China Deal Review: Startups raise $5.1b from PE-VC investors in May, down 8.9% from April

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Risk capital investors in Greater China pumped in less than $5.1 billion in the startup ecosystem, recording a marginal 8.9% dip in value from $5.6 billion in April.

In terms of volume, as many as 122 deals were clocked last month versus 149 transactions in April.

The decline in deal flow comes in after private equity (PE) and venture capital (VC) firms invested a whopping $11.4 billion across 199 transactions in March in companies across diverse sectors.

In a year-on-year (YOY) comparison, however, the market in May was still more vibrant than the same month last year, with a 67.1% leap in deal count and a 30.7% increase in deal value.

16 megadeals raise 57.2% of PE-VC capital

The value of megadeals, defined as transactions worth $100 million and more, accounted for 57.2% of the total funding in May – a proportion higher than that of April yet still inferior to the usual range of 60%-70% recorded in the previous months.

Weilong Delicious Global Holdings, a snack maker famed for its Chinese spicy strips, closed the month’s biggest funding round at 3.56 billion yuan ($559 million) from investors including CPE, Hillhouse Capital, Tencent, and Yunfeng Capital. The firm, which posted an annual profit of 819 million yuan in 2020, filed for a Hong Kong initial public offering (IPO) after the new funding.

This said transaction, alongside another 15 megadeals of at least $100 million each, amassed $2.9 billion in total.

In terms of deal value, the percentage of $100 million-plus transactions stood at 50% in April; 69.3% in March; 62.9% in February; and 69.7% in January.

Startups that required Series B capital or even earlier-stage funding completed more deals than their growth- and late-stage domestic counterparts.

In May, as many as 46 deals were closed at Series A stage and before, compared to 30 Series B deals; 18 Series C deals; nine Series D round deals; and five deals at Series E stage and after. The funding stages of 14 deals were not disclosed.

Going forward, investors are expected to at least retain, if not further grow, their interest in emerging businesses in Greater China. This is because competition for allocations to more mature, well-known companies has become fiercer amid the country’s buoyant stock markets over recent months.

Beijing’s rising efforts to crack down on monopoly practices are believed to be creating “a more level playfield” for smaller players, another factor that may further spice up early-stage investments.

In terms of deal value across different funding stages, there was also a slight preference for early-stage portfolios. Series B round was the most well-funded stage with nearly $1.2 billion of capital inflows, or 23.4% of May’s total financing, followed closely by Series C round at 22.8%.

16 megadeals worth $100m and above (May 2021)

