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ASIA’S VENTURE CAPITAL ECLIPSE: A PREQIN AND VERTEX VENTURES STUDYOctober 2018

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CONTENTS

24 A S I A N V E N T U R E C A P I T A L F U N D M A N A G E R A C T I V I T Y

25 C A N S O U T H E A S T A S I A E M U L A T E C H I N A ?

31 I N F O C U S : A S E A N

32 A S I A N V E N T U R E C A P I T A L P E R F O R M A N C E

33 I N F O C U S : N O R T H E A S T A S I A

34 A S I A N V E N T U R E C A P I T A L D E A L S

42 I N V E S T O R S

4 A W O R D F R O M P R E Q I N ’ S C E O

5 A T A G L A N C E

6 A W O R D F R O M V E R T E X V E N T U R E S ’ C E O

8 C H I N A : I N N O V A T I V E F U T U R E

13 I N F O C U S : G R E A T E R C H I N A

14 V E N T U R E C A P I T A L F U N D R A I S I N G I N A S I A

17 I N D I A : T H E G R O W I N G E N T E R P R I S E M A R K E T

23 I N F O C U S : S O U T H A S I A

All rights reserved. The entire contents of Asia’s Venture Capital Eclipse: A Preqin and Vertex Ventures Study, October 2018 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Asia’s Venture Capital Eclipse: A Preqin and Vertex Ventures Study, October 2018 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent financial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Asia’s Venture Capital Eclipse: A Preqin and Vertex Ventures Study, October 2018. While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confirm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Asia’s Venture Capital Eclipse: A Preqin and Vertex Ventures Study, October 2018 are accurate, reliable, up-to-date or complete. Although every reasonable effort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Asia’s Venture Capital Eclipse: A Preqin and Vertex Ventures Study, October 2018 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication.

A S I A ’ S V E N T U R E C A P I T A L E C L I P S E : A P R E Q I N A N D V E R T E X V E N T U R E S S T U D Y

4 © P r e q i n L t d . | w w w . p r e q i n . c o m

A WORD FROM PREQIN’S CEO

Welcome to our new report, “Asia’s Venture Capital Eclipse: A Preqin and Vertex Ventures Study”, that we are proud to present alongside our partners in the project, Vertex

Ventures, a leading global venture capital investor, and part of Singapore’s Temasek group.

‘Eclipse’ is a strong word, but it has been chosen carefully. We are all accustomed to using superlatives when describing the scale and pace of growth in Asia-Pacific economies, and nowhere is this more evident than in the venture capital industry: Asia-focused venture capital assets under management have more than doubled since December 2014 ($88bn in 2014 vs. $221bn in 2017), highlighting the remarkable growth in the industry, which now rivals that of the US for its scale and diversity. This investment has driven significant success: according to the Global Startup Ecosystem Report 2018, about one in three unicorns globally now come from China, comparing favourably with 41% in the US.

The pace of growth may have taken many by surprise, but with hindsight it was entirely to be expected. The industry’s growth reflects the confluence of several factors: rapid economic growth, young and well-educated populations, high levels of online activity (800 million internet users in China), distinct regional and local nuances to peoples’ habits and requirements, and an astute global ecosystem of investors capable of spotting the opportunities that this brings.

The result is a vibrant venture capital ecosystem capable of driving innovation at pace and scale; Preqin’s online platform now tracks over 2,600 ‘institutional-quality’ venture capital firms in Asia. Although China accounts for the largest portion of these firms, significant clusters of venture capital activity also exist throughout Asia. The dynamics of each sub-region differ, and the following pages delve into some of the details.

An important aspect of venture capital in Asia is the extent to which investors from around the globe are participating in the opportunity. Asia-based investors account for approximately 28% of the interest that Preqin has seen in Asian venture capital, but North America leads with 53% of all investor interest in Asia, while Europe accounts for a further 15%. The market opportunities and the portfolio companies may be Asian, but the investment opportunities are truly global, and they are benefitting all investors.

This connectedness runs through the entire venture capital ecosystem, and many leading players have positioned themselves to maximum advantage – firms like Vertex Ventures that operate as a network of venture firms focused on their individual regional markets within Asia, but benefit from the network advantages of being local in many places.

It is a very exciting – and challenging! – time to be at the forefront of venture capital investing in Asia. Preqin is committed to investing in our research and product to bring you the best possible data to help you chart your course through the exciting opportunities ahead. Together with Vertex Ventures we hope that you will find this study and report to be a helpful guide.

Happy investing!

MARK O’HARECEO, Preqin

D O W N L O A D D A T A P A C K : w w w . p r e q i n . c o m / a v c e 1 8

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Location of Asia-Based Venture Capital Fund Managers and Institutional Investors

1,063

255

China134

India

74

110

Japan

137

65

Singapore

36

84

South Korea

73

45

Hong Kong

42

Fund ManagersInvestors

Source: Preqin Pro

AT A GLANCE



Vertex Ventures was started with the keen sense that technologies would be a critical differentiator in an increasingly competitive world. More than ever, accelerating technological advances and innovation will

bring even greater disruptions to economies and the world.

Focused on our mission to seek out promising disruptive, transformational leaders from around the world and nurturing them into prospective global champions, Vertex today is organized as a global network of independently managed and localized VC funds. Our global VC franchise comprises four early-stage, IT-focused funds across China, Israel, the US, Southeast Asia and India, as well as a global healthcare fund. Vertex also has a growth-stage-focused fund that looks at follow-on opportunities from its portfolio of early-stage companies. At Vertex, we believe that innovation comes from all over the world, requiring in-depth, local knowledge and networks to access the best investment opportunities. At the same time, markets for innovative products and services are global. Our global-local structure enables our professional, localized investment teams to be deeply connected with the innovation markets and ecosystems they operate in. This is important from both deal-sourcing or portfolio-support perspectives, while having the unique advantage of proprietary support from the global Vertex network. Across Vertex today, we have a deep, global bench of over 40 VC professionals,

representing an impressive array of investor-operator competencies and experience.

We are proud to have built many great technology companies that improve people’s lives and transform businesses. If we look to the answer as to why we have achieved so much over the years, it was because we unleashed the energy and individual genius of entrepreneurs driven by the sole objective of identifying, investing and supporting global champions. In doing so, we have also delivered outsized returns to our investors.

Building on the foundations of our unique parentage and support from Temasek, deep operating experience and credible track record, Vertex is looking ahead towards building a differentiated and enduring Global Venture Capital Platform.

A WORD FROM VERTEX VENTURES’ CEO

CHUA KEE LOCKCEO, Vertex Holdings

Managing Partner, Vertex Ventures SEA & India



CHINA: INNOVATIVE FUTURE

How has China’s tech landscape evolved over the years and how do you see it developing?Over the years, China’s vast population has shown a willingness to embrace new technologies. Smartphone shipments have increased from 212 million in 2012 to 468 million in 2017. The Chinese also use online services for gaming, social media and shopping, registering online sales of $650bn, spawning a $22bn online gaming industry as well as increased social media use – as evidenced by WeChat’s monthly active users rising from 100 million in 2012 to over 1 billion in early 2018.

China is also one of the world’s leading players in digital payments, with mobile payments exceeding $12tn for the first 10 months of 2017, nearly 40% more than 2016. In urban areas, China has practically gone cashless.

In 2000, there were less than 10 million internet users in China, now there are 800 million internet users. The market has grown over 80x. Its market potential is at least 5x larger than that of the US; if China has not overtaken the US, it is certainly catching up fast.

Today, we are observing the next wave of innovation in China. With a large, tech-savvy domestic market, China is an ideal place to experiment with new innovations (e.g. bike sharing, products/services for the middle class and mobile internet). There are many innovation opportunities for start-ups, particularly in retail, healthcare and transportation. For example, Invented-in-China brands, robots and AI are fertile breeding grounds for China’s next unicorns.

With local support and policies attracting talent back home, China offers a larger domestic market with the latitude for innovation, sustainable growth and more space for unicorns to grow. Chinese entrepreneurial drive is impressive, and this will allow China to

sustain that advantage – giving it a fair chance of surpassing the rest of the world in innovation.

What do you think is unique about China’s innovation model? China has a vibrant ecosystem with no shortage of funding. It also has a rising middle class that is open to new business models, services and products like DJI’s drones.

As a “bicycle kingdom”, most people in China are used to commuting by cycling. We wondered if a more convenient and affordable bike-sharing service could be made available in China. This was why we began looking out for promising bike-sharing start-ups and invested in Mobike in 2016. Today, Mobike is a symbol of China’s innovative transformation which can be found in more than 200 cities, offering first-and last-mile solutions to everyone.

How does China compare to other start-up ecosystems?An area of distinction is its ascendancy as a global AI hub. In fact, China has plans to create a $150bn AI industry by 2030. According to CB Insights, of the $15bn invested in AI start-ups globally in 2017, about half went to China. For the first time, China’s AI start-ups surpassed those in the US in terms of funding.

TAY CHOON CHONGManaging Partner, Vertex Ventures China


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While the US still has more AI start-ups than China, the gap is closing.

China is also home to some of the world’s largest high-tech companies like Huawei, Tencent, BYD, Gionee, Konka, TP-Link, TCL and OnePlus. These companies are major contributors to R&D in China and have substantially upped their budgets in recent years. Huawei has already surpassed Apple, Oracle and Facebook in its R&D investments.

According to the Global Startup Ecosystem Report 2018, only 14% of current unicorns originated in China in 2014. Today, about one in three unicorns come from China, comparing favourably to 41% in the US. Beijing boasts of 40 unicorns, second only to Silicon Valley, while Shanghai is home to 21 unicorns and counting.

In addition to having more billion-dollar companies, China has also seen an increase in patents, especially in the AI and blockchain sectors. While the US still has more venture capital investment in these sectors, China has surpassed in terms of patent applications, with 4x as many AI-related patents and 3x as many blockchain- and crypto-related patents as of 2017.

