China Deal Review: Investors pump over $6.2b into startups in June, up 22.8% from May

Photo by Jason Weingardt on Unsplash.

Investments in privately-held companies in Greater China showed robust growth in June with private equity (PE) and venture capital (VC) firms pouring a total of over $6.2 billion into 154 startups.

June’s aggregate deal value was a 22.8% increase over May, while the number of investments also increased by 26.2% from the previous month, according to proprietary data compiled by DealStreetAsia.

However, the country’s tightening grip on the tech sector could cast a shadow over the dealmaking landscape in the months to come. Beijing stepped up oversight of data security and overseas listings by domestic firms in early July, days after ride-hailing giant DiDi Global’s US debut.

Meanwhile, dealmaking in the second quarter of 2021 was less vibrant as compared to the first quarter. Greater China-based startups raised close to $17 billion in the April-June period, representing a 29.7% decrease in total deal value from the January-March period. But the market was still more alive than Q2 2020, when startups collected only about $9.5 billion at the prime time of the COVID-19 pandemic.

In the entire first half of 2021, PE-VC investments in Greater China stood at $41.1 billion, up 7.9% from $38.1 billion in H2 2020. There were 889 transactions in H1 2021, 12.2% more than the 792 deals recorded in the previous six months.

Megadeals dominate

Megadeals, defined as transactions worth $100 million or more, contributed to more than half of the financing in June.

Chubby Bear, a business-to-business (B2B) trading platform for home furnishing materials, pocketed the biggest investment in the month, raising $400 million from investors including CMC Capital Group, SoftBank, and others. This transaction, alongside another 18 megadeals, collectively secured over $3.7 billion, or 59.8% of the total funding in the month.

Startups that raised Series B or earlier-stage financing outnumbered their growth- and late-stage counterparts. In June, there were 63 deals at Series A round and earlier, 33 Series B deals, 20 Series C deals, 11 Series D deals, and two at Series E round and later. The funding stages of 25 investments were not disclosed.

Growth equity investors, which back companies at more mature stages of their life cycle, could face more uncertainties around exiting from their Chinese portfolios. New York-listed DiDi becoming the subject of China’s first cybersecurity review could slow down. IPOs, especially in the US. This may have a bearing on investors’ appetite for growth-stage, especially pre-IPO, investments.

For now, startups in their Series C stages were still the best-funded and garnered just over $1.7 billion in June, or 27.3% of the total financing. They were followed by companies in their Series B round, which raised over $1.1 billion; and those in the Series D round, which closed slightly more than $1 billion.

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Nineteen megadeals in June 2021

StartupHeadquartersInvestment size (USD)Investment stageLead investor(s)Investor(s)IndustryVertical
Chubby BearShanghai$400 millionCC: CMC Capital Group; C+: SoftBank Vision Fund 2C: Matrix Partners China, Genesis Capital, Tencent Investment, Yunqi Partners, Immensus Capital, Gan Jiawei (Individual investor), Cygnus Equity; C+: Matrix Partners China, CMC Capital Group, Genesis Capital, Yunqi Partners, Hundreds Capital, Ab Initio Capital, Gan Jiawei (Individual investor), Cygnus EquityInternetE-commerce
WeRideGuangzhou/Zhengzhou$310 millionCRenault-Nissan-Mitsubishi alliance, China Structural Reform FundAutomobiles, Other Vehicles & PartsAutonomous Driving
Chehaoduo (Operator of Guazi.com)Beijing$300 millionH CapitalSequoia Capital China, IDG Capital, Mark Yang/Yang Haoyong (Individual investor)Automobiles, Other Vehicles & PartsE-commerce
Hesai TechnologyShanghai$300 millionDGL Ventures, Xiaomi, Meituan, CPEHuatai US Dollar Fund, Lightspeed China Partners, Lightspeed Venture Partners, Qiming Venture PartnersAutomobiles, Other Vehicles & PartsAutonomous Driving
YaoshibangGuangzhou$270 millionPearl River Investment, Baidu, Green Pine Capital Partners (GPCP), SFundHealthcare ITHealthTech
Insilico MedicineHong Kong$255 millionCWarburg PincusQiming Venture Partners, Pavilion Capital, Eight Roads Ventures, Lilly Asia Ventures (LAV), Sinovation Ventures, BOLD Capital Partners, Formic Ventures, Baidu Ventures, CPE, OrbiMed, Mirae Asset Capital, B Capital Group, Deerfield Management, Maison Capital, Lake Bleu Capital, President International Development Corporation, Sequoia Capital China, Sage PartnersPharmaceuticalsHealthTech
Dingdang Health Technology GroupBeijing$220 millionPre-IPOTPG Capital Asia, OrbiMed Healthcare Fund Management, Redview CapitalValliance Asset Management, Orchid Asia Group, Summer Capital, Yingke PEHealthcare ITHealthTech
Xforceplus Information TechnologyShanghai$200 millionC+, C++Dragoneer Investment Group, MSA Capital, Huatai Innovative InvestmentSoftwareSaas
SmartMore CorporationHong Kong$200 millionBIDG Capital, CoStone Capital, Sequoia Capital China, Green Pine Capital Partners, Lenovo Capital, ZhenFundSoftwareAI and Machine Learning
ZongMu TechnologyShanghai$190 millionDD1: Denso Corporation; D2: Cowin Capital, Gaoyuan Capital; D3: Xiaomi Yangtze River Industry Investment FundD1: Liangjiang Capital, Huantaihu Group, Jadex Capital; D3: Industrial Bank, Shanghai S&T Investment, Fosun Group’s private equity arm, Legend Capital, Qualcomm Ventures, Jadex CapitalAutomobiles, Other Vehicles & PartsAutonomous Driving
Stemirna TherapeuticsShanghai$188 millionSequoia Capital China, China Merchants Medical and Healthcare Industry Equity Fund, WuXi AppTec, Greenwoods InvestmentOrbiMed Healthcare Fund Management, Advantech Capital, Guoxin Guotong, CMB International, Efund, Forebright, Tsing Song Capital, CITIC SecuritiesPharmaceuticalsBiotech
CD FinanceBeijing$154 millionEquity financing Teachers' Innovation Platform (TIP, affiliated with Ontario Teachers' Pension Plan)ABC World AsiaAgribusinessFintech
Venturous Group Beijing$131 millionABenson Tam (Individual investor), Fidelity China Special Situations PLC, Savio Kwan's family officeInternetInternet of Things
Xiao'E TechShenzhen$120 millionDIDG CapitalGL Ventures, Qiming Venture Partners, GGV CapitalBusiness Support ServicesSaas
Inmagene BiopharmaceuticalsShanghai/San Diego/Hangzhou/Wuhan$100 millionCHighlight Capital, Panacea VentureVMS Asset Management, Triwise Capital, South China Venture Capital, Kunlun FundBiotechnologyBiotech
EcoFlowShenzhen$100 millionBGL VenturesEnergy Storage & BatteriesCleanTech
Amber GroupHong Kong$100 millionBChina RenaissanceTiger Brokers, Tiger Global Management, Arena Holdings, Tru Arrow Partners, A&T Capital, Sky9 Capital, DCM Ventures, Gobi Partners, Pantera Capital, Coinbase Ventures, Blockchain.com, Bit Digital, Digital Finance Group, Fenbushi Capital, Math Wallet, SNZ Capital, Continue Capital, Zhao Qingsun (Individual investor)Financial ServicesFintech
Doublefs Beijing$100 millionSequoia Capital China, IDG Capital, 5Y Capital, HIKE Capital, Capital TodayConsumer ProductsE-commerce
ZhuanzhuanQingdao$100 millionD1Xiaomi CorporationShunwei Capital, Advantech CapitalInternetE-commerce

