After two soft quarters of investment, VC investment in Asia rebounded significantly in Q3’20, led by a $1.5 billion raise by Shanghai-based automotive company Weltmeister and a $1.3 billion raise by India-based internet retailer Flipkart.
VC investment in China rebounded in Q3’20, as China continued to recover from the impacts of COVID-19. While VC investment remained slow compared to pre-pandemic levels, China saw an increasing number of large deals, including the $1.5 billion raise by Weltmeister and a robust number of $100 million+ deals, including raises by JD Health ($830m), electric vehicle company Xpeng ($500m) – which also held a successful IPO on the NYSE during the quarter, grocery delivery company Miss Fresh ($495m), edtech company Zhangmen.com ($450m), internet retail company Xiauhongshu ($450m), medtech company MicroPort Medical Robots ($432 million) and discount grocery company Yipin Shengxian ($353m).
In China, the pandemic has had a major impact on companies, particularly those in hard-hit sectors such as commercial real estate. This is expected to drive up consolidation activity over the next few quarters as companies run out of cash. Less proven new economy companies looking to raise funding will likely face significant downward valuation pressure from investors.
Despite very challenging economic conditions due to COVID-19, VC investment in India rose during Q3’20. VC investment primarily focused on highly relevant companies and industries; in the highly competitive food and grocery delivery, Flipkart raised $1.3 billion. Large tech giants continued to be very active in India during the quarter. In July, Google announced a $10 billion fund to help accelerate India’s transition to a digital economy; Google also will make a $4.5 billion investment in Jio Platforms, following on Facebook’s $5.7 billion investment in the same company in Q2’20. Jio Platforms also made its own investments in Q3’20, including the acquisition of online pharmacy Netmeds in August.
VC investment in Asia is expected to continue to pick up, particularly in areas such as healthtech, eCommerce, AI, and digital enablement. Fintech investment is also expected to grow, particularly in terms of SME financing solutions.