VC Investment Maintains Steady in Q3 16; RMB100B-sized State-owned. VC Fund Gives Impetus to Innovation and Development of Central.

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1 Vol. 58 October 31 st, 2016 Latest Report VC Investment Maintains Steady in Q3 16; RMB100B-sized State-owned VC Fund Gives Impetus to Innovation and Development of Central Enterprises By Emily Shen, Zero2IPO Research Center According to data released by Zero2IPO Research Center, a famous VC/PE research institution in Greater China, in Q3 16, China s VC market witnessed reduction in fundraising, but significant increase in fundraising amount, as evidenced by the emergence of multiple super-large funds, indicating that large-amount fundraising has become a trend. According to the statistics of PEdata.cn, in Q3 16, Chinese and foreign VC firms raised a total of 94 funds investable in Chinese mainland, and 62 of them with the fundraising amount disclosed raised a total of US$20.67B, which averaged up to US$333.38M, indicating significant year-on-year and quarter-on-quarter increases in average fundraising scale. Moreover, in Q3 16, a total of 698investment deals were closed, which was basically equal to the previous quarter. Among them, 631 investment deals disclosed the amount, which totaledus$3.16b, down 47.2% year on year and averaged US$5M. In Q3 16, altogether 354VC exit deals were completed, with New Third Board as a major exit channel. There were 231 exits through listings on New Third Board, accounting for 65.3%.Exits through IPO and equity transfer ranked second and third, with 71 and 19deals respectively. Due to increases in the number of Chinese enterprises going for domestic and overseas IPOs and the growth rate of IPO exits, the number of IPO exits in Q3 16 was even basically equal to that in H1 16. Large-Amount Fundraising Becomes A Trend; Number of Fundraising Drops InQ3 16, Chinese and foreign VC institutions raised a total of 94 new funds investable in Chinese mainland, down 49.2% year on year and 11.3% quarter and quarter. And62 of them with the fundraising amount disclosed raised a total of US$20.67B,up 72.7% year on year and even 227.2% quarter on quarter. In Q3 16, the average fundraising amount was US$333.38M, an increase of 376.2% year on year and 248.3%quarter on quarter. In 2016, although fundraising has become less active, there were still plenty of big-sized funds, as evidenced by the seven funds valuated at above US$299.4M. China State-owned Venture Capital Fund recorded the largest fundraising amount, with the target scale of US$29.94B and the first phrase scale of US$14.97B. It was jointly set up by China Reform Holdings

2 Co., Ltd., Postal Savings Bank of China Co., Ltd., China Construction Bank Co., Ltd., Shenzhen Investment Holdings Co., Ltd. and other firms, and managed by its fund management company. The fund specializes in the investment in technological innovation, industrial upgrading projects and promotion of cooperation among enterprises directly under the central government. Figure 1 Comparison of Fundraising of Funds of VC Firms in China in Q1'13-Q3'16 In Q3 16, RMB funds were still active, as evidenced by the fact that a total of 584 new funds were raised, occupying about 90.4% of the total number of newly raised funds. Meanwhile, only nine foreign-currency funds were raised, accounting for merely 9.6%. In Q3 16,China s VC market registered a total fundraising amount of US$20.67B, includingus$19.27b of RMB funds, accounting for 93.2% of the total, and US$1.4B of foreign-currency funds, taking up 6.8%. In terms of the average fundraising scale, RMB funds surpassed their foreign-currency peers for the first time with their average fundraising amount up to US$350.45M. 2

3 Figure 2 Comparison of Newly Raised VC Funds in Q3'16 by Currency (By No.of Funds) Figure 3 Comparison of Newly Raised VC Funds in Q3'16 bycurrency (By Amt. Raised, US$M) 3

4 No. of VC Investments Almost Equal to Previous Quarter; Early-stage Investments Account for Nearly 60% In Q3 16, there were a total of 698 VC investment deals, a decrease of 34% year on year. Among them,631 deals disclosed their investment amount, i.e. US$3.16B, down 12.5% year on year. The average investment scale of the deals disclosed amounted to US$5M. After the boom in 2015, China's VC market has become more stable and investors tended to be more prudent in In Q3 16, Chinese VC investments almost were equal to that in the previous quarter and mainly took in seed-stage and early-stage companies. The number of investment deals in seed-stage and early-stage companies was 383,occupying 54.9% of the total. Figure 4 Comparison of VC Investments in China s Market in Q1'13-Q3'16 4

