China Deal Review: Startups gather $6.02b in Sept as fundraising hits new peak

Great Wall of China. Source: Vidar Nordli-Mathisen/Unsplash

As investors and fundraisers rushed to wrap up deals before China’s “golden week” national holiday that started on October 1, September has enjoyed significant month-on-month growth in deal value while the month’s deal count has reached a new high since April.

Chinese startups raised approximately $6.02 billion across 137 venture capital (VC) and private equity (PE) transactions in September, according to proprietary data compiled by DealStreetAsia. Compared to August, the numbers represent a 42.4 per cent surge in total funds raised and a 35.6 per cent increase in the number of deals. Of the 137 deals, financial details of 18 investments were undisclosed.

A billion-dollar deal in China’s EV industry

In the largest round in September as well as the biggest financing in a Chinese electric vehicles (EVs) developer to date, Shanghai-based WM Motor completed a Series D round at 10 billion yuan ($1.47 billion). The Series D round was jointly led by three state-owned investment platforms in Shanghai and state-owned automaker SAIC Motor, with participation from a slew of investors including some with close links to the government.

The deal is the fourth billion-dollar investment in a China-based startup this year, following MGI Tech‘s $1-billion Series B round in May and two such deals in March, namely Yuanfudao‘s $1-billion Series G round and a $2.4-billion Series D+ round in Beike Zhaofang, which also goes by its formal name “KE Holdings.”

The WM Motor deal alone contributed to nearly one-fifth of financing in September. Along with another 13 transactions that each closed at least $100 million, these megadeals – most of which were at Series C round and after – collectively amassed a combined $3.95 billion, or 65.6 per cent of the total deal value in the month.

Market leaders continued to take up a sizeable chunk of VC/PE money in China. In August, an aggregate of $2.89 billion, or 68.4 per cent of total capital, was garnered across 14 megadeals (deals at $100 million and over), while a combined $2.55 billion was raised across nine such deals in July, accounting for 62.5 per cent of the month’s VC/PE investment.

Setting aside 18 deals in which financial terms were not disclosed, there were 24 medium-sized transactions in the $30-100 million range. They together raised $1.14 billion, or 17.5 per cent of the total deal value.

Eighty-one startups, or 59.1 per cent of fundraisers, completed a deal of smaller than 200 million yuan (just below $30 million), including 33 deals worth less than 100 million yuan (about $14 million) and 48 deals in the $14-30 million bracket.

Despite growth-stage players’ capability in attracting larger-cheque commitments, investments into Chinese early-stage startups remain fervent. In September, there were 42 deals at Series A round and before, 35 at Series B round, 22 at Series C round, 10 at Series D round, and three at Series E round and beyond.

Companies at Series D round collected the biggest amount of capital thanks to WM Motor’s $1.47 billion deal, which took up of 72.8 per cent of the total $2.02 billion, followed by their domestic counterparts at Series C round that pocketed a combined $1.22 billion.

The increased traction of the two investment stages was largely driven by big-ticket deals. Four firms at Series D round each completed a deal at $100 million and more, namely WM Motor; biotech firm Biocytogen; drug maker InvestisBio; and LinkDoc Technology, a provider of medical data solutions. They raised a total of $1.86 billion, or 92.1 per cent of all capital at the investment stage.

Likewise, three companies at Series C round, including commercial launch startup LandSpace, AI-based pharmaceutical firm XtalPi, and supply chain provider Xingyun Group, raised a sum of $693.8 million – 56.7 per cent of all capital at the investment stage.

14 deals worth $100 million and more (Sept 2020)