The entrepreneurial culture in China has gradually shifted from “Made in China” to “Invented in China”. Mobike is an example of China’s many innovative design products – combining GPS, IoT chips, solar panel, air-free tyres, chainless, aircraft-quality aluminum and mobile payments. Millions of orange-hued dockless bikes have been deployed around the world.

China has its own factories, and now also owns technologies, talents, strong spending power and unique consumption habits. This is expected to be the flywheel driving more innovative concepts, models and technologies.

What are the domestic industries that are particularly exciting? We spend most of our time looking for potential investments in AI, deep tech and consumption upgrade opportunities.

AI: The Chinese Government positioned AI as a strategic priority and laid out a development plan in 2017, aiming to become the world leader in the field. For instance, the City of Beijing plans to build a $2.1bn AI development park in the city’s western region that will house up to 400 AI enterprises. Just last year, local investment was soaring with 7.3% of all local VC investment going into AI, big data and analytics start-ups.

Founded in 2012, ByteDance, a popular Beijing AI start-up famed for its personalized news aggregator app Toutiao, is now planning for an IPO. Chinese citizens seem to be embracing AI with similar enthusiasm, using facial recognition technology for payment authentication. Machine learning requires a lot of data to achieve accurate results. China has abundant data streams, with the majority of its 1.4 billion population online daily.

Facial recognition technology in China is now one of the most advanced in the world because of its massive training datasets. SenseTime and Face++ are the leading facial recognition technology companies in China. Both started only a few years ago and have now already received more than $1bn each from investors. Besides facial recognition, China is applying AI to healthcare, self-driving cars, traffic management and various smart city applications.

Our portfolio company, Horizon Robotics, is a case in point. Horizon uses a proprietary Gaussian-architecture and embedded AI computer vision processors that power smart cars and smart cameras, providing a complete solution including algorithm, chipset and cloud. It has raised more than

The entrepreneurial culture in China has gradually shifted from “Made in China” to “Invented in China”.



$100mn in Series A+ led by Intel Capital in December 2017.

In the education sector, almost 90 million Chinese citizens educated themselves online in 2016. The Chinese online education market is expected to grow to some 240 million users and a total value of $64bn by 2021. China’s leading internet giants – Baidu, Alibaba and Tencent – have all invested heavily in online education. AI is tested in Chinese schools. One in four Chinese schools were experimenting with computer software using deep learning to evaluate students’ work. It is estimated that 60,000 schools are testing the technology. A beneficiary of this trend is XueBaJun – our portfolio company specializing in the development of mobile online solutions to assist K12 students in their homework using deep-learning technology.

Deep Tech: There are also significant deep-tech opportunities in China. In advanced manufacturing and robotics, China is a rising world-leader. The country employs the highest number of industrial robots in the world and is home to two of the four unicorns in the advanced manufacturing sub-sectors: UBTECH Robotics and DJI. According to Inc, Shenzhen is the electronics manufacturing hub of the world, making 90% of the world’s electronics.

Riding this trend, we invested in Geek+, a start-up offering advanced robotics and AI for logistics and warehouse automation solutions. Geek+ robots have been deployed in DKSH, SF Express, Tmall and Suning’s warehouses. We also invested in SolidEnergy which is a battery technology company that manufactures the world’s lightest rechargeable cells. They supply these to large Li-ion cell manufacturers to be integrated with a separator and cathode into fuel cells which can be customized for drones, consumer electronics and electric vehicles. Now its products have been sold to many large companies in China and the US.

Yunyinggu develops new display technologies that can significantly improve the performance of flat panel displays. Its proprietary solution is the world’s best in achieving high PPI (pixel per inch) and can be applied to all kinds of flat panels such as LCD, LED, OLED and others. Smarter Micro is a fabless semiconductor company that designs, develops and provides MMIC, RF and Analog IC. The company’s product portfolio currently includes Gain block, GPA, Switch, Power Amplifier, Mixer etc.

Consumption Upgrade: The rise of the middle class, different spending habits of a younger generation and the proliferation of social media platforms are expected to spur the growth of Invented-in-China brands.

In recent years, consumers have turned to buying more quality products. Many new local brands have well-designed products that have been elevated to leading consumer brands by multi-channel marketing like online media, WeChat, domestic movies and TV shows.

We believe there are significant opportunities for new brands in each consumer segment in China that meet the unique consumer needs and preferences of a particular segment. For example, Loho is an online-to-offline spectacles brand owner and distributor. Neiwai designs comfortable and natural innerwear that promotes health and wellbeing. 73 hours designs and sells high heels that are entry-level luxury – past the point of being basic or cheap, but within the purchasing power of China’s middle class. Though it is not technology based per se, this segment clearly has significant potential.

Do you think there is too much liquidity in China chasing a few selected start-ups, leading to excessive valuations?Overall, valuations do not appear unreasonable. At a micro level, one should consider valuations in the context of the start-up’s potential over the longer


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term. And China has start-ups with outstanding prospects. From a market viewpoint, there is also ample liquidity and exits to support valuations.

As an early-stage investor, valuing a start-up takes more than simply benchmarking comparable companies at the same stage; it also requires a clear understanding of the start-up’s business model, addressable market, growth potential and barriers to entry etc.

For example, when we invested in Mobike in 2016, its valuation was in the tens of millions of US dollars – deemed relatively expensive then. However, we invested based on a conviction in its technology and market potential. When Meituan Dianping acquired Mobike recently, we exited at a valuation of $2.7bn.

How do you stay ahead of the herd when it comes to investing in the next big thing?As a VC, when it comes to investing, we need to adopt a long-term view of the actual pain-points that need to be addressed and their second-order effects.

For instance, in 2015, most VCs in China did not pay attention to smart manufacturing. We observed that it was getting harder for large factories like Foxconn, Quanta and Jabil to recruit, having to increase their recruitment budgets dramatically every year during peak season.

So we began focusing on smart manufacturing, especially industrial robotics. This industry can be divided into three layers: the lowest-level

solution providers at the bottom, robotics body manufacturers at the mid-tier and the core component manufacturers at the top. Based on our research, we thought that the top- and mid-tier components produced in China still lagged behind other countries. Therefore, we decided to start from the bottom tier by investing in ioranges. By the time 3C manufacturing robotic applications took off in 2017, ioranges had accumulated many early successes, gaining recognition from leading customers and achieving significant business growth.

China imported $227bn worth of integrated circuits in 2016, more than for imports of crude oil, iron ore and primary plastics combined. This weakness has become more apparent in the recent ban on ZTE. We realized the importance of own-chip development technologies and products many years ago. Since 2003, we have been investing in semiconductor chip design and manufacturing companies. For example, we invested in Horizon Robotics; its core technology is the AI algorithm and the self-designed chip that can maximize algorithm performance, while reducing cost and power consumption. We also invested in Ancsonic, which is an active noise cancellation (ANC) solution provider. Ancsonic develops their own chipsets to ensure the security of the algorithm and for cost control.

These examples reflect our investment thinking and why it is important not to get caught up in fads. Importantly, how we can stay ahead of the curve is by investing in start-ups that are focused on solving real pain-points.

We believe there are significant opportunities for new brands in each consumer segment in China that meet the unique consumer needs and preferences of a particular segment.



ABOUT THE AUTHORMr. Tay Choon Chong joined Vertex in 2009. Prior to joining Vertex, he was the Senior VP of GIC based in Beijing, China, from 2007 to 2009. Prior to that, Choon Chong was the Senior VP of ST Aerospace responsible for its Component Aviation Service Division. From 2000 to 2005, he headed Fortune VC Singapore and covers VC investment in China and Singapore. Choon Chong graduated from Imperial College with BEng in Electrical Engineering and from Stanford University with MSc in Electrical Engineering.

Comparison of Vertex Ventures China Funds vs. Greater China-Focused Venture Capital Funds (Vintage 2007-2015)

41

20

05

1015202530354045

Vertex Ventures China I (2008 Vintage) Vertex Ventures China II (2013 Vintage)

Net IR

R (%)

Source: Preqin Pro

Top Quartile: 20.9Median: 16.7


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IN FOCUS: GREATER CHINA

Fig. 2: 10 Largest Greater China-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last 10 Years (As at July 2018)

Firm Headquarters Total Funds Raised in Last 10 Years ($bn)

China Reform Fund Management Beijing, China 20.2

YF Capital Shanghai, China 5.3

Shanghai Integrated Circuit Investment Fund Shanghai, China 4.4

Shanghai DOBE Cultural & Creative Industry Development Shanghai, China 4.2

Legend Capital Beijing, China 4.1

IDG Capital Beijing, China 4.0

Qiming Venture Partners Shanghai, China 3.7

Nanjing Zijin Investment Nanjing. China 3.2

Shunwei Capital Partners Beijing, China 2.9

Baidu Capital Beijing, China 2.7

Source: Preqin Pro

China, Hong Kong, Macau and Taiwan

Fig. 1: Annual Greater China-Based Venture Capital Fundraising, 2010 - 2018 YTD (As at July 2018)

7 8 8 6 6 10 4 6 3

152210

157 129 173

352285

15231

7.8

20.8

11.6

4.0

13.7

18.820.9

15.0

7.7

0

5

10

15

20

25

050

100150200250300350400

2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

No. of Funds Closed (Rest of Greater China) No. of Funds Closed (China) Aggregate Capital Raised ($bn)

No. o

f Fun

ds Cl

osed

Aggregate Capital Raised ($bn)

Year of Final Close

Source: Preqin Pro



VENTURE CAPITAL FUNDRAISING IN ASIA

Two hundred and fifty-one Asia-focused venture capital funds reached a final close in 2017, securing $20bn in aggregate capital, down from the fundraising peak of $28bn in 2016 (Fig. 3). With aggregate capital targeted

standing at a record $67bn in July 2017 (Fig. 6), and 68% of all Asia-focused funds closed meeting or exceeding their targets in the same year (Fig. 4), the decline in aggregate capital raised does not necessarily indicate a slowdown in the Asian venture

capital market, but rather highlights the fact that many large fund managers are now actively investing their capital rather than raising it. It is perhaps unsurprising that China-focused funds closed make up the majority of aggregate capital raised in 2017: 74% ($15bn) of all Asia-focused aggregate capital raised by funds closed in 2017 is targeting China (Fig. 9), and seven of the 10 largest funds closed in the past 10 years predominantly target the country for venture capital opportunities.


