VC investment in Asia recorded $24.5B across 2,206 deals, finds KPMG’s analysis

China’s energy, robotics and semiconductor sectors remain hot areas for investment

China’s energy, robotics and semiconductor sectors remain hot areas for investment

25 July 2022, Hong Kong – Global venture capital investments reached USD120.2 billion across 8,420 deals in the second quarter of 2022, according to the latest edition of KPMG Private Enterprise’s Venture Pulse Report.

Energy continued to be one of the hottest sectors for investment across Asia, with companies raising large funding rounds even at early stages. During Q2’22, China-based Gokin Solar raised USD251 million during a Series A funding round. The large early-stage funding rounds seen in recent quarters likely reflect the fact that energy startups are more capital intensive than startups in other sectors.

The Asian market remained sluggish with VC investment slipping to USD24.5billion across 2,206 deals in the second quarter, the report said.
According to the report, domestic VC funds are taking a stronger role in supporting fast-growing startups in China as VC funding in the country continues to tilt away from US dollar-based VC funds to yuan-based funds during Q2’22.

Egidio Zarrella

Egidio Zarrella, Partner, Clients and Innovation, KPMG China, says:

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Overall venture capital investment in China has slowed considerably in the first half of the year. However, we continue to see strong investment in areas such as robotics, semiconductors and ESG –all key areas at the heart of the Central Government’s most recent five-year plan.

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Looking ahead, VC investment in China is expected to remain relatively soft in Q3’22 given the ongoing COVID-19 situation and the uncertain geopolitical and macroeconomic environment. Fundraising activity in China’s VC market is also expected to remain muted.

M&A activity across Asia, however, could get a boost heading into Q3’22 as investors and corporates look to take advantage of lower valuations and the tightening funding environment to tap inorganic growth opportunities and the chance to gain market share.

In China, the energy, semiconductor and ESG sectors are expected to remain attractive for investors.

Allen Lu

Allen Lu, Partner and Head of TMT Audit of KPMG China, says:

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We continue to see investor interest in areas like artificial intelligence and electric vehicles as these are areas the government has continued to promote. ESG will likely remain a hot area of investment for some time. In recent quarters, we’ve seen a number of big VC firms setting up funds focused on ESG-related investment.

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In Hong Kong, the healthtech, insurtech and greentech industries are expected to benefit from increased VC investment in the coming months amid a challenging overall funding landscape. The city’s development as a sustainable finance hub remained a high priority during Q2’22, with the Hong Kong Monetary Authority continuing to work on ways to drive green finance initiatives forward through its work with local and international banks.

Allen Lu

Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong Region, KPMG China, KPMG China, says:

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While the VC market is being challenged in Hong Kong, our long-term prospects remain positive as the government continues to support the economy amid the impact of COVID-19. Also, our financial system has strong fundamentals alongside the commitment made by the Securities and Futures Commission and other government departments to develop Hong Kong as a sustainable finance hub.

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