Expand Table

StartupHeadquartersInvestment size (USD)Investment StageLead Investor(s)Investor(s)Industry/SectorVertical  
WM MotorShanghai$1,470 millionDThree Shanghai state-owned investment platforms (Qingpu Investment, Yangpu Investment, Shanghai State-Owned Asset Investment), SAIC MotorSIG China, government-finance industrial funds (Hubei, Jiangsu, Hunan, Guangzhou, Anhui), Sino IC Leasing, Tsinghua unisplendour, Tsinghua Holdings' unit, Hongta Tobacco Group, Agile PropertyAutomobiles, Other Vehicles & PartsElectric/Hybrid Vechicles
MicroPort MedBotShanghai$512 millionHillhouse Capital, CPE, Biolink Capital, Grand Flight Investment, E FundMedical Devices & EquipmentHealthTech
XtalPiShenzhen$318.8 millionCSoftBank Vision Fund 2, PICC Capital, Morningside Venture CapitalCICC Capital, CMB International, Mirae Asset, Shunwei Capital,Oceanpine Capital, Foursquare Capital, IMO Ventures, Tencent, Sequoia Capital China, China Life Private Equity Investment, SIG ChinaPharmaceuticalsHealthTech
Guangdong Guangyan HoldingsGuangzhou$278 millionEquity InvestmentNingbo Haoshu Investment Company, Yunnan Provincial Energy Investment Group, Guangdong's state-owned Enterprise Refrom Fund, Nanfang Media Group, Fujian Salt Group, Guangzhou Dingyan Investment, Quzhou Fenghe Management, Shenzhen Yuanzhen Investment Management, Zhongshan GF Xinde Investment, Guangdong Zhongpeng Investment, Shenzhen Yanxinhong Management, Guangdong Guangshan Management, Guangdong Yueding InvestmentConsumer ProductsN/A
Xingyun GroupShenzhen, Hangzhou$200 millionCTaikang Insurance Group, Highlight Capital, Zhongyuan CapitalHidden Hill Capital, Morningside Venture Capital, Xingnahe Capital, C&D ermerging industry investment, Pantheon Asset, Matrix Partners China, Shandong Shuyuan CapitalLogistics & DistributionE-commerce
Taimei TechnologyShanghai/Jiaxing$176 millionTencent, Hillhouse Capital's GL Ventures, YF CapitalMorningside Venture Capital, Matrix Partners China, SoftBank China Venure Capital (SBCVC), Cowin Ventures, Fanzhuo Capital, Ivy Capital, Zheshang Venture CapitalSoftwareHealthTech
LandSpaceBeijing$175 millionC+Sequoia Capital China, Matrix Partners China, Country Garden Venture Capital, Co-Stone Asset ManagementNational Small-Medium Enterprises Development Fund, Lightspeed China Partners, Gopher Asset Management, Cedarlake Capital, Sunac China, LUCION, ESUN Investment, Joint CapitalAerospaceN/A
InventisBioShanghai$147 millionDHillhouse Capital's GL VenturesQiming Venture Partners, Matrix Partners China, Janchor Partners, AIHC Capital, DYEE Capital, E Fund, Lilly Asia Ventures (LAV), OrbiMed Asia, CMB International, Pudong Innotek, Advantech Capital
PharmaceuticalsBiotech
Biocytogen Beijing$142 millionD+CMB InternationalSDIC Venture H92Capital, China Life Investment Holding, 3E Bioventures Capital,Cowin Capital,Baifu CapitalPharmaceuticalsBiotech
Star ChargeChangzhou$125 millionASchneider Electric, CICC Capital's sub-fundCCB International, Shanghai Guohe Capital, Wiz International scientific and technological cooperation's unit, CDB-CDC Investment ManagementEnergy Storage & BatteriesElectric/Hybrid Vechicles
Beijing Internetware Limited CorporationBeijing$103 millionBChangchun Financial Holdings, Changchun Jingyue SoftwareBig Data
LinkDoc Technology (Beijing) Company LimitedBeijing$102 millionD+CICC Capital, Youshan Capital, Jinnan Haihe Broadband Zhihui Industry FundHealthcare SpecialistHealthTech
New Ruipeng Pet Healthcare GroupShenzhen$100 millionStrategic InvestmentTencentCountry Garden Venture Capital, Boehringer Ingelheim, Snow Lake Capital, OrbiMed, Aspex Management, Lake Bleu CapitalConsumer ProductsPet Technology
Wanwu Xinsheng Group (formerlly Aihuishou)Shanghai$100 millionE+JD.com, Guotai Junan InternationalFresh Capital, Guohe Capital (Shanghai International Group/SIG), Huihe Capital (JD Logistics Industry Fund),InnoVen CapitalInternetE-commerce

Pharma firms top the list with 20 VC/PE deals

Similar to August, Greater China-based startups in the fields of pharmaceuticals, software, consumer products, the Internet, medical devices, and biotech continued to be some of the most sought-after investees in September.

