China Deal Review: Dealmaking stages a comeback in March as startups raise over $11.4b

Shanghai, China. Source: Denys Nevozhai/Unsplash

After the first two months of slowdown in the dealmaking space this year, risk capital investors in the Greater China region have staged a comeback in March, thereby setting a new record of more than $11.4 billion in monthly capital deployment.

According to proprietary data compiled by DealStreetAsia, startups headquartered in Greater China managed to secure over $11.4 billion from private equity (PE) and venture capital (VC) investors, recording a whopping 119.5% jump from a month before. This is even as the financial details of 20 deals were not disclosed.

In terms of volume, there was a 63.1% jump last month with the total number of transactions standing at 199. In March last year, during the peak of the pandemic in Asia, dealmakers pumped about $6.1 billion across 68 transactions in China.

The pick-up in dealmaking activity highlights how investors are increasingly getting comfortable parking capital in startups as the impacts of the pandemic get clear across Asia. Take Southeast Asia and India, for instance. The two regions recorded similar fundraising rallies in March this year.

On account of megadeals closed by PatSnap and SiCepat Ekspres, the $781-million financing pumped into Southeast Asian startups was nearly five times that of February; while Indian startups raked in at least $2.38 billion, recording a 72% jump in value month-over-month.

 

Megadeals account for 69.3% of financing

The spike in fundraising activity in China can be primarily attributed to 27 megadeals, or investments worth $100 million and above.

Fangchebao (FCB), China Evergrande Group’s online real estate and automobile marketplace, was the biggest fundraiser after it agreed to sell a 10% stake to 17 investors for HK$16.4 billion ($2.1 billion) ahead of a planned initial public offering (IPO).

Another three startups, including grocery app Nice Tuan; e-commerce giant JD.com’s infrastructure asset management arm JD Property; and autonomous driving startup Momenta, successfully completed an investment of $500 million or over. With the addition of 23 deals within the $100-500 million range, these megadeals collectively pocketed almost $7.9 billion, or about 69.3% of the overall financing in March.

By and large, the proportion of financing garnered by megadeals has always retained at 60-70% of overall deal flow in recent months. It stood at 62.9% in February, in comparison with 69.7% in January, 68.6% in December, and 69.9% in November.

Entrepreneurship and tech innovations are in the ascendant in China. The country is already the world’s second-largest source of unicorns after the US, hosting 119 privately-owned companies valued at over $1 billion as of November 2020, according to US research firm CB Insights.

Even so, early-stage fundraisers – defined as companies at Series B rounds and earlier – still outnumbered their growth- and late-stage counterparts. In March, there were 94 deals at Series A stage and earlier, compared with 42 Series B deals; 31 Series C deals; 10 Series D round deals; and five deals at Series E stage and after. The funding stages of 17 deals were not disclosed.

Meanwhile, investors’ willingness to write bigger-ticket cheques in more mature startups has grown stronger as they gear up to grab a slice of quality deals.

At the most well-funded stage, the total value of Series C deals amounted to nearly $2.6 billion, or 22.5% of March’s overall investment scale, compared to 19.0% in February. Likewise, Series D deals raised 8.7% of financing, up from 1.7% in February; while deals at Series E rounds and later accounted for 22% of financing due to FCB’s $2.1-billion pre-IPO round, up from 14.7%. Deals with undisclosed funding stages collected about $1.7 billion, or 14.6% of the month’s funding.

Internet startups raise most funds; Tech giants ramp up investments

Floated up by five megadeals, Internet startups raked in the most funds in March, at close to $3.5 billion, across merely 10 deals.

FCB’s funding of $2.1 billion and Nice Tuan’s $750-million deal, alongside three hundred-million-dollar investments into cloud-based industrial Internet platform developer CASICloud-Tech; MetaApp, which created an interactive Internet platform that connects game creators and players; and ICHunt, a B2B trading platform for integrated circuit (IC) components, made the Internet industry top the charts in terms of aggregate deal value.

Fundraisers in the biotech, software, and consumer products fields – usually among the most-favoured five sectors for China-focused investors – continued to lead the pack in terms of deal count. Biotech and software startups both completed 22 deals, followed by China’s homegrown consumer products companies, which closed 20 transactions.

Unlike software fundraisers that were mostly at an early stage and hardly able to clock megadeals, capital-intensive biotech companies raised over $1.4 billion in total, thanks to Chime Biologics’ over-$190-million Series A+ round; Gensciences’ Series A and B rounds, in which it garnered over 800-million yuan ($121 million); a $120-million Series C round into EpimAb Biotherapeutics; and Biotheus’ $100-million fourth funding round.