5 Figure 5 Comparison of VC Investments in China s Market in Q3'16 by Investment Stage Internet, IT and Bio/Healthcare Rank Top Three; Beijing, Shanghai & Shenzhen Take up Nearly 60.0% of Total Fundraising In Q3 16, 698 VC investments took place in 22 grade 1 industries in China. In terms of the number of investment deals, Internet continued to rank first with 187 deals; IT came next with 102 deals; And bio/healthcare ranked third with totally 74investments. With respect to investment amount, Internet ranked atop with US$924.7M,closely followed by bio/healthcare and IT with US$489.97M and US$402.84M. 5

6 Figure 6 Industry Breakdown of VC Investments in China s Market in Q3'16(By No. of Deals) 6

7 Figure 7 Industry Breakdown of VC Investments in China s Market in Q3'16(By Investment Amt., US$M) Geographically speaking, Beijing, Shanghai, Shenzhen and other tier 1 cities remained the major investment destinations. In Q3 16, Beijing reported 215 investments, involving the investment amount of US$1.04B; Shanghai registered 106 investments, with the investment amount of US$620.96M involved; and Shenzhen had 76 deals and investment amount of US$288.17M. The total number of investments in Beijing, Shanghai and Shenzhen occupied 56.9% of the total in Q3 16, and their total investment amount 61.9%. Meanwhile, they were closely followed by Jiangsu, Guangdong (excl. Shenzhen) and Zhejiang. 7

8 Figure 8 Geographical Distribution of VC Investments in China s Market in Q3'16(By No. of Deals) 8

9 Figure 9 Geographical Distribution of VC Investments in China s Market in Q3'16(By Investment Amt., US$M) New Third Board Remains as the Most Important Exit Mode; IPO Exits Increase A Bit In Q3 16, there were a total of 354 domestic and foreign VC exits, declining by 23% year on year. In Q3 16,231 exits were completed through listings on New Third Board, which accounted for up to 65.3%. Listing on New Third Board has been recognized as a major exit option. In Q3 16, 71 IPO exits were completed, which took up 20.1% of the quarterly total; Exits through equity transfer took the third place, involving a total of 19 deals and accounting for 5.4%. In Q3 16, the number of exits dived year on year, because of the nosedive in the number of exits via listing on New Third Board. This also demonstrates that Chinese and foreign VC institutions took more rational attitude towards New Third Board. 9

10 Figure 10 Comparison of VC Exits in China s Market in Q1'13-Q3'16 Figure 11 Comparison of VC Exits in China s Market in Q3'16 by Exit Option(By No. of Deals) 10

11 BPEA News The third training about the belt &road : investment in German held successfully On October 19 th, 2016, the third training about the belt & road : investment in German was held successfully in Beijing, organized by CAPE, BPEA and Jones Day. The theme of this training is investment in German. Mr. Li Weiqun, Secretary-General of CAPE, expressed our warm welcome to foreign legal consultants from Jones Day. >Read more The 59th BPEA Monthly Training held successfully On October 21 st, 2016, the 59th BPEA Monthly Training held successfully in our meeting room. This month s training focused on the topic of "The Interpretation of New Tax Policy for Equity Incentive". Mr. Leo Chiu partner of department of Transaction Tax of EY and Mr. Brooke Xia, Senior Manager of department of People Advisory Services of EY, shared their experiences with the attendees. >Read more The fourth training about the belt &road : M&A in Italy and Spain held successfully On October 26 th, 2016, the fourth training about the belt & road : M&A in Italy and Spain was held successfully in Beijing, organized by CAPE, BPEA, Cathay global legal service network and Cathay Associates. The theme of this training is investment and acquisitions in Italy and Spain. Mr. Rupert VÁRNAI, CEO of Cathay global legal service network, gave a welcome speech. >Read more 11

12 BPEA Upcoming Events The 8th Global PE Beijing Forum The Transition Period of Private Equity Industry: Confidence and Opportunity Date: December 10th, 2016 (Saturday) Location: Shangri-la Hotel, Beijing Hosted by: China Association of Private Equity (CAPE) Beijing Municipal Bureau of Financial Work The People s Government of Haidian District, Beijing Municipal Beijing Private Equity Association (BPEA) Agenda December 3 rd, :00-09:05 Opening Speech Keynote Speech by Chairman of China Association of Private Equity, Mr. Shao Bingren Opening Speech by Senior official from Beijing 09:05-10:45 Municipal Government Opening Speech by Senior official from Beijing Municipal Bureau of Financial Work Opening Speech by Senior official from The People s Government of Haidian District, Beijing Municipal Keynote speech by Prestigious Economist Keynote speech by senior official from SSF/CSRC 12