Self-driving startups outshine

Companies offering automobiles, auto parts, and related services grabbed the most funding in June — over $1.2 billion — as investors bet on the future of China’s mobility industry enabled by advanced technologies like artificial intelligence (AI).

The largest chunk of the $1.2 billion investment went to the top five fundraisers, namely self-driving firm WeRide; online car trading group Chehaoduo; lidar sensors developer Hesai Technology; autonomous driving solutions provider ZongMu Technology; and salvage cars’ online auction platform Bochewang. Noticeably, seven of the nine deals in the field were made into self-driving companies.

In terms of deal count, the software industry continued to lead the pack with 22 transactions. Xforceplus Information Technology, which provides software that enables supply chain and value-added tax (VAT) invoice management; and Hong Kong-based SmartMore, a hardware and software developer for intelligent manufacturing, each raised $200 million to become the two largest fundraisers in the area.

Investments into Chinese domestic consumer brands grew more active against the backdrop of the country’s growing middle class and China’s per capita disposable income in H1 approaching 18,000 yuan (about $2,781.6). At 16 deals, the consumer products sector surpassed biotech, semiconductors, and internet industries to clock more transactions, mostly by fashion e-commerce, beverages, fitness & wellness, as well as beauty & hygiene businesses.

Sequoia China retains title of top investor

Sequoia Capital China, which invested in tech giants including Alibaba, JD.com, and TikTok-owner ByteDance, retained its position as the most active venture firm in Greater China through capital injections into at least 13 companies in June. The value of its participated deals totaled nearly $1.3 billion, including five megadeals in Chehaoduo; SmartMore; Hong Kong-based AI drug discovery firm Insilico Medicine; mRNA-driven drugs and vaccines maker Stemirna Therapeutics; and cross-border fashion e-commerce website Doublefs.

Other active PE-VC investment groups include Matrix Partners China, the China team of US-based Matrix Partners; Asia-focused PE powerhouse Hillhouse Capital’s VC unit GL Ventures; as well as Legend Capital and Legend Star, investment arms of Chinese conglomerate Legend Holdings, among others.

Expand Table

Most active investors in China's PE-VC market (June 2021)

Investment companyNo. of dealsTotal value of participated deals (USD)LeadNon-lead
Sequoia Capital China13$1,291.5 million49
Matrix Partners China11$789 million74
GL Ventures8$638 million71
Legend Capital & Legend Star8$386 million26
GGV Capital8$331 million35
IDG Capital7$780 million16
Xiaomi Corporation and affiliates6$635 million42
CPE5$631 million32
SoftBank and affiliates5$461 million32
CITIC Group and affiliates5$409 million32
*If one deal is backed by only two investors, we consider neither of the two investors as a lead investor.

Liya Su contributed to the story.

Note: In our monthly analysis for June 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.

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.

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.