VC investment in Asia remained relatively steady in Q3’21, led by a $3.6 billion raise by Flipkart and a $1.7 billion raise by energy storage company Svolt.

New record for fintech investment in India

India saw a massive increase in VC investment in Q3’21, reaching a quarterly record — in excess of $14 billion. In addition to substantial raises by Flipkart and Byju, both PharmEasy and Ola raised $500 million funding rounds in Q3’21. Investors outside traditional VC firms took part in a number of deals in Q3’21 — including traditional PE firms, which have not historically been active in consumer tech deals in India. The country saw nine new unicorns created during the quarter, including fintechs BharatPe and CoinDCX and edtechs UpGrad and Eruditus Executive Education.

IPO activity was also very strong in India in Q3’21, with indications Q4’21 will be even stronger. During the quarter, food delivery company Zomato hosted a successful IPO, with its stock price rising 80% in first day trading1. Unicorn fintech Paytm also announced its intent to go public — likely in Q4’212. PharmEasy is also expected to file IPO paperwork early in Q4’213.

Evolving regulations in China affecting VC investment, but only in some sectors

Both VC investment and IPO activity in China slowed somewhat during Q3’21, in part due to evolving government policies and regulations targeting specific sectors like edtech and fintech. During Q3’21, China’s central government announced new implementation guidance related to Chinese companies listing overseas, including plans to enhance oversight and improve regulations related to overseas data flows and data security4, tightened regulations related to after-school tutoring programs and companies, and banned all cryptocurrency transactions.

Several sectors outside those affected by new regulatory guidance continued to see robust investment, including hardware and consumer market companies — such as restaurants and food delivery. In addition to Svolt’s large raise, 5G technology company CICT Mobile raised $569 million, milk tea retailer HeyTea raised $500 million, and integrated circuit company ESWIN Material raised $462 million during Q3’21.

Interest in ESG growing in Hong Kong (SAR, China)

Investor interest in ESG and greentech is growing in Hong Kong (SAR, China) as companies across sectors look for ways to reduce or offset their carbon emissions. While many ESG-focused startups in Hong Kong (SAR, China) are still within the very early funding stages, they are increasingly attracting attention from investors given the increasing demand for green technologies and the growing focus of the government on sustainability and climate change. The challenge for many startups will be finding the right economies of scale in order to bring costs down and become financially sustainable — but given the high priority being given to ESG, it is likely only a matter of time before these companies grow and drive larger investments.

Trends to watch for in Asia

Heading into Q4’21, VC investment is expected to remain slow in a number of sectors in China, although there will likely continue to be robust investment in companies focused on healthtech, the new consumer market, and hardware.

In India, VC investment could grow even further in Q4’21, particularly given the euphoria around investments in consumer tech, D2C companies, fintech and edtech. Social commerce could also see growing attention from VC investors in India over the next few quarters. India could also see a number of blockbuster IPOs before the end of 2021.

Venture financing in Asia

In Asia, the pipeline of later stage companies is better than ever. VC investors are looking for opportunities to exit so the capital markets and IPO markets continue to be very strong. In China there has been a little bit of a slowdown, but there are a lot of companies at the right stage to be ready for the public markets — so that’s driving a lot of funding to them

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

  • Venture capital investment nears new high — with $48.1 billion across 2616 deals

  • After a decline, late stage resurges

  • Corporates double down — with investments nearing $30 billion

  • India sets an all-time high for VC invested

  • China’s VC funding back on the upswing

  • Top 10 deals include 4 deals from India (Flipkart, BYJU, Eruditus, Meesho)

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