Thursday, October 30, 2014

Dow Jones VentureSource 3Q’14 China Venture Capital Report


The following report presents Dow Jones VentureSource’s quarterly findings for Chinese venture capital fundraising, investment, and liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market.

Highlights for 3Q 2014 include:

Chinese venture capital fundraising sees substantial decline, falling to its lowest dollars raised level since 2Q 2013;

Quarterly venture investment takes dip from 2Q 2014; however, deal flow continues upward trend to reach record high;

Venture exit activity declines as number of mergers and acquisitions (M&As) and initial public offerings (IPOs) fall from 2Q 2014. Exit activity still surpasses that of the year-ago period, however.
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Chinese Venture Capital Fundraising Experiences Substantial Decline in 3Q 2014
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Chinese venture fundraising declined significantly to $403 million across 9 funds during 3Q 2014. The quarter represents the lowest fundraising accumulation since 2Q 2013 when six funds raised just $136 million.

In comparison with the same period last year, dollars raised fell by 54% while the number of venture funds completing closings declined by 18%.

Olympus Capital Holding Asia’s Environmental Partners II fund was the largest of 3Q 2014, raising $152.85 million, accounting for 38% of the total amount for the quarter.


Venture Capital Investment in China - 3Q 2014
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Chinese venture-backed companies raised $2.8 billion in 195 deals during 3Q 2014, a 5% decline in capital invested from 2Q 2014 despite a 50% increase in the number of deals completed.

Compared with 3Q 2013, however, dollars invested rose by 88% while deal flow increased by 61%.

Investment for the nine-month period dwarfs that of the equivalent 2013 timeframe, with $8.1 billion raised compared with $3.2 billion. Similarly, deal flow has also risen, from 282 to 442, equating to an increase of 57%.

Equity Financings into China-based, VC-backed Companies, by Industry Group (3Q 2014)

Consumer Services companies took $1.8 billion through 91 deals during 3Q 2014, an increase of 40% in deal flow but a dip of 1% in dollars invested from 2Q 2014. The sector attracted 48% of all deals completed for the quarter and a 66% share of total amount invested.

The Business and Financial Services sector placed second for investment, receiving $414 million across 35 deals. Sector investment declined by 18% compared with 2Q 2014 despite deal flow improving by 46%. The investment figure represents a 15% share of total equity financing into China-based VC-backed companies for 3Q 2014.

The Information Technology sector raised the third highest proportion of investment during 3Q 2014. IT companies garnered $377 million across 48 deals; a 9% rise in dollars invested from the prior quarter and a 66% increase in the number of deals completed.


Venture M&A and IPO Market Activity in China (3Q 2014)
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M&A activity for venture-backed companies in China fell in 3Q 2014 to six from seven completed during the previous quarter, but stayed flat compared with 3Q 2013. A total of 17 M&As have been completed in the first nine months of 2014, one up from the equivalent 2013 period.

The largest M&A of the quarter was Chinese Universe Publishing & Media’s acquisition of mobile games platform developer Beijing Elex Technology Co. Ltd. in July for $429 billion.

Nine VC-backed companies went public during 3Q 2014 in China, a decline of 18% from the previous quarter. Total dollars raised in VC-backed IPOs fell substantially from 2Q 2014, by 61% to $1.06 billion.

Nine VC-backed companies went public during 3Q 2014 in China, two fewer than in 2Q 2014 but eight more than the single listing completed during the third quarter of 2013.

A total of $1.06 billion were raised through Chinese VC-backed IPOs in 3Q 2014, representing a decrease of 61% from the previous quarter. A total of $5.9 billion have been raised in IPOs during the first nine months of this year, the most since the equivalent period of 2011 when $13.9 billion were raised.

Guangdong Ellington Electronics Technology Co. Ltd. had the largest IPO of the quarter, raising $222 million for its July listing on the Shanghai Stock Exchange. The printed circuit board manufacturer’s IPO represents 21% of the total raised through VC-backed IPOs in China during 3Q 2014.

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