Investors eye opportunities in artificial intelligence, autotech and enterprise services companies
Venture capital (VC) investment in China reached a record high of over USD40 billion in 2017. The positive sentiment was driven by a number of mega deals as investors seek opportunities in artificial intelligence (AI), autotech and enterprise services companies, finds latest KPMG analysis.
China accounted for five of the top 10 largest VC financings globally in Q4 2017, including three transactions that were larger than USD1 billion, according to Venture Pulse, KPMG’s quarterly global report on the latest VC trends. The strong showing helped propel China’s VC market to new heights, with a record investment of more than USD40 billion, or a 15 percent increase from the USD35 billion seen in 2016.
Continued investor focus on quality has resulted a decline in the overall number of deals to 75 – the lowest quarterly figure since Q2 2013, the report highlights.
Egidio Zarrella, Partner and Head of Clients and Innovation, KPMG China, says: “AI investment is a big focus in China, not just for VC investors, but also for the large tech players. The challenge for many will come down to talent. Corporates, in particular, are making strategic acquisitions simply as a means to capture talent.”
In Q4 2017, corporate participation in China VC deals was 32.3 percent, higher than the global average of 18.7 percent. Corporate VC investment in China hit USD11.7 billion in Q4 2017, which was the second-highest over the past decade.
The report also highlights that enterprise services companies have gained ground in Asia, particularly in China.
Philip Ng, Partner and Head of Technology, KPMG China, says: “In Q4 2017, more than 70 deals closed in the B2B enterprise services space, with over USD1.3 billion invested. Over time, this area is expected to grow as companies realise the value of leveraging startups to drive both efficiency and customer value.”
Additionally, the autotech industry is also attracting significant interest, with a number of sizeable deals concluded in Q4 2017. This momentum is expected to continue.
Irene Chu, Partner and Head of Technology for Hong Kong, KPMG China, adds: “Chinese investors are focused on rapidly scaling and gaining market share so that they can quickly dominate the market. This is why we are seeing bigger acquisitions – many driven by China’s biggest tech giants, as they look to take out their competition in different areas.”
Globally, VC investment hit a decade high at USD155 billion in 2017 despite a slowdown in deal volume. The global VC market is expected to remain strong in 2018, with healthcare, biotech and autotech to continue to grow rapidly. Interest in AI is also likely to drive significant investment rounds across various industries. Emerging areas such as foodtech and agritech are also expected to gain traction heading into 2018, the report highlights.
KPMG China operates in 16 cities across China, with around 12,000 partners and staff in Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 154 countries and territories and have 200,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies.