China 4Q 2014
The following report presents Dow Jones VentureSource s quarterly findings for Chinese venture capital fundraising, investment, valuation, and liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market. Highlights for 4Q 2014 include: Chinese venture capital fundraising fails to improve on previous quarter, however, total fundraising for year more than doubles that of 2013; Venture capital investment into Chinese companies more than doubles 3Q 2014 total; Overall exit activity improves from 3Q 2014 despite fall in mergers and acquisitions (M&As) as Initial public offerings (IPOs) rally in both number of offerings and dollars raised. 2
FUNDRAISING Chinese Venture Capital Fundraising Fails to Improve in 4Q 2014 Chinese venture fundraising declined to $339 million across 9 funds during 4Q 2014. The quarter represents the lowest fundraising accumulation since 2Q 2013 when six funds raised just $140 million. In comparison with the same period last year, dollars raised fell by 57% while the number of venture funds completing closings declined by 25%. Le Fund s II fund and Arbor Ventures fund I were the joint largest of 4Q 2014, raising $100 million apiece, accounting for 59% of the total amount for the quarter combined. Looking at the year as a whole, however, 2014 has surpassed the previous year both in terms of dollars raised and the number of completed closings, improving by 131% and 8% respectively. Chinese VC Fundraising (2011 2014) Based on multiple closings 30 25 20 $4.50 $4.00 $3.50 $3.00 15 10 $2.50 $2.00 $1.50 5 0 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 Amount Raised ($B) $3.92 $0.72 $0.37 $1.69 $1.26 $0.79 $0.14 $0.88 $0.78 $1.23 $4.04 $0.37 $0.34 Number of Funds 28 13 13 15 17 7 6 11 12 6 16 8 9 $1.00 $0.50 $0.00 3
Largest VC Funds Raised in 4Q 2014 FUNDRAISING Firm Name Fund Name Amount ($M) Closed in 4Q Location Offering Status Fund Type Fund Category Closing Type Le Fund Le Fund II $100.00 Beijing Closed Early-stage venture capital Venture Capital Final Arbor Ventures Arbor Venture Fund I LP $100.00 Hong Kong Open Early-stage venture capital Venture Capital First Yahui New Material Venture Capital Fund Yahui New Material Venture Capital Fund $41.56 Yibin Closed Early-stage venture capital Venture Capital Final Beijing Hongtai Tongchuang Investment Management Co. Ltd. Angel Plus $32.72 Beijing Closed Early-stage venture capital Venture Capital Final Shandong Binhaichuangfu Venture Fund Shandong Binhaichuangfu Venture Fund $24.46 Shandong Open Multi-stage venture capital Venture Capital First 4
Venture Capital Investment in China - 4Q 2014 Chinese venture-backed companies raised close to $6.8 billion in 243 deals during 4Q 2014, an increase of 128% in capital invested from 3Q 2014 with a 17% rise in the number of deals completed. Compared with 4Q 2013, dollars invested more than quadrupled while deal flow increased by 79%. Investment in venture backed companies in 2014 dwarfs that of 2013, with $15.5 billion raised compared with $4.8 billion. Similarly, deal flow has also increased significantly, from 439 to 740, equating to an increase of 69%. Equity Financings into China based, VC-backed Companies (2011 2014) $8.00 $7.00 $6.00 250 200 $5.00 $4.00 $3.00 150 100 $2.00 $1.00 50 $0.00 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 Amount Raised ($B) $1.66 $1.19 $1.48 $0.88 $1.42 $0.72 $1.16 $1.49 $1.41 $2.38 $3.40 $2.97 $6.77 Number of Deals 112 89 80 65 86 76 101 126 136 132 158 207 243 0 5
Equity Financings into China based, VC-backed Companies, by Round Class (2011 2014) Number of Deals 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 Seed 8 13 6 5 11 8 11 20 14 16 14 9 17 First 56 44 29 28 40 35 57 65 80 71 74 113 131 Second 16 7 19 13 18 14 13 20 18 23 40 49 53 Later 27 20 20 18 13 13 12 13 21 16 20 31 31 Restart 0 0 1 0 0 0 0 0 0 0 0 0 0 6