Consumer products firms secured a combined $589.7 million, among which were major fundraisers including yogurt brand Simple Love; consumer electronics maker Shanghai Longcheer Technology; and smart lock brand Kaadas.

Chinese smartphone maker Xiaomi, and Shunwei Capital, created by Xiaomi co-founder Lei Jun and Tuck Lye Koh, emerged as the most active investment group in March – it participated in 15 deals worth a total of $648.5 million. Another China’s big tech firm Tencent also made it to the list of the most deep-pocketed investors, backing 11 deals worth about $1.1 billion.

As China’s tech giants all stepping up efforts in making strategic investments to generate synergies and consolidate market positions, Xiaomi recorded a portfolio of 310-plus investee companies, including both publicly-traded and privately-owned firms, as of December 31, 2020. According to its latest financial results, the total value of Xiaomi’s investments reached 67.3 billion yuan ($10.3 billion) by the end of last year.

Shunwei Capital, in particular, had 13 announced deals in March including two megadeals, namely Momenta’s $500-million Series C round, and logistics service FlashEx’s $125-million Series D2 round. Moving forward, Xiaomi is expected to make more bets around its focused strategy of “smartphone x AIoT (Artificial Intelligence of Things),” as well as smart electric vehicles (EVs) – a newly launched business that it pledged to invest $10 billion over the next 10 years.

Other notable PE-VC investment firms in March include Matrix Partners China, Beijing-based IDG Capital, tech investment bellwether Sequoia Capital China, as well as PE powerhouse Hillhouse Capital and its VC arm GL Ventures.

Most active investors in China’s PE-VC market (Mar 2021)

Expand Table

Investment companyNo. of dealsTotal value of participated deals (USD)LeadNon-lead
Shunwei Capital & Xiaomi15$648.5 million69
Matrix Partners China14$648.5 million77
IDG Capital13$759 million67
Sequoia Capital China13$663.9 million58
GL Ventures & Hillhouse Capital12$1,097 million84
Tencent11$1,080.5 million65
Cowin Capital10$356 million28
Source Code Capital9$787.5 million27
5Y Capital7$108 million43
Shenzhen Capital Group6$648.5 million24

The March numbers brought the total funds raised in Q1 2021 to more than $24.1 billion across 464 deals. That compares to less than $23.8 billion raised in Q4 2020 from 438 deals.

For the entire 2020, startups in Greater China managed to grab an aggregate of $56.2 billion from 1,193 transactions, shows DealStreetAsia’s report, Greater China Deal Review: Q4 2020.

Note: In our monthly analysis for March 2021, 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.

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.

Liya Su contributed to the story.

