Q3’21 Venture Pulse Report– Asia

India saw a massive increase in VC investment in Q3’21, reaching a quarterly record — in excess of $14 billion. In addition to substantial raises by Flipkart and Byju, both PharmEasy and Ola raised $500 million funding rounds in Q3’21. Investors outside traditional VC firms took part in a number of deals in Q3’21 — including traditional PE firms, which have not historically been active in consumer tech deals in India. The country saw nine new unicorns created during the quarter, including fintechs BharatPe and CoinDCX and edtechs UpGrad and Eruditus Executive Education.

IPO activity was also very strong in India in Q3’21, with indications Q4’21 will be even stronger. During the quarter, food delivery company Zomato hosted a successful IPO, with its stock price rising 80% in first day trading¹. Unicorn fintech Paytm also announced its intent to go public — likely in Q4’21². PharmEasy is also expected to file IPO paperwork early in Q4’21³.

Both VC investment and IPO activity in China slowed somewhat during Q3’21, in part due to evolving government policies and regulations targeting specific sectors like edtech and fintech. During Q3’21, China’s central government announced new implementation guidance related to Chinese companies listing overseas, including plans to enhance oversight and improve regulations related to overseas data flows and data security⁴, tightened regulations related to after-school tutoring programs and companies, and banned all cryptocurrency transactions.

Several sectors outside those affected by new regulatory guidance continued to see robust investment, including hardware and consumer market companies — such as restaurants and food delivery. In addition to Svolt’s large raise, 5G technology company CICT Mobile raised $569 million, milk tea retailer HeyTea raised $500 million, and integrated circuit company ESWIN Material raised $462 million during Q3’21.

Investor interest in ESG and greentech is growing in Hong Kong (SAR, China) as companies across sectors look for ways to reduce or offset their carbon emissions. While many ESG-focused startups in Hong Kong (SAR, China) are still within the very early funding stages, they are increasingly attracting attention from investors given the increasing demand for green technologies and the growing focus of the government on sustainability and climate change. The challenge for many startups will be finding the right economies of scale in order to bring costs down and become financially sustainable — but given the high priority being given to ESG, it is likely only a matter of time before these companies grow and drive larger investments.

Heading into Q4’21, VC investment is expected to remain slow in a number of sectors in China, although there will likely continue to be robust investment in companies focused on healthtech, the new consumer market, and hardware.

In India, VC investment could grow even further in Q4’21, particularly given the euphoria around investments in consumer tech, D2C companies, fintech and edtech. Social commerce could also see growing attention from VC investors in India over the next few quarters. India could also see a number of blockbuster IPOs before the end of 2021.