In the month, the pharmaceutical sector outperformed software to become the most popular industry in terms of the number of deals. Compared to $584.0 million across nine deals in August, 20 pharmaceutical firms secured $929.8 million, including three deals at $100 million and more:

  • MicroPort MedBot, the surgical robotic solution unit of medical device developer MicroPort, raised 3.5 billion yuan ($512 million) from a group of investors including Asia-focused private equity powerhouse Hillhouse Capital. The firm’s post-money valuation reached about 22.5 billion yuan ($3.29 billion).
  • Beijing-based preclinical-stage biotech platform Biocytogen closed 970 million yuan ($142 million) in a Series D+ round led by returning investor CMB International, a Hong Kong-based subsidiary of China Merchants Bank.
  • Xtalpi, a pharmaceutical firm that uses AI to accelerate drug development, garnered $318.8 million in a Series C round jointly led by SoftBank Vision Fund 2; PICC Capital, an alternative investment platform of Chinese government-owned insurer PICC Group; and Chinese early-stage venture capital firm Morningside Venture Capital.

Ranking second was the software industry, which saw 16 startups raising a combined $462.4 million. Most software fundraisers were at Series B round and closed a transaction at somewhere between 10 million yuan ($1.4 million) and 200 million yuan (just below $30 million), except for two megadeals:

  • Taimei Technology, which develops AI-enabled software suites to assist in drug R&D, secured over 1.2 billion yuan ($176 million) in a funding round co-led by Tencent, Hillhouse Capital’s venture capital arm GL Ventures, and YF Capital, a private equity firm backed by Alibaba co-founder Jack Ma Yun.
  • Internetware, a Data-as-a-Service affiliate of Hong Kong-based Digital China Holdings, reached a valuation of about 6.2 billion yuan ($918 million) after the completion of its Series B round at 700 million yuan ($103 million).

The consumer products space came third with 14 startups raising $553.2 million in total. These startups, a majority of which were at Series A or Series B round, target to serve China’s new-generation consumption demand across various verticals like fitness & wellness, beauty & hygiene, and pet technology.

The two mega-deals in the field were both completed by more traditional players:

  • Guangdong Guangyan, a unit of Chinese state-owned Guangdong Salt Industry Group, inked an agreement with 14 investors to raise an aggregate of 1.9 billion yuan ($278 million). The investors included Chinese alternative asset manager CDH Investments.
  • Pets medical care services provider New Ruipeng Pet Healthcare Group announced the completion of “hundreds of millions of US dollars” in a round led by Tencent, which brought the firm’s valuation to nearly 30 billion yuan ($4.4 billion).

Hillhouse bags the crown by backing 13 deals that total $1.05b

Hillhouse Capital, a $60-billion PE powerhouse led by Chinese investing elite Zhang Lei, was the most active and deep-pocketed institutional investor in the month after it backed 13 deals worth a combined $1.05 billion.

All but one of the 13 transactions were made by its GL Ventures, a VC arm that Hillhouse had launched in February 2020 in an attempt to raise its stakes in early-stage investments. GL Ventures primarily focuses on four major areas, namely biopharmaceutical and medical apparatus; software services and technological innovation; consumer-oriented internet and technologies; as well as emerging consumer brands and services.

Most active investors in China’s VC/PE market (Sept 2020)

Expand Table

Investment companyNo. of dealsTotal value of participated deals (USD)
Hillhouse Capital & GL Ventures13$1,049.0 million
Matrix Partners China11$854.2 million
CICC Capital and affiliates10$832.8 million
Sequoia Capital China10$775.8 million
Tencent8$767.8 million
Qiming Venture Partners6$246.0 million
Morningside Venture Capital5$756.8 million
SDIC and affiliates5$231.0 million
CMB International4$607.8 million
Shunwei Capital4$376.8 million

While anchoring seven of the 13 deals, Hillhouse and GL Ventures evenly distributed their focus across investment stages from Series A round to pre-IPO round. Their firepower was concentrated on medical devices and pharmaceutical firms, prioritizing above other focused areas of software, biotech, cybersecurity, and consumer products.

Of the 13 deals, there were three megadeals including MicroPort MedBot’s $512-million deal, Taimei Technology’s $176-million round, and a 1-billion-yuan ($147 million) Series D round raised by clinical-stage drug maker InventisBio.

Started in 2005 as a boutique hedge fund with $20 million from Yale University’s endowment, Hillhouse generated at least $2.4 billion of gains for Yale through prescient bets on some of the most successful firms nowadays, such as Alibaba, Tencent, Zoom, and JD.com.

The firm was reportedly raising an RMB-denominated fund with a target of over 20 billion yuan ($3 billion), according to a Bloomberg report in September, citing people with knowledge of the matter. It formally began fundraising for its largest-ever yuan fund in recent months, said the sources.

The publication said in an April report that Hillhouse was seeking to raise as much as $13 billion new capital from investors.

Note: In our monthly analysis for September, 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.

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.