27 Megadeals worth $100m and above (Mar 2021)

Expand Table

StartupHeadquarterInvestment Size (USD)Investment StageLead Investor(s)Investor(s)Industry/SectorVertical
FCB Group (A unit of China Evergrande Group)Shenzhen$2,100 millionPre-IPOUnited Strength Harmony Limited, Shenzhen Mingsheng Duling Commerce and Trade, Shenzhen Jianhui Investment, Shenzhen Jianke Investment, Foshan Xinmingzhu Enterprise Group, Tisé Opportunities SPC, CITIC Capital, Top Shine Global, Triumph Roc International, Kingsville Global Investments, Top Assemble Holdings, Advance Power International, Genuine Fair, Zhongrong International Trust, Anatole, JMC Capital HK LimitedInternetE-commerce
Nice Tuan/ShihuituanBeijing$750 millionDST Global, Alibabathe D.E. Shaw group, Dragoneer, Anatole Investment ManagementInternetE-commerce
JD PropertyBeijing$700 millionAWarburg Pincus, Hillhouse CapitalReal Estate Development & Operating CompanyReal Estate Tech
MomentaBeijing$500 millionCSAIC Motor, Toyota, Bosch, Temasek Holdings, YF CapitalShunwei Capital, Mercedes-Benz, GGV Capital, Tencent, Cathay CapitalAutomobiles, Other Vehicles & PartsAutonomous Driving
Zhongneng UnitedNanjing$461 millionC2, C3C2: Source Code Capital; C3: Five Star Holdings GroupC2: Buhuo Ventures; C3: Oakwise Capital, VSFG Private Asset Management (PAM), Shanghai Shibei Hi-Tech's big data fund, YiMei Capital, Buhuo Ventures, Source Code CapitalBusiness Support ServicesN/A
CASICloud-TechBeijing$405 millionStrategic InvestmentICBC Financial Asset Investment, China Merchants Capital, Shenzhen Capital GroupInternetCloud Computing
Guoquan ShihuiShanghai$300 millionDCMB InternationalTiantu Capital, GenBridge Capital, IDG Capital, Vision Knight Capital, Buhuo VenturesRetailN/A
Newlink GroupBeijing$200 millionStrategic InvestmentBain CapitalJoy CapitalRetailInternet of Things
Walnut Education/Hetao101Beijing$200 millionCKKR, Vision Plus Capital, GL VenturesSource Code Capital, Huaxing Growth CapitalEducation/TrainingEdTech
Chime BiologicsWuhan$190 millionA+VMS GroupFidelity International, Panacea Venture BiotechnologyBiotech
Yunxuetang/YXT.comSuzhou$190 millionEE2: Matrix Partners China E1: Tencent; E2: Sequoia Capital China, Hundreds CapitalEducation/TrainingEdTech
Iluvatar CoreXShanghai$186 millionCCedarlake Capital, Centurium CapitalGortune Investment, China Unicom CapitalSemiconductorsCloud Computing
MediTrust HealthShanghai$155 millionBAnt Group, Sinovation Ventures, Shanghai Biopharmaceutical Investment FundHuaxing Growth Capital, Northern Light Venture Capital, BioTrack Capital, Marathon Venture Partners (MVP), SAIF Partners ChinaHealthcare ITHealthTech
FadadaShenzhen$138 millionDCenturium Capital, ZWC Partners, TencentBusiness Support ServicesBlockchain
FlashEx/Beijing Tongcheng Biying TechBeijing$125 millionD2Shunwei Capital, SIG China, N5Capital, Tiantu Capital, Oceanpine Capital, Alpha Square Group, Axiom Asia Private Capital, Qianshan Capital, CF Quanxing Junyuan Capital ManagementLogistics & DistributionN/A
Simple LoveGuangzhou$122 millionBMatrix Partners China, BA Capital, CITIC Agri Fund, Maison Capital, Sequoia Capital China, YF Capital, Proterra Investment Partners, DCP CapitalConsumer ProductsN/A
GensciencesNantong$121 millionA, BHaitong Kaiyuan InvestmentEfung Capital, Huarong Rongde Asset Management, IDG Capital, New Alliance Capiptal, Huaige CapitalBiotechnologyBiotech
EpimAb BiotherapeuticsShanghai$120 millionCChina Merchants Bank International (CMBI), Mirae Asset Financial GroupHony Capital, Cormorant Asset Management, Yanchuang Capital, Octagon Capital, Adrian Cheng (Individual Investor), ShangBay Capital, Decheng Capital, SDIC Fund, Sherpa Healthcare Partners, Hidragon CapitalBiotechnologyBiotech
Midu (affiliated with Nasdaq-listed Qutoutiao)Shanghai$110 millionCTravel & LeisureN/A
BiotheusZhuhai$100 millionFourth roundIDG Capital, General AtlanticKunlun Capital, CPE, Cowin Capital, HighLight Capital, Shiyu Capital, New Alliance Capital, Huajin InvestmentBiotechnologyBiotech
Arctic VisionShanghai$100 millionBLoyal Valley CapitalTencent, Octagon Capital, New World Development Group's Adrian Cheng, Nan Fung Life Sciences, Pivotal bioVenture Partners China, Morningside VenturesHealthcare SpecialistBiotech
MetaAppBeijing$100 millionCSIG ChinaChina Creation Ventures (CCV), Sky9 CapitalInternetN/A
USHOPALShanghai$100 millionDFountainVest PartnersCathay Capital, Zhongyuan Capital, Hengxu Capital, Dazhong Zhongsong FundRetailBeauty & Hygiene
Ichunt.comShenzhen$100 millionCJD MROInternetE-commerce
Shanghai Longcheer TechnologyShanghai$100 millionBShenzhen Capital Group, Shenzhen Qianhai Wanrong Hongtu Investment FundAccurate Capital, Jintaifu Capital Management, Huaxu Industrial Investment Fund Management, Forebright Capital Management, FutureX CapitalConsumer ProductsN/A
AirwallexHong Kong$100 millionD3GreenoaksGrok Ventures, Skip Capital, ANZi VenturesFinancial ServicesFintech
KaadasShenzhen$100 millionBOrchid Asia GroupCowin Capital, Qianhai Huxing Asset ManagementConsumer ProductsAI and Machine Learning

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.