Fig. 3: Annual Asia-Focused Venture Capital Fundraising, 2006 - 2018 YTD (As at July 2018)

104 127 131 144234 290 239 217 262

460374

25167

6.710.0

12.0

5.7

11.6

24.1

15.9

7.7

18.822.7

28.1

20.4

11.0

0

5

10

15

20

25

30

0

100

200

300

400

500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

No. of Funds Closed Aggregate Capital Raised ($bn)

No. o

f Fun

ds Cl

osed

Year of Final Close

Source: Preqin Pro

Fig. 4: Fundraising Success of Asia-Focused Venture Capital Funds, 2006 - 2018 YTD (As at July 2018)

35% 30% 30%53%

25%41% 44% 35% 40%

20% 20% 31% 19%

48%33% 42%

47%

58% 33% 38%38% 30%

48% 51%43%

42%

17%36% 27% 17% 26% 18% 27% 30% 31% 29% 25%

38%

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Below Target Met Target Exceeded Target

Prop

ortio

n of F

unds

Clos

ed

Year of Final Close

Source: Preqin Pro



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Fig. 7: Annual ASEAN-Focused Venture Capital Fundraising, 2006 - 2018 YTD (As at July 2018)

0100200300400500600700800

02468

1012

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD

No. of Funds Closed Aggregate Capital Raised ($mn)

No. o

f Fun

ds Cl

osed

Fig. 8: Annual India-Focused Venture Capital Fundraising, 2006 - 2018 YTD (As at July 2018)

0.0

0.5

1.0

1.5

2.0

2.5

05

1015202530

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD


No. o

f Fun

ds Cl

osed

Aggregate Capital Raised ($mn)

Year of Final Close


Year of Final Close

Fig. 5: Average Time Spent in Market by Asia-Focused Venture Capital Funds Closed, 2006 - 2018 YTD (As at July 2018)

12.2 11.9 13.115.3

17.1

8.3

17.018.5

15.6 14.5 14.8

18.8

12.1

0

5

10

15

20

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD

Aver

age T

ime S

pent

on Ro

ad

(Mon

ths)

Year of Final CloseSource: Preqin Pro

Fig. 6: Asia-Focused Venture Capital Funds in Market over Time, 2013 - 2018

60 84 102 150 188

517

7.2 9.613.9

19.3

66.560.1

0

10

20

30

40

50

60

70

0

100

200

300

400

500

600

Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18No. of Funds Raising Aggregate Capital Targeted ($bn)

No. o

f Fun

ds Ra

ising

Source: Preqin Pro

Source: Preqin Pro Source: Preqin Pro

Fig. 9: Annual China-Focused Venture Capital Fundraising, 2006 - 2018 YTD (As at July 2018)

2246 67 80

166220

159 134177

357

292

160

322.2

4.27.9

2.8

9.0

21.2

11.6

4.6

14.9 18.1

23.1

15.0

7.6

0

5

10

15

20

25

050

100150200250300350400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD


No. o

f Fun

ds Cl

osed


Source: Preqin Pro

Year of Final Close

Aggregate Capital Targeted ($bn)



Fig. 10: Largest Asia-Focused Venture Capital Funds Closed, 2006 - 2018 YTD (As at July 2018)

Fund Firm VintageFund Size

(bn) Fund TypeFinal Close

Date

China Integrated Circuit Industry Investment Fund SINO-IC Capital 2014 138.7 CNY Growth Dec-14

Shanghai Integrated Circuit Investment Fund

Shanghai Integrated Circuit Investment Fund 2016 28.5 CNY Venture Capital

(General) Apr-16

Shenzhen Guoxie I Equity Investment Fund Partnership

Shenzhen Zhaoshang Guoxie I Equity Investment Fund

Management2017 30.0 CNY Growth Dec-16

Shanghai Municipal Creative (Design) Industrial Investment Fund

Shanghai DOBE Cultural & Creative Industry Development 2011 26.9 CNY Venture Capital

(General) Aug-11

Hillhouse Fund III Hillhouse Capital Management 2016 4.2 USD Growth Feb-16

Beijing Zhongjiao Jianxin Equity Investment Fund CCCC lndustrial Fund Management 2014 20.0 CNY Growth Dec-14

Nanjing Jianning Zijin Equity Investment Fund I Nanjing Zijin Investment 2012 3.2 USD Venture Capital

(General) Mar-12

Inventis China Growth USD Fund V Inventis Investment Holdings (China) 2010 3.0 USD Growth Sep-10

Zhongjieneng Seasalt Green Development Industry Investment Center

CECEP Huayu Fund Management 2017 3.0 USD Growth Feb-17

Actis Emerging Markets 3 Actis 2007 2.9 USD Balanced Dec-08

Source: Preqin Pro


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INDIA: THE GROWING ENTERPRISE MARKET

How have market conditions in India changed over the years and how has Vertex adapted to the changing environment?There has been significant growth in the Indian startup base from around 3,000 in 2009 to over 5,000 in 2017. While the US and China are the top two geographies for number of unicorns, India has the second highest average unicorn valuation, led by Flipkart. Several prominent start-ups projecting tremendous growth stories include Paytm, OLA, Flipkart, Inmobi and Swiggy.

Exits are also generally positive. The IPO market is very robust with more than 100 IPOs in India in H1 2018, with NewGen Software and consumer tech firm Dixon Technologies having successful local IPOs. We are also seeing a lot of M&A happening right now. H1 2017 included more than 50 M&A deals (up 25%), with corporates’ M&A share rising to about 30%. B2B acquisitions continue to rise, mostly focused on building tech capabilities (e.g. Altran Technologies bought Aricent for $2bn). B2C acquisitions are primarily for market expansion (e.g. Walmart’s $16bn acquisition of Flipkart).

While these are good times, there are also challenging parts of the cycle. We were fortunate that we slowed down during 2014 and 2015, when the markets were overheated. In fact, our CEO, Mr Chua Kee Lock, told the media then “that it was easy to raise money as the [2015 Indian] market was hot,” but had added that “the music would soon stop, and at that time, you should not be caught without a chair.” Some VCs were upset with his stance then. They asked him why we were not actively investing in India. But he had been speaking from experience of having seen such cycles.

Anecdotally, for every 10 start-ups a VC fund invests in, it will typically lose money in five, make modest returns in three and make great returns in two. So at least half of all start-ups will go through some existential challenge in their life. In India, we saw the

first wave of mortalities in 2015, but you will continue to see companies fail, just as you will continue to see companies become wildly successful. Venture capital is a high-risk, high-return business.

In the aftermath, many of our VC peers had to deal with insider funding rounds or down rounds. Although we did not deal with those, we did make a few investments during that period such as FirstCry (online store for baby products), XPressBees (last-mile delivery) and Yatra (online travel firm) that have turned out very well for us. FirstCry is by far the market leader in its category and Yatra is now listed on the NASDAQ.

Looking ahead, the Indian Government is aiming to create a trillion-dollar economy through its “Digital India” campaign in the next few years. Close to a billion people will come under the digital ecosystem, making the scale and opportunity unprecedented anywhere else in the world. Many multibillion-dollar companies can be created out of India which will ride this wave of digital innovation. To prepare for next decade, a new generation of public and private digital infrastructure in the form of IndiaStack, GST, low-cost data etc. is converging in India. We raised SEA & India Fund III to capitalize on these emerging opportunities.

BEN MATHIASManaging Partner, Vertex Ventures

Southeast Asia & India



What was the rationale for setting up an SEA & India fund instead of a standalone India fund?We see a lot of similar trends across Southeast Asia (SEA) and India, particularly in internet and fintech businesses. For example, Validus is an SME digital lending platform across SEA that we invested in. We had seen similar businesses in India and were therefore able to evaluate Validus effectively. Moreover, SEA is generally the first port of call for Indian companies looking to expand overseas. So we are able to open a lot of doors for our Indian companies in SEA. The most efficient way to do this is from Singapore.

We also see many cross-border companies that are headquartered in Singapore but have the majority of operations in India, and the founding team split between the two countries. InstaRem is one such example.

We have invested about $68mn in start-ups in India since 2010. In the next few years, we expect our third SEA & India fund to be very active in India to ride these underlying trends. We are looking to invest in early-stage and mid-stage ventures in enterprise technology, consumer internet/mobile and fintech. We like to invest in companies where we can bring more to the table beyond just capital. For example, companies that are looking for an SEA expansion where we can leverage our significant network in the region.

The fund will continue with the same investment thesis across SEA and India, which primarily means Series A deals with follow-on, and some capital deployed first at Series B stage. In India, we will continue to invest across three main themes: a. Increasing consumer consumption over the

mobile internet;b. The rapid transition of financial services onto

the digital IndiaStack;c. Cutting-edge enterprise technology being built

in India for the global market.

You raised $210mn for your SEA & India Fund III; how much of this will be deployed in India and over what time?Nothing is fixed so it will depend on the opportunities we see. We will invest the fund over the next three years and expect to stay in most investments for a 5-7 year timeframe. Compared to Fund I and Fund II, this fund will be much more active in India. We now have a team on the ground in India to source and support investments here. However, we made several investments from Fund I and Fund II which have scaled extremely well. For example, we invested in FirstCry which has grown to be the clear market leader in its category. We invested in HouseJoy from Fund II, along with Amazon.

