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  • VENTURE CAPITAL REPORT

    Venture Capital Report China | 4Q | 2018

  • VENTURE CAPITAL REPORT

    VENTURE CAPITAL REPORT

    The following report presents Dow Jones VentureSource’s quarterly findings for Chinese venture capital fundraising, investment, valuation, and

    liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market.

    Highlights for 4Q 2018 include:

    • Equity investment retreated from the second quarter’s high point, but 2018 ended with the greatest annual total seen in any country on record.

    • While U.S. investment jumped ahead of China in 4Q, on an annual basis Chinese funding exceeded the U.S. for the third consecutive year.

    • Median equity deal sizes in China hit a new record at $12.3 million.

    • VC fundraising was a mixed picture – activity surged from the previous quarter, but not enough to prevent a 13% year-over-year decline.

    • Liquidity markets endured wild fluctuations, with both M&As and IPOs down sharply in 4Q. However, on an annual basis in terms of both capital

    collected and deal flow, M&As had their best year ever; and IPOs experienced the best since 2010 in terms of amount raised.

    • VC investment remained tightly concentrated in Beijing (38.8%) and Shanghai (17.4%) in amount raised.

    2

  • VENTURE CAPITAL REPORT

    EQUITY FINANCING IN CHINA DIPS IN 4Q, BUT ENDS 2018 WITH RECORD-BREAKING HAUL

    Equity investment in 4Q retreated significantly from the

    record-breaking second quarter, but still contributed to a year

    that ended as the best ever for Chinese companies. In fact,

    the $139.72 billion raised across 3,725 deals in 2018 ranks as

    the largest annual total seen in any country, exceeding U.S.

    investment for the third consecutive year.

    Median round amounts set a new record in 4Q, hitting $12.3

    million. This is nearly four times the annual median from 2016,

    indicating that the surge of investment is broad-based.

    The top deal of the quarter was a $3 billion round for

    Beijing-based Bytedance, the owner of Jinri Toutiao and Tik

    Tok, is currently valued at $78 billion.

    3

    FINANCING

    Equity Financings into China-Based, VC-Backed Companies (2015–2018)

  • VENTURE CAPITAL REPORT

    Number of Deals

    VC DEAL FLOW IN CHINA-BASED, VC-BACKED COMPANIES, BY ROUND CLASS (2015–2018]

    4

    FINANCING

  • VENTURE CAPITAL REPORT

    Amount Raised ($B)

    VC INVESTMENT IN CHINA-BASED, VC-BACKED COMPANIES, BY ROUND CLASS (2015–2018)

    5

    FINANCING

  • VENTURE CAPITAL REPORT

    MEDIAN DEAL SIZE FOR CHINESE COMPANIES HITS NEW RECORD IN 4Q

    6

    FINANCING Median Equity Deal Size ($M)

  • VENTURE CAPITAL REPORT

    MAJOR SHIFT TOWARD BUSINESS & FINANCIAL SERVICES; HEALTHCARE SPARKS NEW INTEREST Companies in the Business and Financial Services sector grabbed the largest

    share of funding in 4Q, confirming a major shift in industry focus in 2018. With

    44% for the quarter and 41% for the year, it was the first time this group took

    first place since 2012. The top deal of the quarter in this space was a $1.44

    billion growth equity round for Nanjing-based Financesn, a

    payment/transactional processing company.

    Consumer Services came in second place in 4Q in terms of funding, but took

    the premier spot for deal flow. Bytedance had the largest round of the quarter

    in this sector (and the top deal for Chinese companies overall).

    Perhaps the most intriguing industry to watch is Healthcare, which soared

    109% in funding and 33% in deal flow during 2018 compared to the previous

    year. While companies in this space still comprise a relatively small portion of

    overall VC activity, at 8.5%, there is a clear trend beginning in 3Q 2017 of

    heightened investor interest.

    7

    FINANCING 4Q 2018 Industry Breakdown By Number of Deals

    4Q 2018 Industry Breakdown By Amount Raised

  • VENTURE CAPITAL REPORT

    TOP EQUITY DEALS FOR CHINA-BASED, VC-BACKED COMPANIES (4Q 2018)

    8

    Company Formal Name Company Familiar Name

    Location Industry Code Industry Group Brief Description Close Date Round Type Raised ($M) Round Investors (* denotes lead)

    Beijing Byte Dance Telecommunications Co.

    Ltd. Bytedance Beijing General Media/Content

    Consumer Services

    Provider of a personalized news aggregation and recommendation

    application.

    10/25/2018 VC 6th $3,000.00 Technology Crossover Ventures, Softbank Group Corp.*, Primavera Capital Group*, Kohlberg Kravis Roberts & Co.

