts and analysis of prominent deals, active investors, deal stages and top sectors grabbing the most venture dollars.

Growth-stage startups remain attractive

Venture capital investments into startups at Series B round were the most active in terms of the deal volume in the fourth quarter, with 35 transactions accounting for a combined $1.014 billion. Companies at the Series A round and angel/seed stage came second with 30 investments, followed by those at Series C round with 21 deals.

Against the headwinds of a gloomy domestic economic environment and geopolitical uncertainties, China’s growth-stage startups, as expected, raised the largest amount of VC money during this period thanks to their proven business model and steadily-growing revenues.

Startups at Series D and later round closed a combined $1.389 billion through only 12 deals while their domestic peers at Series C round secured an equally massive amount of capital, which amounted to $1.39 billion across 21 deals.

Most deep-pocketed investors: Matrix, Tencent

Bluechip investors Matrix Partners China, Hillhouse Capital Group, and Sequoia Capital China were the three most active investment institutions in the Chinese VC market, as they each participated in at least seven transactions in the fourth quarter of this year.

Shenzhen Capital Group, an investment company created by the local government in southern China’s Shenzhen city, ranked fourth in terms of the deal volume after the government-led fund participated in six transactions worth $347 million in total. Shenzhen Capital Group has invested roughly 47.6 billion yuan ($6.79 billion) in 1,051 firms as of November 2019, shows the company website.

Most Active Investors in China’s VC Market

Expand Table

Investment CompanyDeal VolumeTotal Value of Participated Deals (USD)
Matrix Partners China7661 million
Hillhouse Capital Group7433 million
Sequoia Capital China7288 million
Shenzhen Capital Group6347 million
CICC Capital and Affiliated Funds5447 million
Qiming Venture Partners5141 million
Tencent4515 million
Yunqi Partners4342 million
Legend Capital491 million
Tiger Global Management3563 million

However, statistics show a different picture of the most deep-pocketed investors in the Chinese VC market if the deal value is concerned.

Matrix Partners China, the Chinese division of US-based Matrix Partners that mainly backs early and middle-stage startups, joined in seven deals worth $661 million. The stunning deal value was mainly contributed by Chinese electric vehicle startup XPeng Motors, which secured 2.8 billion yuan ($400 million) in a Series C round in November from Matrix Partners China, smartphone maker Xiaomi Corporation, and other investors.

Chinese social and gaming giant Tencent led four transactions that garnered a total of $515 million. Tiger Global Management, an American hedge fund and family office established by Julian Robertson, also poured money into three deals that added up to $563 million. The US fund led two of the three investments.

Health-tech takes the lead, e-commerce follows

Among all industries we surveyed, health tech-enabled startups were the most popular portfolio components in China’s VC market in the fourth quarter, collecting an aggregate of $1.434 billion across 32 transactions. Four out of 15 Chinese startups who raised a new funding round worth at least $100 million were from the health technology sector:

· Taimei Technology, a cloud-based software provider that serves pharmaceutical companies and clinical research organizations (CROs), raised 1.5 billion yuan ($212 million) in a Series E and E+ round led by Tencent and Tiger Global Management in October.

· Akeso Biopharma, which is engaged in the innovative antibody drugs space, closed $150 million in a Series D round led by China-focused private equity firm Loyal Valley Capital (LVC) and Hong Kong-listed Sino Biopharm in early November.

· Medbanks, a Beijing-based oncology database platform, secured about 1 billion yuan ($142 million) in a Series D+ round led by Tencent with participation from investment firm Wu Capital in late November.

· Medical instrument provider Peijia Medical raised 700 million yuan ($100 million) in a Series C round from Matrix Partners China, China-based biomedical venture capital firm Lilly Asia Ventures, Grand Flight Investment, which is backed by Hong Kong-listed Far East Horizon, and other investors this November.

Ranked second was China’s e-commerce & internet economy industry (in terms of the deal value), which has grown fairly mature with the presence of a few major players including Alibaba and JD.com. The sector was found – surprisingly – still burning money to explore new business models or to help traditional industries go digital since statistics indicate that companies in the e-commerce & internet economy field collected a combined $539 million across six transactions in the fourth quarter.