Have recent policy initiatives helped with deal flow? Any domestic industries that are particularly exciting?The start-up momentum in India is so strong right now that there is not a whole lot needed from the government. I do think, however, that the state governments need to find ways to encourage entrepreneurs in sectors that may not attract overseas venture capital but would have a high impact domestically. For example, business in areas like agritech and telehealth could be addressing a large rural Indian market but will have longer gestation periods than most venture capital funds would look for.

There is no shortage of entrepreneurs in India, and today, the venture capital ecosystem is well established. The Indian Government should look to Singapore as a model for how the government should encourage entrepreneurship without being interfering. Rather than investing on its own, the government should sponsor venture capital funds that have a focus on these priority sectors and allow these investors to find the right entrepreneurs to back.

It was easy to raise money as the [2015 Indian] market was hot, but the music would soon stop, and at that time, you should not be caught without a chair. – Chua Kee Lock, CEO of Vertex Holdings & Managing Partner of Vertex Ventures Southeast Asia & India


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That said, India’s government has 56 active policies that target and support the start-up ecosystem. The “Startup India” initiative that provides funding of $1.5bn over four years to aid start-up funding, industry academia partnership (e.g. Atal Innovation Mission) and policy simplification.

At the same time, there are increasing corporate initiatives, both Indian and global, focused on nurturing the start-up ecosystem (e.g. Microsoft and Apple have accelerators in Bangalore).

Then there is the Digital India initiative that has helped grow India’s internet population to over 450 million connected citizens and growing in the mid-teens. The low smartphone penetration remains a major attraction for all device vendors. They are now making serious attempts to address the problem of affordability in India with more affordable products, resulting in initiatives such as Android Oreo ‘Go edition’, telco bundling with low-cost 4G smartphones and even the 4G feature phone JioPhone.

Since 2014, the cost of a smartphone has dropped and this caused internet growth to cross the tipping point, leading to a lot of capital going into consumer internet. Most Indians access the internet via mobile devices. The rising use of mobile broadband is speeding up the penetration rate. The cost of data has been going down. Jio began charging data fees for as little as 309 rupees ($5) for 1 GB per day for three months in April 2017. It now accounts for a leading 39% of all broadband subscribers, covering over 80% of the country’s population.

By 2022, the number of Indian internet users is expected to double to 850 million with a 90% mobile phone penetration. Most of this growth in smartphone usage is from rural areas, where companies are now finding the job of accessing previously untapped markets much easier and extremely promising.

With mobile broadband user growth, we expect a significant rise in the use of e-commerce services offered by local startups. There are 1,700+ start-ups, having raised $1.1bn in H1 2017.The three key players are Walmart-Flipkart, Snapdeal and Shopclues. Vertical aggregators (e.g. Swiggy, OYO, Coverfox) form c.70% of the deals by funding value and number of deals.

Government initiatives like “Make in India” have incentivized companies to build top-notch businesses in India. It is also geared towards improvements in the country’s infrastructure and increased domestic consumption. Logistics start-ups gained their foothold with the advent of the e-commerce industry. Even players like Flipkart, PayTM and Amazon use third-party logistics services in addition to in-house ones. A number of start-ups have begun tapping other areas to support the existing supply chain solutions or to fill the gaps in the otherwise fragmented and unorganized Indian logistics industry.

Fintech is another. Foundations are already in place for a digitally inclusive economy including the [1] financial inclusion of non-banked individuals (Jan Dhan); [2] unique, universal digital identity for all (Aadhaar); [3] smartphone and internet connectivity (Mobile). There are 736 million Aadhaar-linked bank accounts, 1.2 billion Aadhaar numbers registered and 450+ million internet users in India.

India is moving towards a digital age powered by smartphones and the nearly ‘free’ cost of internet connections offered by telcos. Government efforts to promote a “cashless economy” have shown positive signs; with the implementation of Universal Payment Interface (UPI) for fund transfers and transactions, the demonetization move made millions experience digital payments.

Combined, these moves have contributed to a marked shift in consumer behaviour – Indians are



purchasing goods from e-commerce websites, hailing cabs via aggregators, transferring money via PayTM or Google Tez and using their smartphones to control more elements of their lives. There has also been an effort to make digital payments simpler and easier using Quick Response Codes, as introduced by Bharat QR code payments.

Today, there are over 360 fintech start-ups and this number is growing at c.31%. Key sub-verticals include P2P lending, wealth management, SME lending, consumer credit, insurance tech and digital payments. A case in point is Kissht, a financial technology platform which enables instant, seamless credit for consumers to make purchases at digital points of sale.

Enterprise is another promising segment with 480+ start-ups. The cloud has made software flat and Indian developers are doing a great job in building products that have global relevance. Importantly, a large number of Indian founders are developing skills that enable a global sales mindset. We are seeing more and more companies that originated as Indian companies, but have evolved into global enterprise technology companies.

These are in areas as diverse as AI, IOT, DevOps, digital marketing and CRM. Data analytics/AI is the largest segment and artificial intelligence (AI) is viewed as one of the most exciting and profitable ventures in the fintech space in India. AI applications in data analytics and customer service create opportunities for more personalized customer experiences, significantly better insights and automation of back-end workflows. A key reason why we invested in Active.AI.

Which kind of tech start-ups are you looking to invest in?We are actively looking at three sectors: enterprise, consumer and fintech. However, our criteria to evaluate each of these is very different. For

enterprise, we look for companies that have a global opportunity. The founders need to be capable of selling the product globally and competing against competitors outside India. Moreover, we should be in a position to help them with our global network. For consumer and fintech, we look for India-oriented business models but they need to have good unit economics. By this we mean low customer acquisition costs, high gross margins and high repeat rates.

Can you give us examples of investments within these sectors?We invested in HouseJoy a couple of years ago, along with Amazon. This is a home services marketplace where the consumer is able to use the app to book services like beauty care, appliance repair, home cleaning, AC maintenance etc. They are able to get gross margins of 30-40% for their services. Moreover, the average consumer repeats 4-5 times per year because a household constantly has a need for these service offerings.

On the enterprise front, we invested in CloudCherry (SaaS for Customer Experience Management) earlier this year. We recognized that the largest opportunity for the company was in the US. Today, the company has moved from an India-centric revenue model to a US- and SEA-centric revenue model. Similarly, Flutura (Industrial IOT Analytics) has built technology where it can take on GE on a deal and still win. We recently announced an investment in Hansel, a mobile-first personalization and reconfiguration platform focusing on the user experience (UX) stack. Their technology enables business teams to orchestrate personalized user experiences with enormous speed, at scale, without disrupting tech roadmap, and they have already got the who’s who of the mobile app world in India as their customers.

In fintech, we invested in Active.AI, which builds AI technology for conversational banking and Virtual Personal Assistants for financial consumers

There is no shortage of entrepreneurs in India, and today, the venture capital ecosystem is well established. The Indian Government should look to Singapore as a model for how the government should encourage entrepreneurship without being interfering.


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predominantly in the retail banking and wealth management spaces. Its solution is in production with several banks in India and SEA. The three founders have deep domain expertise in banking and are able to impress potential customers instantly in the first meeting.

What similarities/differences have you seen between founding teams in India in the last decade?When I first moved to India over 10 years ago, most entrepreneurs came from business families and you had to deal with a father-son founding team. Today, most founding teams are first-time entrepreneurs typically in their thirties. Most of them have already had some work experience which they can leverage for their start-ups. The founders of Flutura, for example, each spent 10 years at MindTree and are leveraging the customer relationships they built there. One notable exception to this is Ashwin Ramesh from Synup who is in his mid-twenties and started the company almost immediately out of college. He has built an incredible SaaS business with 50,000 customers in the US, with his entire team in India.

Some firms feel that quality deals are few and far between in Asia. Does Vertex share the same sentiment and can the same be said for the Indian market? With regards to quality deals, India always has huge potential given its market size. The main challenge for us in India is to figure out what companies to invest in and at sensible valuations. Most times, valuations are excessive.

While sentiment was clearly overdone post-2015’s euphoria, India is developing rapidly and will be a good market over the longer term (e.g. Walmart’s $16bn acquisition of Flipkart). That said, there are challenges for India which will be resolved over time – this is not different from China over a decade ago. Many people today compare China with Silicon Valley – it has so many start-ups, lots of companies with unique models. Perhaps the same can be said of India’s start-up ecosystem evolution in the decade ahead.

Today, there are entrepreneurs doing exciting things around sectors such as digital lending, IoT (Internet of Things) and enterprise SaaS (software as a service). New sectors will continue to emerge while other sectors will mature. We are already seeing many successful companies come out of India that are fast becoming global leaders in their categories. Globallogic, MuSigma, Zoho and Freshdesk for example. The level of technology talent in India is so tremendous, it is inevitable that we will eventually produce world leaders.



ABOUT THE AUTHORMr. Ben Mathias is Managing Partner of Vertex Ventures Southeast Asia & India, having joined Vertex in 2015. While his key focus is in India, he is part of the Vertex team covering India and Southeast Asia. Prior to Vertex, Ben was a partner at New Enterprise Associates (NEA).He held senior positions at E2open and i2 Technologies. Previously, Ben spent a number of years at PwC Consulting. In his early career, he was at Open Environment Corporation. Ben received his Master of Science in Engineering Sciences from Dartmouth College and his Bachelor of Technology from the Indian Institute of Technology, Madras.

Comparison of Vertex Ventures SEA & India Funds vs. *ASEAN- and *South Asia-Focused Venture Capital Funds (Vintage 2007-2015)

23.7

32.5

0

5

10

15

20

25

30

35

Vertex Ventures SEA & India I (2010 Vintage) Vertex Ventures SEA & India II (2014 Vintage)

Net IR

R (%)

Source: Preqin Pro

Top Quartile: 26.9

Median: 15.5

Bottom Quartile: 8.2

*Funds that have a focus on either ASEAN or South Asia, mutually exclusive, excluding Vertex Ventures SEA & India I and II which focus on both ASEAN and India.