Equity Financings into China based, VC-backed Companies, by Round Class (Year over Year, 2004 2014 ) Number of Deals 400 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 Restart 0 0 2 0 0 0 1 0 0 Later 35 73 87 112 148 114 71 59 98 Second 56 78 70 54 64 75 57 65 165 First 160 225 200 157 185 226 141 237 389 Seed 12 10 5 4 8 22 35 53 56 7
Equity Financings into China-based, VC-backed Companies, by Round Class (2011 2014) Amount Raised ($M) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 Seed $14 $5 $4 $1 $7 $5 $12 $15 $10 $19 $20 $16 $15 First $466 $358 $349 $256 $173 $163 $303 $330 $446 $498 $565 $636 $1,110 Second $332 $120 $387 $141 $213 $220 $179 $278 $213 $557 $830 $1,081 $1,375 Later $748 $515 $702 $486 $1,027 $281 $407 $280 $721 $357 $1,490 $1,169 $3,868 Restart $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 8
Equity Financings into China-based, VC-backed Companies (2011 2014) Median Equity Deal Size ($M) $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $- 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 Median Equity Deal Size ($M) $9.41 $7.10 $10.15 $6.00 $2.39 $3.94 $4.83 $3.51 $4.00 $5.00 $10.00 $5.00 $10.00 9
Equity Financings into China-based, VC-backed Companies, by Industry Group (4Q 2014) companies took $3.7 billion through 110 deals during 4Q 2014, a rise of 91% in dollars invested from 3Q 2014 with a 10% increase in deals completed. The sector attracted 46% of all deals completed for the quarter and a 55% share of total amount invested. The Information Technology sector placed second for investment, receiving $2.3 billion across 76 deals. Sector investment quintupled from 3Q 2014 as deal flow improved by 55% to a total of 32% of all deals completed for the quarter. The investment figure represents a 34% share of total equity financing into China-based VCbacked companies for 4Q 2014. Business and Financial companies raised the third highest proportion of investment during 4Q 2014. The sector garnered $469 million across 38 deals, generating 16% of all deals for 4Q 2014; a 23% rise in dollars invested from 3Q 2014 despite deal flow remaining flat. 4Q'14 Industry Breakdown By Number of Deals 4Q 14 Industry Breakdown By Amount Raised 32% 16% 2% Business and Financial Goods 34% 7% 1% Business and Financial Goods Energy & Utilities (0%) Energy & Utilities (0%) 4% 46% Healthcare Industrial Goods & Materials (0%) Information Technology 3% 55% Healthcare Industrial Goods & Materials (0%) Information Technology 10
Equity Financings into China-based, VC-backed Companies, by Industry Group (2014) 2014 Industry Breakdown By Number of Deals 2014 Industry Breakdown By Amount Raised ($B) 26% 17% 3% Business and Financial Goods 24% 10% 2% Business and Financial Goods 5% 4% Energy & Utilities (0%) 3% Energy & Utilities (0%) Healthcare Healthcare 49% Industrial Goods & Materials 61% Industrial Goods & Materials (0%) Information Technology Information Technology 11
Top 5 Deals into China-based VC-backed Companies (4Q 2014) Co. Name Industry Group Industry Segment Industry Code Brief Description Close Date Round Type Raised ($M) Round Investors (* denotes lead) Beijing Xiaomi Technology Co. Ltd. Information Technology Software Communications Software Provider of mobile phones and applications. 12/20/2014 5 th $1,100.00 All-Stars Investment Ltd.*, Digital Sky Technologies Ltd., GIC Private Ltd., Hopu Investments Management Co. Ltd., Yunfeng Capital Management Co. Ltd. Beijing Xiaoju Technology Co. Ltd. Provider Shopping Facilitators Information of taxi reservation services. 