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StartupHeadquarterInvestment Size (USD)Investment StageLead Investor(s)Investor(s)Industry/SectorVertical
Weilong/Weilong Delicious Global HoldingsLouhe$559 millionACPE, Hillhouse CapitalHosen Capital, Tencent Investment, Yunfeng Capital, Sequoia Capital China, Oceanpine CapitalFoodN/A
Dingdong MaicaiShanghai$330 millionD+SoftBank Vision FundInternetE-commerce
BeisenBeijing$260 millionFSoftBank Vision Fund 2, Goldman Sachs, Primavera Capital, Fidelity International, Matrix Partners China, Sequoia Capital China, Genesis Capital, Shenzhen Capital GroupSoftwareHR tech
Shiyue DaotianShenyang$228 millionBSequoia Capital China, Yunfeng CapitalCMC Capital Group, Taihecap, GenBridge CapitalFoodE-commerce
Horizon Construction DevelopmentShanghai$205 millionStrategic InvestmentXCMG Construction MachineryHillhouse Capital, CMB International, Zoomlion, Zhejiang Dingli Machinery, Lingong Machinery Group, TerexConstructionN/A
For-U Smart FreightBeijing$200 millionEChina Structural Reform Fund, China Life Investment Management, Greater Bay Area Homeland InvestmentsChina Merchants Sino-BLR Capital Management, China Merchants Capital, Parantoux Capital, Legend Capital, Matrix Partners ChinaLogistics & DistributionBig Data
Hangzhou DAC Biotech Hangzhou$156 millionCGL Ventures, CITIC Private Equity Funds Management (CPE), CDG CapitalCITIC Securities, K. Wah International's fund, TigerYeah CapitalBiotechnologyBiotech
YuanbaoBeijing$156 millionCSource Code CapitalCathay Capital, HIKE Capital, Northern Light Venture Capital (NLVC), Qiming Venture Partners, Susquehanna International Group (SIG)InsuranceInsuretech
Xunce TechShenzhen$110 millionCCPE, Tencent Investment, Taikang Life InsuranceGoldman Sachs, Greater Bay Area Homeland Investments LimitedFinancial ServicesFintech
Elpiscience BiopharmaShanghai$105 millionCGreater Bay Area Homeland Development FundCormorant Asset Management, Maison Capital, Superstring Capital, Pluto Connection Limited, Unifortune Fund, Lilly Asia Ventures (LAV), CDH Investments, Dyee Capital, Oriza HoldingsBiotechnologyBiotech
Valgen Medtech/Valgen Holding CorporationHangzhou$100 millionBSequoia Capital China, DCPLake Bleu Capital, Venus Medtech, China Life Healthcare Fund, Ascendum Capital, Qiming Venture PartnersMedical Devices & EquipmentN/A
WeRideGuangzhou$100 millionCIDG Capital, Hechuang Investment, CoStone Capital, Cypress Star, Sky9 Capital, K3 Ventures, CMC Capital Group, Qiming Venture Partners, Lingfeng Capital (瓴峰资本)Automobiles, Other Vehicles & PartsAutonomous Driving
Access Medical Systems (AMS)Shanghai$100 millionSequoia Capital China, GL VenturesKaiser Permanente, Sinovation Ventures, Wisdomont Asset Management, Hidragon Capital, Qiming Venture Partners, Matrix Partners China, Legend CapitalHealthcare ServicesHealthTech
DSTShenzhen$100 millionCIngka Investments (affiliated with Ingka Group)SMRT Ventures, China Securities Investment Capital, Bojiang Capital, Matrix Partners ChinaTransportation ServicesElectric/Hybrid Vechicles
YuanQuNaShanghai$100 millionD1Source Code CapitalLogistics & DistributionBig Data
Ningbo Jenscare BiotechnologyNingbo$100 millionGL Ventures, Primavera CapitalFutureX Capital, Cormorant, Forebright CapitalMedical Devices & EquipmentN/A

Software, Internet & biotech top deal count list

While the food sector raised the most venture funding largely on account of Weilong’s $559-million deal, the software industry, as in April, continued to evince investor interest, as is visible in deal count. As many as 15 software startups collected a total of $632 million, including the biggest of all, a $260-million Series F round by human resources (HR) software-as-a-service (SaaS) firm Beisen.

Dealmaking in the Internet industry also saw significant action with 12 Internet startups raking in a combined $448.2 million. The biggest proportion of financing into the sector was pocketed by Dingdong Maicai, a grocery app that secured $330 million in a SoftBank’s Vision Fund-led Series D+ round in May. The financing came on the heels of the completion of its $700-million Series D round in April as the company geared up to launch its US IPO.

The biotech industry witnessed 11 transactions totaling $587 million. There were two megadeals in the field, including biopharmaceutical firm Hangzhou DAC Biotech’s 1-billion-yuan ($156 million) Series C round; and clinical-stage drug maker Elpiscience Biopharma’s $105-million deal, also at Series C stage.

Top investors

Sequoia Capital China, a backer of tech giants including Alibaba, JD.com, and ByteDance, cemented its position as the bellwether of investments in Greater China through capital injections into at least 15 companies in May. The total value of the firm’s participated deals stood at about $1.7 billion, floated by five megadeals into companies including Weilong; Beisen; agriculture brand Shiyue Daotian; healthtech firm Access Medical Systems (AMS); and Valgen Medtech, a developer of treatment technologies for heart diseases.

Other active PE-VC investment groups include Asia-focused PE powerhouse Hillhouse Capital and its VC unit GL Ventures; Matrix Partners China, the China team of US-based Matrix Partners; and Qiming Venture Partners, among others.

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

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Investment companyNo. of dealsTotal value of participated deals (USD)LeadNon-lead
Sequoia Capital China15$1,698 million78
Hillhouse Capital & GL Ventures12$1,368 million57
Matrix Partners China9$912 million18
Qiming Venture Partners8$620 million35
CPE6$933 million51
Legend Capital and affiliates6$487 million33
China Merchants Capital and affiliates6$305 million24
Yunfeng Capital5$1,020 million41
SoftBank and affiliates5$650 million23
Gaorong Capital5$285 million23
*If one deal is backed by only two investors, we consider neither of the two as a lead investor.

Liya Su contributed to the story.

Note: In our monthly analysis for May 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.