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IN FOCUS: SOUTH ASIA

Fig. 12: 10 Largest South Asia-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last 10 Years (As at July 2018)


Nexus Venture Partners Mumbai, India 1.2

Kalaari Capital Bangalore, India 0.6

IDG Ventures India Bangalore, India 0.5

SIDBI Venture Capital Mumbai, India 0.4

Matrix Partners India Bangalore, India 0.4

Vertex Ventures Southeast Asia & India Singapore 0.4

Duke Industries New Delhi, India 0.3

Aavishkaar Venture Management Services Mumbai, India 0.3

Eight Roads Ventures India Mumbai, India 0.3

Ventureast Hyderabad, India 0.2

Source: Preqin Pro

Bangladesh, India, Nepal, Pakistan and Sri Lanka

Fig. 11: Annual South Asia-Based Venture Capital Fundraising, 2010 - 2018 YTD (As at July 2018)

8 1014

914 16

923 13

0.7

0.3

1.0

0.4

0.8

1.3

0.6 0.70.7

0.00.20.40.60.81.01.21.41.6

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD


No. o

f Fun

ds Cl

osed


Source: Preqin Pro



Fig. 13: Number of Asia-Based Venture Capital Fund Managers by Sub-Region

1,134

140 109 194

Greater China South Asia ASEAN Northeast Asia

Source: Preqin Pro

ASIAN VENTURE CAPITAL FUND MANAGER ACTIVITY

Asia-focused venture capital assets under management have increased eight-fold in 10 years, reaching a record $221bn in December 2017 (Fig. 14), highlighting the sheer impact of technological advancement

and innovation in Asia. Venture capital managers based in China make up 67% of all Asia-based fund managers (Fig. 13).

Fund Manager Location

Fig. 14: Asia-Focused Venture Capital Assets under Management, 2005 - 2017

5.7 9.1 15.1 17.6 16.3 17.3 24.1 25.3 23.6 23.7 29.4 44.3 71.16.0 8.2 12.5 13.5 17.0 33.1 29.8 38.6 51.8 64.4 82.4109.6

149.8

0

50

100

150

200

250

Dec-0

5

Dec-0

6

Dec-0

7

Dec-0

8

Dec-0

9

Dec-1

0

Dec-1

1

Dec-1

2

Dec-1

3

Dec-1

4

Dec-1

5

Dec-1

6

Dec-1

7

Dry Powder ($bn) Unrealized Value ($bn)

Asse

ts un

der M

anag

emen

t ($b

n)

Source: Preqin Pro

Fig. 15: Venture Capital Fund Managers by Number of Funds Raised Previously and Location

54% 49% 52%

26% 32% 34%

8% 10% 9%11% 9% 5%

0%

20%

40%

60%

80%

100%

Asia North America Europe

6 or More Funds Raised Previously

4-5 Funds Raised Previously

2-3 Funds Raised Previously

1 Fund Raised Previously

Prop

ortio

n of F

irms

Source: Preqin Pro


25|

Fig. 16: 10 Largest Asia-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last 10 Years (As at August 2018)


SINO-IC Capital Beijing, China 22.6


CCT Fund Management Beijing, China 19.6

Inventis Investment Holdings (China) Hong Kong, Hong Kong 12.2

China Merchants Capital Shenzhen, China 12.0


CCCC lndustrial Fund Management Beijing, China 9.3

CMB International Capital Management Hong Kong, Hong Kong 8.6

CITIC Private Equity Funds Management Beijing, China 8.5

CDH Investments Beijing, China 7.9

Source: Preqin Pro

Fig. 17: 10 Largest Asia-Based Venture Capital Fund Managers by Estimated Dry Powder (As at August 2018)

Firm Headquarters Estimated Dry Powder ($bn)

CCT Fund Management Beijing, China 10.6


China Merchants Capital Shenzhen, China 8.2

CMB International Capital Management Hong Kong, Hong Kong 5.7

SINO-IC Capital Beijing, China 5.1


Inventis Investment Holdings (China) Hong Kong, Hong Kong 4.3

CCCC lndustrial Fund Management Beijing, China 4.0

Shandong Hi-speed Investment Fund Management Shandong, China 3.4

China Ministry of Finance Beijing, China 3.3

Source: Preqin Pro



CAN SOUTHEAST ASIA EMULATE CHINA?

How have market conditions in Southeast Asia changed over the years and how has Vertex adapted to this changing environment?Over the past decade, there have been three buzzwords rocking the world: start-up, disruption and innovation. Everyone wants to be Silicon Valley. Southeast Asia has also become a hipster – but to think we want to be like the Bay Area is misguided. There is another model ecosystem closer to home.

In California’s shadow, China has slowly risen thanks to the grand powers of Baidu, Alibaba and Tencent, with the fledgling powers of Xiaomi, Didi, Ctrip and more in tow. And in China’s shadow is Southeast Asia. With this juxtaposition, it is no wonder the founders and investors of the region are hoping Southeast Asia will be the next China.

Although everyone knows we operate in a complex region – with multiple political and cultural issues along with economies that are oceans apart – everyone is holding out hoping that Southeast Asia will be the next China. Everyone wants us to produce an Alibaba. And indeed, that is how investors and founders are subconsciously behaving. Southeast Asia certainly has potential, but does it have the explosive multibillion-dollar juggernauts incoming that justify the inflated valuations?

We are seeing similar exuberance in the start-up market that we saw 6-7 years ago. Back then, there was a spike in interest and excitement for start-ups. As a result, valuations grew and promises were made. But Southeast Asia does not operate like Silicon Valley, where ballooning valuations lead to further ballooning.

Inflation inevitably leads to down rounds when start-ups are unable to produce the exits their exuberant investors wanted. Once in a while, a resilient start-up appears and can make an impressive exit or IPO. The pattern is repeating itself today. Southeast Asia is again going through another hype-cycle in which

young investors are chasing after deals rooted in overwatched trends and founders are inflating their prices because there are too many hot investors.

In tandem with this is the rise of accelerators, co-working spaces and corporate innovation programs that underline a fervour and desperation around phraseology like start-up, disruption and innovation.

‘Start-up’ is overheating and it is creating hot air balloons across the ecosystem. Of course, some of the chasing is warranted. Some deals are just so hot and the companies have such strong potential that it is irresistible. But it is important to stick to the fundamentals and be disciplined about investment.

But these are the basic boom-and-bust cycles of venture capital. In every cycle we see the same pattern repeating – investors rush to invest at high valuations, then they get burnt because the market becomes overheated and valuations plunge. The younger and less experienced investors have a hard time staying ‘sane’ when money is pouring into deals at inflated valuations and they miss the signs pointing to an oncoming bubble.

Unfortunately, it appears that being part of a high profile deal (albeit at a potentially inflated valuation)

CHUA JOO HOCKManaging Partner, Vertex Ventures

Southeast Asia & India


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Venture Capital Investments as a % of GDP

SEA (2014) SEA (2016) India (2016) China (2016) US (2016)

0.04%

0.18% 0.18%

0.30%

0.40%

Southeast Asia

Source: e-Conomy SEA Spotlight 2017 by Google and Temasek

brings lots of media attention. And some investors crave the visibility amid all the media frenzy. We read in the media about which firm has completed the most deals and who are the most active investors. It is the wrong focus.

Ultimately, a good VC is able to give real returns in not one but several investments. Venture capitalism is not about doing many deals in the quickest possible time; it is about investing and building great companies that can produce outstanding exits and returns.

Currently, Southeast Asia is around 10 years behind China. It is facing similar issues China faced a decade ago like difficulties in finding talent and money, with few players, exits and unicorns. But China is advancing quickly and Southeast Asia is now an emerging market at an inflexion point. The region has raked in cumulative funding of almost $9.5bn from 2010 to 2017. For VC investments, Southeast Asia’s $3bn in 2017 looks similar to China’s in 2006. The corresponding sum for the US then was $30bn. Today, China’s investment stands at $40bn vs. $70bn for the US.

Overall, VC investments in Southeast Asian companies signal a strong confidence in the potential of Southeast Asia’s digital economy by global and regional investors. These investments stood at 0.18% of Southeast Asia GDP in 2016, up from 0.04% in 2014. Southeast Asia is now on par with India (0.18% of GDP in 2016) and narrowing the gap with China (0.30% of GDP in 2016).

In the next decade, Southeast Asia is going to be one of the most exciting regions to invest in. If you think about it, it is kind of situated between the two giants

of China and India. Imagine Silicon Valley companies that missed out on China and India looking at where the last big markets are left. And that is right here. This is an interesting moment in time for Southeast Asia – essentially because investors are now realizing that it is the only large market left to grow.

That said, Southeast Asia needs to be looked at in conjunction with India. This is central to Vertex SEA & India Fund’s strategy because there are many cross-border collaboration opportunities (e.g. Flutura offering IoT analytics solution to leading industrial companies in Southeast Asia). There are also many Indian entrepreneurs starting their business in Southeast Asia (e.g. Socash – a mobile-first cash circulation platform in Asia, leveraging an offline merchant network. Active.AI, Validus and Instarem are other notable Singapore-based fintech start-ups with Indian founders). Today, other VCs are imitating the Vertex model (i.e. India-specific VC funds adopting Southeast Asia as part of their strategy or Southeast Asia & India-focused funds).

Southeast Asian start-ups, especially those based in Singapore, now have the most unicorns in Asia after China. The region is rising and currently home to seven unicorns: Grab, Go-Jek, Lazada, Razer, Sea Ltd. (f.k.a. Garena), Traveloka and Tokopedia. Southeast Asia’s decacorn, Grab, raised the region’s largest round in 2017 with a $2bn Series G from SoftBank Group, Didi Chuxing and Toyota, followed by another $2bn from Toyota, OppenheimerFunds, Ping An Capital and other investors in 2018.

Within Southeast Asia, Singapore and Indonesia continue to figure prominently on investors’ radar, with fintech ($3.2bn) and e-commerce ($2.9bn) attracting the most investments.