13 10:45-10:50 Rotating Ceremony of BPEA 8 th Interim Chairman 10:50-11:05 Tea Break Keynote Speech by Oversea Government Senior official 11:05-12:05 Keynote Speech by Chairman of Oversea PE/VC Associations Keynote Speech by BPEA 8 th Interim Chairman 12:05-12:15 Release the 4 th Edition of The Guiding Principle for China PE and VC Industry 12:15-14:00 Lunch 14:00-15:10 15:10-16:20 Panel 1:VC and Innovation Technology Panel 2:M&A Investment Panel 3:FoF Investment Panel 4:Exit Panel 16:20-16:35 Tea Break 16:35-17:45 Panel 5:TMT Investment Panel 6:Cultural Industry Investment 17:45 Ending 18:00-20: China PE/VC Award Ceremony More information, please contact Jenny chen, , kemeng.chen@chinacape.org 13

14 Beijing Private Equity Association (BPEA) was established on Jun 20, 2008 北京股权投资基金协会成立于 2008 年 6 月 20 日 BPEA committed to: 协会致力于 促进行业环境建设 维护会员合法权益 培养相关专业人员 Promote the issuance of preferential policies for PE industry Build the self-regulatory discipline of PE industry Safeguard the legitimate rights of members Research development trends of PE industry Train relevant professional individuals Cooperate with domestic and overseas institutions 建立自律监管机制 研究行业发展动向 组织内外交流合作 协会服务中心 : 为会员及相关从业人士提供 : 专业咨询 辅 导 基金注册 备案 商务会议 培训等服务 BPEA Service Center: BPEA provides services for members and relevant industrial individuals: professional consultation and guidance, fund registration and recording, business conference,training and so on. 协会主要成员 BPEA main members include: 邵秉仁 原国家经济体制改 革委员会副主任 Former Deputy Director of the State Economic System Reform Commission 方风雷 董事长 厚朴投资 Fang Fenglei, Chairman of HOPU Investment 李爱庆 董事长 北京科桥投资 Li Aiqing, Chairman of Beijing Co-Bridge Investment Advisor Ltd. 衣锡群 常务副会长 中国股权投资基金协会 Yi Xiqun, Executive Vice Chairman of CAPE 赵令欢 弘毅投资总裁 联想控股有限公司常务副总裁 John Zhao, CEO of Hony Capital, Executive Vice President of Legend Holdings 刘乐飞 首席执行官 中信产业基金投资管理有限公司 熊晓鸽 创始合伙人 IDG 资本 Hugo Shong, Founding General Partner of IDG Capital Partners 吴尚志 董事长 鼎晖投资 Wu Shangzhi, Chairman of CDH Investments 何小锋 教授 博导 北京大学经济学院金融系 Professor and Doctoral Advisor of the Finance Department of the Economics School at Peking University 田溯宁 创始合伙人 董事长 宽带资本 Edward Suning Tian, Founder and Chairman of CBC Capital 沈南鹏 创始及执行合伙人 红杉资本中国基金 Neil Shen, Founding Managing Partner of Sequoia Capital China 阎焱 首席合伙人 赛富亚洲投资基金 Andrew Y.Yan, Managing Partenr of SAIF Partners 张懿宸 首席执行官 中信资本 Zhang Yichen, CEO of CITIC Capital 于剑鸣 管理合伙人 新天域资本 Yu Jianming, Managing Partner of New Horizon 靳海涛 董事长 深圳创投 Jin Haitao, Chairman of Shenzhen Capital Group Co.Ltd 唐葵 总裁 合伙人 方源资本 Frank Tang, CEO and Managing Partner of FountainVest Partners 杨向东 董事总经理 凯雷投资集团 凯雷亚洲基金联席主管 Xiang-Dong (X.D.)Yang, Managing Director and Co-Head of Carlyle Asia Partners ("CAP") 刘晖 合伙人 太盟产业基金 Allan Liu, Partner of PAG Capital 殷荣彦 董事长 北京股权投资发展管理有限公司 Yin Rongyan, Chairman of Board, Beijing Equity Investment Development Management Company 熊焰 董事长 总裁 北京金融资产交易所 Xiong Yan,Chairman and President of China Beijing Financial Assets Exchange 联系方式 电 邮 地 邮 单祥双 创始人 董事长兼总裁 中科招商集团 Shan Xiangshuang Founder,Chairman and President of CSC GROUP Liu Lefei,CEO of CITIC Private Equity Funds Management Co., Ltd. 话 传 真 箱 bpea@bpea.net.cn 网 址 址 北京市西城区金融大街甲 9 号金融街中心南楼 902 编 Contact us: Tel: Fax: bpea@bpea.net.cn Website: Room No.902, South Building of Financial Center, 9A Financial Street, Xicheng District, Beijing, P.R.China Zip:100033