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VC investment in Asia held steady quarter-over-quarter, driven by the continued resurgence of investment in China, including a $3 billion raise by group buying platform Xingsheng Selected.

Asia remains attractive to VC investors

Asia continued to be an attractive market for VC investment in Q1’21, although ongoing travel restrictions likely affected the amount of international investment going into the region. A number of VC funds have targeted Asia, particularly Southeast Asia given its high population and its relatively low level of market maturity.

China attracted the largest deals of the quarter. In addition to Xingsheng Selected, enterprise AI solutions company 4Paradigm raised $700 million, electric vehicle company Leapmotor raised $662 million, alternative battery solutions provider Svolt raised $541 million, and remote healthcare provider Miaoshou Doctor raised $463 million. Hong Kong (SAR) -based Lalamove also raised $1.5 billion. India also saw strong VC investment in Q1’21, including a $460 million installment in an ongoing fundraise by edtech Byju, a $450 million raise by e-grocery Grofers, a $400 million secondary transaction sale by gaming company Dream11, and a $250 million raise by food delivery app Zomato.

Venture financing in Asia, Q1'21

India sees strong VC activity in Q1’21

VC in India was robust in Q1’21, with a wide range of sectors attracting $100 million+ funding rounds, including edtech, grocery delivery, and gaming. Over the quarter, VC deal activity picked up significantly, both in terms of companies looking to raise funds and in terms of dry powder being deployed. The velocity of deals was also quite rapid, with companies getting higher valuations. During Q1’21, India also saw one of the largest exits by a gaming company: a domestic IPO by Nazara Technologies. The successful IPO highlights the rapidly changing perceptions of startups in India, as similar startups would have had to look to foreign markets to go public as recently as eighteen months ago.

SEHK attracts secondary listings from China-based companies

The Hong Kong Stock Exchange (SEHK) continued to be a key location for hosting IPOs in Asia, including the secondary listings of China-based companies already listed in the US. Given recent changes to US listing rules, a number of Chinese companies listed in the US are now considering Hong Kong for a secondary listing in order to remain public in the event they are delisted in the US. In March, China mega-giant Baidu raised $3.1 billion in a secondary listing on the SEHK. Online vehicle platform Autohome also held a secondary listing on the SEHK, raising $688 million in Q1’21.

One area that will likely see growth in the future is around ESG-driven businesses. In Hong Kong, there continues to be strong interest in ESG and a dedication to reducing carbon emissions –and that’s driving interest in everything from meat alternatives to smart technologies. China has also committed to becoming Net Zero by 2060, which will likely drive investment over time in a host of related sectors.

Irene Chu
Partner, Head of New Economy and Life Sciences
Hong Kong Region, KPMG China

Trends to watch for in Asia

Looking head to Q2’21, VC investment in China is expected to focus significantly on embedded technologies like AI in healthcare. Green technologies will likely also garner increasing investments given China’s commitment to become Net Zero by 2060. Foodtech is also poised to gain some traction among investors, particularly in Hong Kong, where there is increasing interest in alternatives to traditional meat.

In India, the velocity of VC deals activity is only expected to increase, with sectors like edtech, delivery, and e-commerce expected to remain hot, while interest in insurance is poised to see significant growth. IPO activity is also expected to pick up in India given a number of the large raises held in Q1’21 were viewed as pre-IPO rounds.