From 2010 to 2017, of all countries in the Southeast Asia region, Singapore has attracted the most funding from investors. More than half of the total investments have reached Singapore-based tech start-ups.

Singapore will continue to be a key Southeast Asian country, attractive to many companies. It has a clear rule of law, with robust IP protection and significant government support. The Singapore Government is also willing to find ways to help start-ups.

The larger VC funds are focused on the two big markets: China and India. That trend will not stop and is expected to persist. In Singapore, the government has done a good job for incubation and start-up funding – these are well funded. But funding is not just giving companies a one-off payment. Several rounds of funding are required – maybe three, four or even five rounds before companies can be successful. When it comes to additional funding or subsequent rounds of funding, be it in Singapore or Southeast Asia, it is not as easy when compared with India and China. More government support may be needed here.

Compared to the US or even broader Asia in general, Southeast Asia still lacks right-sized VC funds with the experience and track record to invest in promising start-ups with growth opportunities. The region’s diversity (market, linguistic, cultural, religious) can be a deterrent to some foreign investors but an opportunity for home-grown companies able to deftly manoeuvre in the region. There is a dearth of experienced investors that know and understand how to build “champions”. As a result, valuations have been hyped up by over-zealous investors and big money being thrown into young start-ups.

Southeast Asia needs funding from VCs with a global perspective and scale, deep local experience and networks, as well as a robust track record to help them succeed.

On this front, we are seeing more funds being established. But the key question for investors is the quality of long-term returns. As a global network of VC funds with four funds focusing on early stage opportunities, Vertex has over 40 investment professionals plugged into the key innovation hubs of Southeast Asia/India, China, Israel and the US. This unique network architecture enables our Southeast Asia team to be better positioned to spot the impactful trends, disruptive technologies and promising entrepreneurs to support.

What are some of the emerging trends in Southeast Asia? Any industries that are particularly exciting?While Southeast Asia often gets classified as a single, homogenous region, it is really a collection of different countries. The dynamics in each country within the region are extremely varied. Singapore is one of the world’s wealthiest country-states. Indonesia, despite having the highest GDP of countries in Southeast Asia, is home to a large unbanked population, with many people still relying heavily on cash. There is a need to recognize the uniqueness of each country and adopt a customized strategy.

There are many factors contributing to the surge of interest in start-ups outside the established hotbeds for technology and innovation. Southeast Asia’s growing digital connectivity for one has made the population addressable, with over 300 million smartphone users in the region, compared to 225

Venture Capital Investments in Key SEA Countries (2010-2017)

Indonesia

67%

22%

5%

1%3%

2%

0.2%

Malaysia

Philippines

Vietnam

Thailand

Others

Singapore

Total Invested

$14.9bn(Cumulative)

Source: Preqin and Vertex databaseNote: VC investments exclude start-ups with undisclosed funding information;Deal stages include Angel, Grant, Growth Capital/Expansion, Seed, Series A-E


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million in the US. This translates to greater consumer demand and purchasing power.

One of the key success factors in China is urbanization. This is not unique to China, the same trend is happening in Southeast Asia and India. Other factors include consumerism with rising incomes, deregulation and young demographics. Most importantly, the market in Southeast Asia has a lower competition intensity for start-up founders and investors alike that provide a rational entry valuation. Interesting sectors to investors include:

Social Media: With a massive boom in smartphone usage, social media in Southeast Asia is a major trend, with Indonesia leading the way. In 2017, M17 (Paktor’s merger with Taiwanese start-up 17Media) added live-streaming and content production to its list of offerings.

Fintech: StoreHub offers a revolutionary iPad POS system that changes how retailers manage their businesses and connect with their customers. Turnkey Lender upgrades traditional lending business with its cloud-based online lending management and credit assessment platform. InstaRem enables lower-cost remittances compared to traditional services like Western Union and banks.

Indonesia has an attractive digital economy. Some fintech start-ups are also serving the underbanked population, e.g. PayFazz enables the “unreached” population in Indonesia to transact, pay and purchase through its network of banking agents.

Artificial Intelligence: With deregulation, enterprises are adopting technology, e.g. Active.AI provides technology for conversational banking and Virtual Personal Assistants for financial consumers predominantly in the retail banking and wealth management spaces. Marketplace lenders like Validus use AI and machine-learning to provide supply-chain financing to SMEs while offering higher risk-adjusted returns to investors.

Some firms feel that quality deals are few and far between in Asia. Does Vertex share the same sentiment and can the same be said for the Southeast Asian market? Southeast Asia is a relatively newer market and has opportunities abound. However, unlike China, there are occasional challenges like the political upheavals in Thailand.

Investors were keen to put money into early-stage start-ups in recent years, and those businesses that managed to survive are now looking for growth

SoftBank

Sources: TechCrunch, TechInAsia, E27, VentureBeat, Preqin, Vertex

Seed & Micro (Pre-A) Early Stage (Series A & B) Expansion (Series C+)

Larger

Smaller

500Startups TNF Venture

Openspace Ventures

Golden Gate Ventures

JungleVentures

Monk's Hill

Axiata

GobiVentures

Hillhouse

Active Fund Size

SequoiaIndia

B Capital

SBI Capital

GSR Ventures

GGV Capital

Venture Capital Funding Landscape in Southeast Asia



capital. As those companies get to the next stage, you start seeing the B and C rounds getting done. It does not necessarily mean that funding for the early stages has dried up.

The last few years have witnessed a “funding barbell”, with money gravitating towards early-stage deals or late, big-ticket rounds, giving the critical Series B and C phases a miss. Yet there is no shortage of companies to invest in; the issue is lack of institutional funding. That is why growth-stage funding will be crucial.

But there is also a view that many start-ups here are kept alive due to government funding beyond their normal lifespan. In the traditional sense, like in Silicon Valley, if their business model was suspect, they would have folded up quickly, as the market would have determined they cannot continue.

That is always a concern – when you have too much money chasing too few companies, even the bad companies get funded. This is something that we cannot help. In a market like this, it is bound to happen. It is not good to have either too much money chasing start-ups or too little money. A right balance is needed.

ABOUT THE AUTHORMr. Chua Joo Hock is based in Singapore and heads the investment activities in Southeast Asia and India. Mr. Joo Hock joined the former Singapore Technologies Group in 1987 where he was involved in the early phase of Singapore Technologies’ venture capital investments which later became Vertex in 1988. Throughout his career in Vertex, he has been involved in VC investments globally particularly in the US, Singapore, Taiwan, India, China and Israel. He spent several years in the US from 1989 to 1992 and later from 1998 to 2004 where he was responsible for Vertex US investments and operation. Mr. Joo Hock graduated from the University of Singapore in 1979 with a Bachelor of Engineering (Mechanical). He also has a MBA from National University of Singapore.


Comparison of Vertex Ventures SEA & India Funds vs. *ASEAN- and *South Asia-Focused Venture Capital Funds (Vintage 2007-2015)

23.7

32.5

0

5

10

15

20

25

30

35

Vertex Ventures SEA & India I (2010 Vintage) Vertex Ventures SEA & India II (2014 Vintage)

Net IR

R (%)

Source: Preqin Pro

Top Quartile: 26.9

Median: 15.5


*Funds that have a focus on either ASEAN or South Asia, mutually exclusive, excluding Vertex Ventures SEA & India I and II which focus on both ASEAN and India.


31|

IN FOCUS: ASEAN

Fig. 18: Annual ASEAN-Based Venture Capital Fundraising, 2012 - 2018 YTD (As at July 2018)

610

610 10

13

4

2

1

1

35

2

1

0

200

400

600

800

1,000

02468

10121416

2012 2013 2014 2015 2016 2017 2018 YTD

No. of Funds Closed (Singapore) No. of Funds Closed (Rest of ASEAN) Aggregate Capital Raised ($mn)

No. o

f Fun

ds Cl

osed

Aggregate Capital Raised ($mn)

Fig. 19: 10 Largest ASEAN-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last 10 Years (As at July 2018)

Firm Headquarters Total Funds Raised in Last 10 Years ($mn)

UOB Venture Management Singapore 509

Vertex Ventures Southeast Asia & India Singapore 390

Vickers Venture Partners Singapore 367

Abundance Venture Capital Petaling Jaya, Malaysia 250

Venstar Investments Singapore 178

F&H Fund Management Singapore 174

Openspace Ventures Singapore 165

East Ventures Singapore 163

Venturra Capital Jakarta, Indonesia 150

Xeraya Capital Kuala Lumpur, Malaysia 150

Source: Preqin Pro

Year of Final Close

Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam

Source: Preqin Pro



ASIAN VENTURE CAPITAL PERFORMANCE

Net cash flow has been falling in the Asian venture capital industry since 2014, with a sharp decline between 2016 and 2017, and stands at -$21bn at the end of 2017 (Fig. 20). A reason behind this

is the plethora of new funds that have emerged in Asia, and more capital will have been called than distributed in this period of heightened fund

formation. Asia-focused funds with vintage years between 2005 and 2015 have a higher associated risk when compared to Europe- and North America-focused funds, but also higher returns in terms of median net IRR (Fig. 21). With Asia still considered a developing region overall, the associated risk of investment is logical compared to more developed parts of the world.