Three companies in the hyper-competitive field raised new investments worth $100 million and over:

· Textile-focused business-to-business (B2B) service platform Baibu closed $300 million in a Series D round led by Yuri Milner’s DST Global in December. CICC Capital, the fund management arm of investment bank China International Capital Corp (CICC), Tiger Global Management, China’s Source Code Capital, and other investors participated in the round.

· KK Group, an online-to-offline new retail business rebranded from “KK Guan,” secured $100 million in a Series D round in late October, which paved its entry into the unicorn club at a valuation of over $1 billion. The Series D round was led by the Electronic World Trade Platform (eWTP), an initiative proposed by Alibaba co-founder Jack Ma in 2016, with participation from Matrix Partners China, Beijing-based venture capital company N5Capital, and Shanghai-based equity investment firm Black Algae Capital.

· Hipac, which provides mother and baby care products, raised a $100 million Series D round led by South Korean private equity firm Anchor Equity Partners in December. Hillhouse Capital Group participated in the investment.

The software & services industry came third in terms of the deal value, with a total of $526 million garnered through 14 transactions that were mostly lower than $50 million. The only mega-deal in the field was a Series B round raised by Hainan Golden Technology in October. The electronic invoicing services provider secured 1 billion yuan ($141 million) in the round led by Tencent, Shenzhen Capital Group, among others.

China’s VC deals worth $100m and over

Expand Table

StartupHeadquarterInvestment Size (USD)Investment StageLead Investor(s)Other Investor(s)Sector
XPENG MotorsGuangzhou400 millionCXiaomi Corporation, Matrix PartnersAutomotive
Baibu/Guangzhou Zhijing Information TechnologyGuangzhou300 millionDDST GlobalCICC Capital, Source Code Capital, Tiger Global Management, Yunqi Partners, Chengwei Capital, Bull Capital PartnersE-Commerce & Internet Economy
Taimei TechnologyShanghai/Jiaxing212 millionE, E+Tiger Global Management, TencentSoftbank China Venture Capital (SBCVC), Morningside Venture Capital, Cowin Venture, SAIF Partners, Zheshang Venture Capital, Ivy CapitalHealth Tech
Danke ApartmentBeijing190 million DChina Media Capital, Primavera CapitalShared Economy
WelabHong Kong 156 millionC-Alibaba Hong Kong Entrepreneurs Fund, China Construction Bank (International)Fintech
Akeso BioPharmaZhongshan150 millionDLoyal Valley Capital (LVC), Sino BiopharmShenzhen Capital Group (SZVC), Lake Blue Healthcare Fund, K. Wah Group, CCB Capital, Triwise Capital Management, OrbiMed, Apricot Capital, BOCOM InternationalÂHealth Tech
MedbanksBeijing142 millionDTencentWu CapitalHealth Tech
Hainan Golden TechnologyShenzhen141 millionBTencent, Shenzhen Capital Group, CDH InvestmentHillhouse Capital, Wanda Group, IDG Capital, Prometheus CapitalSoftware & Services
NetDragon Websoft Holding LimitedFuzhou140 millionStrategic InvestmentAscendent Capital Partners-Ed Tech
Neng Lian TechnologyShanghai 110 millionCJoy CapitalNio Capital, Korea Investment PartnersBlockchain
MiduAnhui100 millionBCMC CapitalQutoutiaoMedia & Entertainment
KK GroupShenzhen100 millionDeWTP Technology & Innovation FundN5Capital, Matrix Partners China, Black Algae CapitalE-Commerce & Internet Economy
Peijia MedicalSuzhou100 millionCMatrix Partners China, Lilly Asia Ventures, Grand Flight, China SDIC Gaoxin Industrial Investment Corp, China Chengtong Holdings GroupHealth Tech
Lumi United Shenzhen100 millionB2Grand FlightCathy Capital, Joy Capital, Yunmu CapitalAI & Robotics
HipacHangzhou100 millionDAnchor Equity PartnersHillhouse Capital GroupE-Commerce & Internet Economy

Liya Su contributed to this story. 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.