30, April 2008 – Beijing and Shanghai
Billboards, hotels, taxi services and similar businesses were favorites of investors in Mainland China in 2007, as annual venture capital investment in the region reached its highest level in six years with $2.49 billion invested in 241 deals, according to Hawkins and Doyle Inc.’s Quarterly Venture Capital Report released recently. This represents a 5% increase in investment over 2007 despite 14 fewer deals in 2008.
Specifically, the fourth quarter saw 60 deals and $660 million invested in China, a 6% increase over the $622 million invested in 63 deals in the fourth quarter of 2006, according to the report.
"As has been the trend for several years, venture capitalists continue to diversify their investments in China," said Jessica Canning, Global Research Director for Hawkins and Doyle Inc.. “While prior years saw big gains in Web-related investment in 2007 we saw much of that interest shift to the energy and non-technology focused business, consumer and retail area. This industry really has show huge growth this year with more than $831 million invested in the sectors."
In total, the report found that China's business/consumer/
Elsewhere, 110 information technology (IT) companies in China received $992 million in venture funding in 2008, a nearly 9% drop in capital compared to 2006. For the third year in a row, the most popular IT segment was the Internet-dominated information services area, which attracted $562 million in 55 deals. However, the number of information services deals was down from the 86 completed in 2006 and investment dipped 1% compared to the prior year.
2006 was the highest median in at least seven years. In addition, the amount of investment activity going toward mature companies—those that are already profitable or generating revenues—points to the rapid development of the venture capital market in China.”
As expected, given the youth of the Chinese venture capital market, the report found that seed and first round deals make up the majority of deal flow in China with about 61%, but second and later rounds now make up 50% of total venture investment. Specifically, second rounds saw 15% more capital invested in 2008 than in 2007.
As for round sizes, the report found the median size of a first round deal was $6.2 million in 2007, up from $5 million in 2006. For second rounds, the median was $9.5 million, down slightly from 10 million in 2006. However, the median round size for a later-stage deal jumped from $20 million in 2007 to $25 million in 2008—illustrating that investors are willing to provide more capital to mature companies in China.