Return - Median Net IRR

Fig. 20: Asia-Focused Venture Capital Funds: Annual Capital Called up, Distributed and Net Cash Flow, 2005 - 2017

-30-20-10

01020304050

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Capital Called up ($bn) Capital Distributed ($bn) Net Cash Flow ($bn)Source: Preqin Pro

Fig. 21: Venture Capital: Risk/Return by Geographic Focus (Vintages 2005-2015)

0%

5%

10%

15%

20%

25%

30%

6% 8% 10% 12% 14% 16%

Asia

North America

Europe

Risk -

Stan

dard

Dev

iation

of N

et IRR

Source: Preqin ProReturn - Median Net IRR


33|

IN FOCUS: NORTHEAST ASIA

Fig. 22: Annual Northeast Asia-Based Venture Capital Fundraising, 2010 - 2018 YTD (As at July 2018)

11 11 18 20 1728 22 20

5

40 47 3036 41

37

24 26

8

1.2

2.4

1.7

2.2 2.2

1.8 1.92.1

1.3

0.0

0.5

1.0

1.5

2.0

2.5

010203040506070

2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

No. of Funds Closed (Japan) No. of Funds Closed (South Korea) Aggregate Capital Raised ($bn)

No. o

f Fun

ds Cl

osed


Fig. 23: 10 Largest Northeast Asia-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last 10 Years (As at July 2018)


Samsung Venture Investment Corporation Seoul, South Korea 1.4

Korea Investment Partners Seoul, South Korea 1.1

JAFCO (Japan) Tokyo, Japan 1.0

SBI Investment Tokyo, Japan 0.8

SV Investment Seoul, South Korea 0.8

Atinum Investment Seoul, South Korea 0.8

InterVest Seoul, South Korea 0.5

UTEC Tokyo, Japan 0.5

KTB Network Seoul, South Korea 0.4

AJU IB Investment Seoul, South Korea 0.4

Source: Preqin Pro

Year of Final Close

Source: Preqin Pro

Japan and South Korea



ASIAN VENTURE CAPITAL DEALS

Fig. 24: 10 Largest Venture Capital Deals* in Asia, 2016 - 2018 YTD (As at July 2018)

Portfolio Company Deal DateInvestment

StageDeal Size

(mn) Investor(s) Industry Location

Ant Financial Services Group Jun-18 Series C/

Round 3 14,000 USD

Baillie Gifford, Carlyle Group, CPP Investment Board, Discovery Capital

Management, General Atlantic, GIC**, Janchor Partners, Khazanah Nasional, Primavera Capital, Sequoia Capital, Silver Lake, T Rowe Price, Temasek

Holdings**, Warburg Pincus

Internet China

Didi Chuxing Apr-17 Unspecified Round 5,500 USD Bank of Communications, China

Merchants Bank, Silver Lake, SoftBank Telecoms China

Ant Financial Services Group Apr-16 Series B/

Round 2 4,500 USD

CCB Trust Co., Ltd.** , China Development Bank Capital, China Investment Corporation**, China

Life Insurance Company, China Post Capital, Primavera Capital

Internet China

Didi Chuxing Dec-17 Unspecified Round 4,000 USD Mubadala Capital, SoftBank Telecoms China

Grab Holdings Jul-17 Series G/Round 7 4,000 USD

Didi Chuxing**, SoftBank**, Toyota, OppenheimerFunds, Ping An Capital

and othersTelecoms Singapore

Meituan-Dianping Oct-17 Series C/Round 3 4,000 USD

Coatue Management, CPP Investment Board, GIC, IDG Capital, Mubadala Capital, Sequoia Capital, Tencent**,

The Priceline Group, Tiger Global Management, Trustbridge Partners

Internet China

Meituan-Dianping Jan-16 Unspecified Round 3,300 USD

Baillie Gifford, Capital Today, China Development Bank Capital, CPP

Investment Board, DST Global**, Hillhouse Capital Management,

Sequoia Capital, Temasek Holdings, Tencent**, Trustbridge Partners**

Internet China

Pinduoduo Apr-18 Unspecified Round 3,000 USD Sequoia Capital, Tencent** Telecoms China

Didi Chuxing Jun-16 Unspecified Round 2,800 USD

Alibaba Group, Ant Financial Service Group, BlackRock, Oppenheimer

Alternative Investment Management, SoftBank, Tencent

Telecoms China

Toutiao Aug-17 Unspecified Round 2,000 USD General Atlantic** Telecoms China

Source: Preqin Pro*Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases.**Denotes lead investor(s).


35|

Fig. 25: 10 Largest Venture Capital Deals* in Asia, 2018 YTD (As at July 2018)

Portfolio Company Deal DateInvestment

StageDeal Size

(mn) Investor(s) Industry Location

Ant Financial Services Group Jun-18 Series C/

Round 3 14,000 USD

Baillie Gifford, Carlyle Group, CPP Investment Board, Discovery Capital

Management, General Atlantic, GIC**, Janchor Partners, Khazanah Nasional, Primavera Capital, Sequoia Capital, Silver Lake, T Rowe Price, Temasek

Holdings**, Warburg Pincus

Internet China

Pinduoduo Apr-18 Unspecified Round 3,000 USD Sequoia Capital, Tencent** Telecoms China

JD Finance*** Jul-18 Series B/Round 2 13,000 CNY

Bank of China Group Investment, China International Capital

Corporation Private Equity, China Securities International, CITIC Capital

Internet China

Manbang Group Apr-18 Unspecified Round 1,900 USD

Baillie Gifford, CapitalG, China Reform Fund Management**, Farallon Capital Management,

Hillhouse Capital Management, IDG Capital, SB Investment Advisers**,

Sequoia Capital, Tencent

Internet China

China Media Capital Inc. Jul-18 Series A/Round 1 10,000 CNY

Alibaba Group**, China Vanke Co. Ltd.**, CMB International Capital

Management, Tencent**Telecoms China

Go-Jek Indonesia Feb-18 Series E/Round 5 1,500 USD

Astra International, BlackRock, Google Inc., JD.com, KKR, Meituan-Dianping,

Samsung Venture Investment Corporation, Temasek Holdings,

Tencent**, Warburg Pincus

Telecoms Indonesia

Ping An Healthcare Administration Co., Ltd. Feb-18 Series A/

Round 1 1,150 USD IDG Capital, SB Investment Advisers, SBI Holdings

Software & Related China

Grab Holdings Jun-18 Unspecified Round 1,000 USD Toyota Motor Corporation** Telecoms Singapore

Mobike Ltd. Jan-18 Unspecified Round 1,000 USD - Telecoms China

Ofo Bicycle Mar-18 Series E/Round 5 866 USD

Alibaba Group**, Ant Financial Service Group, Haofeng Group, Junli Capital,

Tianhe CapitalTelecoms China

Source: Preqin Pro

*Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases.**Denotes lead investor(s).***Financing round is set to be completed in Q3 2018.



Fig. 26: 10 Largest Venture Capital Exits in Asia, 2016 - 2018 YTD (As at July 2018)

Portfolio CompanyDate of First Investment Investor(s)

Total Known Funding (mn) Exit Type Exit Date Acquiror (Exit) Exit Value (mn) Industry Location

Flipkart Internet Private Limited* Oct-09

Accel, Axis Bank, Baillie Gifford, Dragoneer Investment Group, DST Global, eBay Inc., GIC, Greenoaks Capital, HDFC Bank, Helion Venture Partners, Iconiq Capital, IDG Ventures

India, Kalaari Capital, Microsoft, Morgan Stanley, Morgan Stanley Alternative Investment Partners, Naspers, Qatar Investment Authority, SB Investment Advisers, Schroder Adveq,

Sofina, Steadview Capital Management, T Rowe Price, Tencent, Tiger Global Management, TR Capital, Vulcan Capital

6,454 USD Trade Sale May-18 Walmart 16,000 USD Internet India

Xiaomi Inc.* Jun-09

All-Stars Investment, Bank of China (Hong Kong), Deutsche Bank, DST Global, GIC, Hopu Investment Management, IDG Capital, Morgan Stanley, Morningside Venture Capital,

Qiming Venture Partners, Qualcomm Ventures, Shunwei Capital Partners, Temasek Holdings, Wing Lung Bank, YF Capital

2,457 USD IPO Jun-18 - 4,720 USD Retail China

Ofo Bicycle* Mar-15

Alibaba Group, Ant Financial Service Group, Atomico, Beijing Dongfang Hongdao, CITIC Private Equity Funds Management, Coatue Management, Didi Chuxing, DST Global, GSR Ventures, Haofeng Group, Hony Capital, Junli Capital, Macrolink Group, Matrix Partners

China, Shunwei Capital Partners, Tianhe Capital, Vision+, Will Hunting Capital, Xiaomi Inc., ZhenFund

2,433 USD Trade Sale Jan-18 Alibaba Group 3,000 USD Telecoms China

Mobike Ltd. Oct-15

BAI Fund, BOCOM International Asset Management, Ctrip/Qunar, Farallon Capital Management, Foxconn Technology Group, Hanting Hotels, Hillhouse Capital Management, ICBC International, Joy Capital, Line Corporation, Panda Capital, Qiming Venture Partners, Qualcomm, Sequoia Capital, Sinovation Ventures, Temasek Holdings, Tencent, TPG, Vertex

Ventures China, Warburg Pincus, Yung Park Capital

1,980 USD Trade Sale Apr-18 Meituan-Dianping 2,700 USD Telecoms China

YTO Express* May-15 Alibaba Group, YF Capital - Merger Mar-16 Dayang Group 17,500 CNY Business Services China

iQiyi.com Inc.* Feb-10 Baidu, Boyu Capital, Hillhouse Capital Management, IDG Capital, Providence Equity Partners, Sequoia Capital, Shunwei Capital Partners, Xiaomi Ventures 1,890 USD IPO Mar-18 - 2,250 USD Telecoms China

ZhongAn Online P & C Insurance Co., Ltd* Jun-15 CDH Investments, China International Capital Corporation, Keywise Capital Management,

Morgan Stanley, SAIF Partners 934 USD IPO Sep-17 - 11,898 HKD Internet China

Mango TV Jun-15 CITIC Private Equity Funds Management, Happigo, Hony Capital, New Alliance Capital, Sequoia Capital, Shanghai Guohe Capital, Xiamen C&D Corporation 390 USD Trade Sale Sep-17 Happigo 9,500 CNY Telecoms China

Mercari, Inc.* Jul-13 Development Bank of Japan, East Ventures, Global Brain Corporation, Globis Capital

Partners, GMO VenturePartners, ITOCHU Technology Ventures, Mitsui & Co., Sumitomo Mitsui Trust Bank, United, Inc., World Innovation Lab (WiL)

113 USD IPO Jun-18 - 130,500 JPY Telecoms Japan

Ping An Health Cloud Co., Ltd.* May-16 IDG Capital, SB Investment Advisers, SBI Holdings 900 USD IPO Apr-18 - 8,770 HKD Telecoms China

Source: Preqin Pro

*Denotes a partial exit.