    LP*, General Atlantic LLC*

    Suning Finance Service (Shanghai) Co. Ltd. Financesn Nanjing

    Payment/Transacti onal Processing

    Business and Financial Services

    Provider of financial services. 12/28/2018

    Growth Equity $1,436.99

    Zhongjin Zhida, Yunfeng Qitai, Suning Holdings Group Co. Ltd., Shenzhen Capital Group Co. Ltd., Qingdao Sishiren

    Investment Management LP, Qiaogeli Investment, Macrolink Group, Jiaxing Kunjia, Guangji Minghe, GP

    Capital Co. Ltd., Fujian Huaxing Venture Capital

    Shanghai Lujiazui International

    Financial Asset Exchange Co. Ltd.

    Lufax Shanghai Lending Business and

    Financial Services

    Provider of an online platform for financial

    asset exchange. 12/3/2018 VC 4th $1,330.00

    United Overseas Bank Ltd., UBS AG, SBI Holdings Inc., Qatar Investment Authority*, Primavera Capital Group*,

    Macquarie Group Ltd, LionRock Capital, JPMorgan Chase & Co., Hermitage Asia Capital Ltd., Hedosophia, Goldman

    Sachs Group Inc., All-Stars Investment Ltd.

    Beijing Yunshan Information Technology

    Co. Ltd. Meicai Beijing

    Business to Business

    Marketplaces

    Business and Financial Services

    Operator of an agricultural products business-to-business (B2B) e-commerce

    platform.

    10/8/2018 VC 6th $800.00 Tiger Global Management LLC*, Shunwei Capital Partners, Hillhouse Capital Management Ltd.*

    Hangzhou Netease Music Technology Co.

    Ltd.

    NetEase Cloud Music

    Hangzhou Movie/Music

    Producers and Distributors

    Consumer Services

    Provider of online digital music

    services. 10/12/2018 VC 2nd $600.00

    General Atlantic LLC, China Everbright Ltd., Boyu Capital Advisory Co. Ltd., Bertelsmann Asia Investment, Baidu

    Inc.*

  • VENTURE CAPITAL REPORT

    MOST ACTIVE INVESTORS IN CHINA-BASED, VC-BACKED COMPANIES (4Q 2018)

    9

    FINANCING

    Number of Deals

  • VENTURE CAPITAL REPORT

    STRONG FINISH FOR CHINESE VC FUNDRAISING IN 4Q, BUT STILL DOWN FOR THE YEAR

    10

    FUNDRAISING

    Chinese VC Fundraising (2015–2018) Based on multiple closings

    Chinese fundraising presented a mixed picture in 2018.

    After starting the year with the weakest quarter since

    2Q 2013, VCs achieved a powerful finish in 4Q, raising

    $4.57 billion across 19 funds. Despite this, overall

    fundraising ended the year down 13% compared to

    2017.

    Strikingly, 2018 saw a continuation of the trend toward

    dramatically larger average fund sizes. In 2011, the

    average fund was around $97 million; by 2018, that

    figure jumped to $240 million – an increase of nearly

    150% in just 7 years.

    The top fund of the quarter was Hong Kong-based

    DCP Capital Partners LP, securing $1.56 billion in its

    first close.

  • VENTURE CAPITAL REPORT

    TOP CHINESE VC FUND CLOSINGS IN 4Q 2018

    11

    FUNDRAISING

    Firm Name Fund Name

    Amount ($M)

    Closed in 4Q

    Location Offering Status Fund Type Closing Type

    DCP Capital Partners LP DCP Capital Partners LP $1,557.05 Hong Kong Open Early-Stage Venture Capital First

    Morningside Group (Holdings) Ltd.

    Morningside USD Technology Fund $1,000.00 Hong Kong Closed

    Early-Stage Venture Capital Final

    Gaorong Capital Gaorong Partners Fund IV LP $500.00 Beijing Closed Multi-Stage Venture Capital Final

    Fortune Venture Capital Co. Ltd.

    Shenzhen Fortune Chuangtong Equity Investment $471.84 Shenzhen Closed

    Multi-Stage Venture Capital Final

    Legend Capital Co. Ltd. Legend Information Technology Fund $256.64 Beijing Open Multi-Stage

    Venture Capital First

  • VENTURE CAPITAL REPORT

    M&A MARKET PLUNGES IN 4Q, BUT 2018 OVERALL SETS ALL-TIME RECORDS

    Following the overheated second and third quarters,

    M&A activity swiftly fell back to earth in 4Q with

    $3.44 billion paid in 18 deals. While the amount was

    26% below the 5-year quarterly average, the number

    of transactions was still quite high by historical

    standards – the third-largest on record, in fact.

    Despite the wild quarterly gyrations, 2018 as a whole

    set new records for both the number of M&A’s and

    the total amount paid on an annual basis.

    12

    LIQUIDITY

    China VC-Backed M&A Activity (2015 - 2018)

  • VENTURE CAPITAL REPORT

    TOP CHINA M&As (4Q 2018)

    13

    LI

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