VC investment in Asia grew in Q2’21, in part driven by surging investment in India, including a $1.5 billion raise by BYJU, an $800 million raise by Swiggy, and a $502 million raise by ShareChat.

China sees numerous $100 million+ VC funding rounds

VC investment in China held steady during Q2’21, with a wide variety of $100 million+ deals, including Horizon Robotics ($1.5 billion corporate venture capital), Dingdong Maicai $700 million), digital supply chain provider Xingyun Group ($600 million), retailer Zhuanzhuan ($390 million), e-grocery company Dingdong Machai ($330 million), home fitness company Fiture Technology ($300 million), and cloud services provider Beisen Cloud Computing ($260 million).

Given the increasing government concern and scrutiny of big tech companies in China, there has been a growing opportunity for second and third tier tech companies focused on areas such as e-commerce, the sharing economy, and logistics to attract more attention from VC investors. While many of these players are still working to scale and grow sufficient volume to become profitable, it could be the beginning of a transition to less concentrated market participation.

India sees VC investment fly through the roof

During Q2’21, VC investment in India soared past the previous record high set in Q4’19, driven not only by VC investors but also by more traditional funds feeling a sense of FOMO given the broad applicability of digital business models in the pandemic. A diversity of companies are attracting VC investment in India, in particular those focused on direct-to-consumer offerings, including e-commerce, food delivery, hyper-local grocery delivery, video sharing, and gaming.

Investors continued to pour money into edtech companies in India, including BYJU, which raised a $1.5 billion funding round this quarter. Food delivery was also very hot in Q2’21, led by Swiggy’s $800 million raise.

Exit activity surges in Asia

Exit activity surged in Asia during Q2’21, particularly in China — which saw a ten-quarter high in exit value, and in India, which saw an eleven-quarter high in exit value and a record number of exits.

IPO activity was quite strong in Asia this quarter. While domestic IPOs may have slowed somewhat due to new regulations coming in, there were a number of high profile IPOs by Chinese companies in the US. Full Truck Alliance (also known as Manbang) also raised $1.6 billion in an US IPO this quarter. In India, food delivery giant Zomato also filed for an IPO this quarter.

Japan’s startup system attracting larger deals

During Q2’21, Japan attracted several large deals, including a $120 million raise by Buy Now Pay Later (“BNPL”) provider, Paidy1–which earned the company unicorn status, a $143 million raise by HR management company SmartHR–which also became a unicorn, a $60 million raise by QR code payment gateway Netstars2, and a $50 million raises by digital molecular analysis company Atonarp3.

The startup ecosystem in Japan continued to mature, in part due to the government’s increasing focus on encouraging innovation and entrepreneurship. The government developed its Integrated Innovation Strategy 20204 to focus its efforts on creating innovation capacity and strengthening research capacity in the country in the wake of COVID-19. Japan’s Ministry of Economic Trade and Industry also set a goal to help develop 20 unicorns by 20235.

COVID-19 continues to drive attention to health and biotech

The large demand from governments looking for specific services ranging from vaccine production to clinical trial services has prompted a much broader focus on biotech, health services, and healthtech across Asia. VC investment in the space was particularly strong in China during Q2’21, with raises by Jinwei ($123 million), Elpiscience ($105 million), AbogenBio ($91 million) and Duality Biologics($90 million).

Trends to watch for in Asia

VC investment is expected to continue to be strong in Asia, particularly in areas such as fintech, e-commerce, edtech, health and biotech, and logistics. IPO activity will be a key area to watch heading into Q3’21, particularly in India. If Zomato and others have a positive showing and are very well subscribed, VC investors will likely gain additional confidence in India’s potential.

Venture financing in Asia

The new anti-competition law in China will help to level the playing field in the longer run and provide more room for other platform players to enter the market to encourage competition and innovation, making Chinese companies even more competitive locally and globally.

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

  • Venture capital investment robust — with $38 billion across 1998 deals

  • Early-stage deals start to heat up

  • Venture backed exit activity returns to historic norms following record Q1

  • India sees surge to almost $8 billion invested — a new record

  • Decline in mega-deals belies ongoing health of Chinese VC

  • Top 10 deals spread amongst Indonesia, India, China, Singapore and South Korea

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