12/9/2014 4 th $700.00 Digital Sky Technologies Ltd.*, GGV Capital, Temasek Holdings Pvt. Ltd.*, Tencent Collaboration Fund* Hangzhou KuaiZhi Technology Co. Ltd. Provider Shopping Facilitators Information of a mobile taxi booking application. 12/31/2014 4 th $600.00 Alibaba Group Holding Ltd., Tiger Global Management LLC, Softbank Corp. Beijing Pocket Fashion Technology Co. Ltd. Provider Shopping Facilitators Information of e-commerce shopping guide solutions. 10/23/2014 4 th $350.00 DST Advisors, Falcon Edge, H Capital, Tencent Holdings Ltd.*, Tiger Global Management LLC*, Vy Capital Management Co. Ltd. Beijing Aiqiyi Technology Co. Ltd. Information Entertainment Provider of online video services. 11/19/2014 Second $294.44 Baidu Inc., Shunwei China Internet Fund LP*, Xiaomi Ventures* 12
Most Active Investors for China-based, VC-backed Companies (4Q 2014) Number of Deals 20 19 18 16 14 12 10 13 12 10 10 8 6 4 2 0 IDG Capital Partners Matrix Management Corp. Sequoia Capital GGV Capital GSR Ventures 13
LIQUIDITY Venture M&A and IPO Market Activity in China (4Q 2014) M&A activity for venture-backed companies in China fell by 50% from the previous quarter and 43% from 4Q 2013 to three completed. 19 M&As have been completed in 2014 as a whole, a drop of 17% from 2013. The largest M&A of the quarter was Wanda Group s acquisition of online payment platform provider 99Bill Corp. in December for $326 million. 61 VC-backed companies went public during 2014 in China, thanks in large part to a flurry of listings in 1Q 2014 which accounted for 44% of the annual total. In contrast, just 15 IPOs took place in 2013. Exit Opportunities for Chinese VC-backed Companies (2011 2014) 4Q'14 3Q'14 2Q'14 1Q'14 4Q'13 3Q'13 2Q'13 1Q'13 4Q'12 3Q'12 2Q'12 1Q'12 4Q'11 0 5 10 15 20 25 30 35 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 IPOs 15 17 15 12 4 0 2 1 12 27 11 9 14 M&As 2 3 3 3 2 7 3 6 7 3 7 6 3 14
Chinese VC-backed IPOs (2011-2014) LIQUIDITY 14 VC-backed companies went public during 4Q 2014 in China, an increase of 56% on 3Q 2014 and 17% on 4Q 2013. HuaDian Heavy Industries had the largest IPO of the quarter, raising $245 million for its December listing on the Shanghai Stock Exchange. The material handling equipment provider s IPO represents 19% of the total raised through VC-backed IPOs in China during 4Q 2014. A total of $1.31 billion were raised through Chinese VC-backed IPOs in 4Q 2014, a rise of 24% from the previous quarter. A total of $7.2 billion has been raised through listings during 2014, dwarfing the $2 billion raised in 2013 and the most since 2011 when $15.7 billion were raised through 100 IPOs. Chinese VC-backed IPO Activity (2011-2014) $3.00 $2.50 30 25 $2.00 20 $1.50 15 $1.00 10 $0.50 5 $0.00 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 Raised ($B) through IPO $1.66 $1.57 $1.63 $1.05 $0.48 $0.00 $0.29 $0.05 $1.63 $2.05 $2.75 $1.06 $1.31 Number of IPOs 15 17 15 12 4 0 2 1 12 27 11 9 14 0 15
Top 3 IPOs in China (4Q 2014) LIQUIDITY Company Name Location Brief Description Industry Code Industry Segment Industry Group Close Date Raised through IPO ($M) Exchange HuaDian Heavy Industries Co. Ltd. Beijing Provider of material handling equipment. General Industrial Machinery Machinery and Industrial Goods Industrial Goods and Materials 12/11/2014 $244.65 SSE: 601226 Shanghai La Chapelle Fashion Co. Ltd. Shanghai Provider of women's wear both online and through retail stores. Clothing/Accessory Retailers Retailers 10/9/2014 $218.89 HKEx: 06116 Momo Inc. Beijing Provider of a mobilebased social networking platform. Online Communities Information 12/11/2014 $216.00 NASDAQ: MOMO 16
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