China leads global VC financings in Q2 2018, finds KPMG analysis

China leads global VC financings in Q2 2018

Fintech investment remains strong, and AI continues to attract major capital


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Venture capital (VC) deals in China led global investment activity in Q2 2018, accounting for eight of the ten largest VC financings globally this quarter, including four transactions larger than USD 1 billion, finds Venture Pulse, KPMG’s quarterly analysis of VC trends.

China notched eight of the top 10 deals, including the record-setting USD 14 billion investment in Ant Financial, operator of Alipay – China’s biggest online payment platform. In addition, Shanghai-based unicorns Weltmeister and Pinduoduo each raised at least USD 3 billion. Other deals included Manbang Group (USD 1.9 billion), Ubtech (USD 820 million), Hellobike (USD 700 million) and SenseTime (USD 620 million and USD 600 million in two separate rounds). 

The report highlights that corporate VC investment in China also hit a new record in Q2 2018, accounting for nearly USD 30 billion.  

Egidio Zarrella, Partner and Head of Clients and Innovation, KPMG China says: “A lot can be learnt from Chinese tech giants such as Tencent and Alibaba. They are very good at tapping into consumer sentiment, and when there is a need for change, they pivot quickly. No doubt they will continue to be active in some of the biggest deals in the future.” 

Exit activity in Asia picked up steam in the form of IPO activity. Irene Chu, Partner and Hong Kong Head of New Economy and Life Sciences, KPMG China, says: “IPOs have been rebounding in Asia, with Hong Kong Stock Exchange’s new listing regime for emerging and innovative businesses spurring renewed interest among unicorns, it would not be surprising to see a number of Asia-based fintech and emerging tech companies looking to the IPO market to exit over the next few quarters.” 

Despite the continued decline in the overall number of VC deals, companies around the world raised a significant amount of VC funding in Q2 – recording nearly USD 70 billion invested, a more than USD 10 billion increase from the USD 58 billion seen in Q1. Artificial intelligence (AI) continued to be a hot area of investment in all regions of the world in Q2, while autotech, cybersecurity, agtech (agriculture tech) and biotech were also seen as key priorities. 

China has seen notable investments in AI this quarter, and this has been identified as a strategic area for investment. SenseTime, the China-based facial recognition company raised USD 1.2 billion over two separate funding rounds this quarter, making it the world’s most valuable AI start-up to date.

Philip Ng, Partner and Head of Technology, KPMG China, concludes: “Looking ahead to Q3, AI and data analytics are expected to continue to drive VC activity across Asia, with investments expected across a range of sectors, including healthcare, biotech, financial services and retail. For example, AI and healthcare – both separately and now together – are considered a national priority in China, given its large and ageing population. Other sectors expecting to see increased investment include payments, virtual banking and consumer sectors that cater to Asia’s rising middle and upper class.” 


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