Venture capital in China soars 25% in 2015

February 18
9:35 AM 2016

The venture capital (VC) investments in the world's second largest economy witnessed an encouraging growth rate of 24 percent in 2015. China ranked at second after the US in mobilizing the venture capital funds. The investors turn choosier and cautious in selecting the startups for extending VC funding in the wake of economy slowdown.

Chinese venture-stage firms mobilized a record volume of Yuan 129.3 billion ($20.2 billion), according to a latest data by Zero2IPO research. The startups in the US on an average raise about $60 billion annually, while Japan is lagging behind with about $1billion VC investment. Chinese startups have good appetite for Venture capital funding and becoming wealthy as well, observe some VC investors.

Nikkei Asian Review reports that venture capitalists are cautious and very selective in choosing Chinese startups as the world's second largest economy is slowing down. Some analysts expressed their concerns about possible tech bubble bust in China, but the things are changing into positive mode. Chinese youngsters are coming up with good business ideas and starting on their own, as stated by some VC investors.

The world's largest economy has been leading in the venture capital investments. The venture capital investments in the US were $58.8 billion in 2015. This is the second highest VC funding recorded in the US economy during the past 20 years, according to  PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.

National Venture Capital Association (NVCA) further adds that 962 deals recorded $11.3 billion venture capital during the fourth quarter of 2015 alone. However, comparing with the third quarter, the number of deals eased 16 percent and value of investment dropped by 32 percent during the fourth quarter. The fourth quarter was the eight consecutive quarter of over $10 billion venture capital inflow. 

Nobuaki Kitagawa, CEO of CyberAgent Ventures Beijing, a unit of the Japanese venture capital company, said: "Of course, only a tiny handful of startups ever reach an initial public offering. But for both entrepreneurs and VC investors, the options for making an exit besides IPOs have grown diverse."

Forbes observes that there's been increase in deal volume and valuations over the past seven years, while non-VC funding is also entering into the system. Limited partners investing in VC funds may continue to do so. However, the market seems to be returning to pre-recession levels. Some analysts forecast the limited partners' investment into VC funds may be encouraging in 2016 unless there's no unforeseen downturn.

The internet giants in China market known as BAT -- Baidu, Alibaba Group and Tencent Holdings. These three internet majors put together spent about $13 billion on acquisitions in 2014 alone. Recently, Tencent invested $13 million in Bilibili, a Shanghai-based operator of video sharing platform. Baidu has taken some stake in Bolome, a Shanghai-based e-Commerce startup.

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