Venture capital (VC) investment in Asia remained quite strong in Q4’21, helping lift total VC investment to a new record high. A number of companies across the Asia-Pacific region attracted large deals, including Indonesia-based J&T Express ($2.5 billion), and Chinese-based companies — Regor Therapeutics ($1.5 billion), GTA Semiconductor ($1.25 billion) Nanjing LingHang Technology ($1.2 billion) — Singapore-based MoonPay ($555 million), and India-based PharmEasy ($350 million).

Artificial intelligence big winner of investment in China in Q4’21

VC investment in China remained solid in Q4’21, propelled by a number of large deals involving AI-driven companies, including Nanjing LingHang Technology ($1.2 billion), Dreame Technology ($558 million), and Avatar Technology ($377 million). The quarter also saw AI company SenseTime raise $740 million in its debut on the HKSE.

While some sectors in China have seen VC investment dry up in recent quarters due to changes in regulatory guidance, others that are well-aligned to the strategic priorities of China’s Central Government continued to attract interest and VC investment — among them, advanced manufacturing, electric vehicle manufacturing, renewable energy, green technologies, and healthcare and biotech.

VC investment in India remains strong, despite drop following record Q3’21

VC investment in India dropped dramatically in Q4’21 compared to the record high set in Q3’21. Despite the optics, however, Q4’21 was India’s second-best quarter of VC investment ever. A growing economy, stable government policies, and a growing middle class have all contributed to the upswell in interest from VC investors. Shifting policy directions in China have likely also helped drive additional investment into India, particularly in sectors not seen as a priority by China’s Central Government. From a sector perspective, fintech was a very strong area of VC investment in India during Q4’21, in addition to healthtech, B2B services, and direct-to-consumer platforms.

IPO activity soars in India in Q4’21

Exit activity was robust in Asia during 2021, with China seeing a massive start to the year in terms of deal value and then dropping off a cliff in the second-half of the year, and India starting on a cooler note and really heating up in Q4’21 with the IPOs of online cosmetics company Nykaa and digital payments firm Paytm. Nykaa raised $722 million in its October IPO7, while digital payments firm Paytm held a $2.4 billion dual-listing on the Bombay and National Stock Exchanges in 8 November. The booming stock market in India has likely helped drive continued interest in the VC market, as VC investors gained increasing confidence that they can get good exits from their investments in the country.

In Hong Kong (SAR, China), IPO activity slowed considerably in Q4’21 amidst growing concerns about general market liquidity, tensions related to regulatory changes to data security and VIE structures, and a number of companies re-evaluating their exit strategies in light of US listing challenges.

VC market in Japan continues to mature as funding reaches new high

Japan continued to see strong VC investment activity in Q4’21, capping off a record year that saw the country attract a record $4.5 billion in VC funding. A rapidly evolving startup ecosystem, growing number of emerging companies, and increasing deal sizes have all helped bring attention and foreign VC investment to Japan. During Q4’21, biotech firm Aculys Pharma and sneaker marketplace Soda Inc became the first Japanese startups to receive investment from SoftBank’s Vision Fund. Exit Activity in Japan also doubled year-over-year to $7.6 billion, led by PayPal’s acquisition of buy-now-pay-later company Paidy in Q3’21.

Trends to watch for in 2022

VC investment in Asia will likely remain strong heading into Q1’22. In China, ESG is well-positioned to see an increase in investment, given the focus of China’s Central Government on greening the economy and goal to become the largest market for electric vehicles.

Following 2021’s record number of unicorn births, there are high expectations that India’s stable of unicorns will grow even further in 2022 as rapidly maturing companies in a wide-range of sectors attract larger investments. Fintech, edtech, and ecommerce are expected to remain hot areas of VC investment, although all three sectors could also see some consolidation as smaller players look to gain scale or are acquired by their larger and better capitalized counterparts.

Venture financing in Asia Q4'21

One area where there’s a lot of room for VC investment growth in China is ESG. The government has an absolute focus on greening the economy and really leveraging innovative technologies to become a leader in areas like EV manufacturing. Looking forward to 2022, I think that focus will help drive a significant increase in the space.

Egidio Zarrella
Partner, Clients and Innovation
KPMG China

  • Venture Capital investment nears new high - with $46.2 billion across 2440 deals

  • Corporates double down — with investments nearing $30 billion

  • Exits resurge in Q4 — finishing the year strong

  • India concludes record-setting year with another $10 billion + quarter

  • China dominates with 7 of top 10 deals

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