37|

Fig. 26: 10 Largest Venture Capital Exits in Asia, 2016 - 2018 YTD (As at July 2018)








Xiaomi Inc.* Jun-09




Ofo Bicycle* Mar-15




Mobike Ltd. Oct-15




YTO Express* May-15 Alibaba Group, YF Capital - Merger Mar-16 Dayang Group 17,500 CNY Business Services China


ZhongAn Online P & C Insurance Co., Ltd* Jun-15 CDH Investments, China International Capital Corporation, Keywise Capital Management,

Morgan Stanley, SAIF Partners 934 USD IPO Sep-17 - 11,898 HKD Internet China

Mango TV Jun-15 CITIC Private Equity Funds Management, Happigo, Hony Capital, New Alliance Capital, Sequoia Capital, Shanghai Guohe Capital, Xiamen C&D Corporation 390 USD Trade Sale Sep-17 Happigo 9,500 CNY Telecoms China





Source: Preqin Pro



Fig. 27: 10 Largest Venture Capital Exits in Asia, 2018 YTD (As at July 2018)








Xiaomi Inc.* Jun-09




Ofo Bicycle* Mar-15




Mobike Ltd. Oct-15









eHi Auto Services Limited Mar-08

CDH Investments, China CITIC Bank, China Development Bank Capital, China Merchants Bank, CTBC Bank, Ctrip.com International, Ltd., DCM, Deutsche Bank, East West Bank,

Enterprise Holdings, Goldman Sachs Merchant Banking Division, Ignition Venture Partners, JAFCO Investment (Asia Pacific), New Access Capital, Qiming Venture Partners,

Shanghai Pudong Development Bank

487 USD Sale to GP Apr-18Baring Private Equity Asia,

Crawford Capital, MBK Partners, Redstone Capital

938 USD Industrials China

Tantan Culture Development (Beijing) Co., Ltd. Jan-15

58.com, Alibaba Group, BAI Fund, DCM, DST Global, Genesis Capital, Gothic Corporation, GX Capital, Kleiner Perkins Caufield & Byers, LB Investment, Matrix Partners China, Momo

Inc., SAIF Partners, Sequoia Capital, Tenzing, Tiger Global Management, Vision Plus Capital, YF Capital, YY, Zhongwei Capital

120 USD Trade Sale Feb-18 Momo Inc. 601 USD Telecoms China

Bilibili Group* May-14 Ourpalm Games, Qiming Venture Partners 22 USD IPO Mar-18 - 483 USD Internet China

Source: Preqin Pro

*Denotes a partial exit.


39|

Fig. 27: 10 Largest Venture Capital Exits in Asia, 2018 YTD (As at July 2018)








Xiaomi Inc.* Jun-09




Ofo Bicycle* Mar-15




Mobike Ltd. Oct-15









eHi Auto Services Limited Mar-08

CDH Investments, China CITIC Bank, China Development Bank Capital, China Merchants Bank, CTBC Bank, Ctrip.com International, Ltd., DCM, Deutsche Bank, East West Bank,

Enterprise Holdings, Goldman Sachs Merchant Banking Division, Ignition Venture Partners, JAFCO Investment (Asia Pacific), New Access Capital, Qiming Venture Partners,

Shanghai Pudong Development Bank

487 USD Sale to GP Apr-18Baring Private Equity Asia,

Crawford Capital, MBK Partners, Redstone Capital

938 USD Industrials China

Tantan Culture Development (Beijing) Co., Ltd. Jan-15

58.com, Alibaba Group, BAI Fund, DCM, DST Global, Genesis Capital, Gothic Corporation, GX Capital, Kleiner Perkins Caufield & Byers, LB Investment, Matrix Partners China, Momo

Inc., SAIF Partners, Sequoia Capital, Tenzing, Tiger Global Management, Vision Plus Capital, YF Capital, YY, Zhongwei Capital

120 USD Trade Sale Feb-18 Momo Inc. 601 USD Telecoms China

Bilibili Group* May-14 Ourpalm Games, Qiming Venture Partners 22 USD IPO Mar-18 - 483 USD Internet China

Source: Preqin Pro



Fig. 29: Venture Capital Deals* in Greater China, 2007 - 2018 YTD (As at July 2018)

010203040506070

0500

1,0001,5002,0002,5003,0003,5004,000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD

No. of Deals Aggregate Deal Value ($bn)

No. o

f Dea

ls

Aggregate Deal Value ($bn)

Fig. 30: Venture Capital Deals* in Northeast Asia, 2007 - 2018 YTD (As at July 2018)

0.0

0.5

1.0

1.5

2.0

2.5

050

100150200250300350400

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD


No. o

f Dea

ls


Fig. 31: Venture Capital Deals* in ASEAN,2007 - 2018 YTD (As at July 2018)

01234567

0

100

200

300

400

500

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD


No. o

f Dea

ls


Fig. 32: Venture Capital Deals* in South Asia, 2007 - 2018 YTD (As at July 2018)

0

2

4

6

8

10

12

0

200

400

600

800

1,000

1,200

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD


No. o

f Dea

ls


*Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases.

Fig. 28: Venture Capital Deals* in Asia, 2007 - 2018 YTD (As at July 2018)

0

20

40

60

80

100

0

1,000

2,000

3,000

4,000

5,000

6,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Greater China Northeast Asia ASEAN South Asia Aggregate Deal Value ($bn)

No. o

f Dea

lsAggregate Deal Value ($bn)

Source: Preqin Pro


Source: Preqin ProSource: Preqin Pro


41|

Fig. 34: Venture Capital Exits in Greater China, 2007 - 2018 YTD (As at July 2018)

0

10

20

30

40

50

0

50

100

150

200

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD

No. of Exits Aggregate Exit Value ($bn)

No. o

f Exit

s

Aggregate Exit Value ($bn)

Fig. 33: Venture Capital Exits in Asia, 2007 - 2018 YTD (As at July 2018)

0

10

20

30

40

50

0

50

100

150

200

250

300

350

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Greater China Northeast Asia ASEAN South Asia Aggregate Exit Value ($bn)

No. o

f Exit

sAggregate Exit Value ($bn)

Fig. 35: Venture Capital Exits in Northeast Asia, 2007 - 2018 YTD (As at July 2018)

0.00.20.40.60.81.01.21.41.6

05

101520253035

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD


No. o

f Exit

s


Fig. 36: Venture Capital Exits in ASEAN, 2007 - 2018 YTD (As at July 2018)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0

5

10

15

20

25

30

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD


No. o

f Exit

s


Fig. 37: Venture Capital Exits in South Asia, 2007 - 2018 YTD (As at July 2018)

0

5

10

15

20

0

20

40

60

80

100

120

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

YTD


No. o

f Exit

s


Source: Preqin Pro





INVESTORS

Fig. 39: Asia-Based Venture Capital Investors by Type

31%

12%

12%8%

7%

7%

5%4%

4%3%2% 4%

Corporate InvestorInvestment CompanyBank/Investment BankFamily OfficeGovernment AgencyInsurance CompanyPrivate Equity Fund ofFunds ManagerAsset ManagerWealth ManagerPublic Pension FundPrivate Sector PensionFundOther

Fig. 40: ASEAN-, China- and India-Based Venture Capital Investors by Type

30%

17%10%

7%

6%

6%

6%

6%8% 4%

Corporate InvestorInvestment CompanyGovernment AgencyInsurance CompanyBankWealth Manager

Private Equity Fund ofFunds ManagerAsset ManagerFamily OfficeOther

Fig. 41: Global Venture Capital Investors by Location

52%

11%5% 4% 4% 3% 2% 2% 2% 2%

0%

10%

20%

30%

40%

50%

60%

US China Japan South Korea UK India Australia Switzerland Germany Canada

Prop

ortio

n of In

vesto

rs

Fig. 38: Global Investors Seeking Asia-Focused Venture Capital Funds in the Next 12 Months by Investor Location

53% 15%28%

5%

North America AsiaEurope

Rest of World

Source: Preqin Pro


Source: Preqin ProInvestor Location


43|

Fig. 43: Asia- vs. North America & Europe-Based Venture Capital Investors by AUM

16%34%10%

12%32%

35%20%

13%10%3%12% 4%

0%

20%

40%

60%

80%

100%

Asia North America &Europe

$100bn or More

$50-99bn

$10-49bn

$1-9.9bn

$500-999mn

Less than $500mn

Prop

ortio

n of In

vesto

rs

Fig. 44: Asia- vs. China & India-Based Venture Capital Investors by AUM

16% 19%10% 13%

32%37%

20%18%

10%6%12% 7%

0%

20%

40%

60%

80%

100%

Asia China & India

$100bn or More

$50-99bn

$10-49bn

$1-9.9bn

$500-999mn

Less than $500mn

Prop

ortio

n of In

vesto

rs

Fig. 42: Number of Asia-Based Venture Capital Investors over Time, 2013 - 2018

803638576553

403368

Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Jun-18

Source: Preqin Pro

Source: Preqin Pro Source: Preqin ProInvestor Location Investor Location

ABOUT VERTEX VENTURESVertex Ventures is a global network of operator-investors who manage portfolios in the U.S., China, Israel, India and Southeast Asia. Vertex teams combine firsthand experience in transformational technologies; on-the-ground knowledge in the world’s major innovation centers; and global context, connections and customers. For more information on Vertex and our publications, please feel free to contact us [email protected].

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