Driven by global appetite from investors and big-ticket deals, the venture capital market in Asia has trebled in size in the last three years with massive amounts of money being raised by region-focused players.
According to a recent report by Preqin, the Asia-focused venture capital industry now controls $221 billion in assets under management, up from $88 billion in December 2014.
In the last few years, Asia has seen an influx of multi-billion dollar deals, the majority of which have come from China led by Alibaba Group’s Ant Financial and ride-hailing giant Didi Chuxing. In a list dominated by Chinese companies, Singapore-based ride-hailing firm Grab’s $4 billion funding round also made it to the top 10 deals in the region in the last two years.
Meanwhile, Indian e-commerce major Flipkart provided the best exit to its investors in the last two years, when global retail giant Walmart Inc picked up a majority stake in the company for $16 billion. This was followed by Chinese firms Xiaomi Inc and Ofo Bicycle, which also gave handsome exits to many of their investors this year.
10 Largest Venture Capital Deals* in Asia, 2016 – 2018 YTD (As at July 2018)http://cdn.dealstreetasia.com/uploads/2018/11/asia-vc-deals.png?resize=264,300 264w" sizes="(max-width: 608px) 100vw, 608px">
10 Largest Venture Capital Exits in Asia, 2016 – 2018 YTD (As at July 2018)http://cdn.dealstreetasia.com/uploads/2018/11/asia-vc-exits.png?resize=300,292 300w" sizes="(max-width: 623px) 100vw, 623px">
Asia-focused funds have a higher median net IRR of 13 per cent across all vintages, the highest of any region, aiding the growth of this investment class. In comparison, the IRR was 8.9 per cent for North America-focused funds and 10 per cent for vehicles targeting Europe.
Not only is there a healthy growth of domestic investors in the country, there is an increasing proportion of investors based outside of the continent that are targeting Asia. Around 53 per cent of the investors targeting Asia are based in North America, while another 15 per cent are in Europe.
Asia-Focused Venture Capital Funds in Market over Time, 2013 – 2018http://cdn.dealstreetasia.com/uploads/2018/11/asia-vc-funds.png?resize=300,208 300w, http://cdn.dealstreetasia.com/uploads/2018/11/asia-vc-funds.png?resize=260,180 260w" sizes="(max-width: 624px) 100vw, 624px">
The fund management industry in Asia is still smaller in comparison to North America, however, global appetite from investors and a strong deals market are providing a strong momentum to the venture capital industry in the region. According to the Preqin data, 251 Asia-focused venture capital funds reached a final close in 2017, securing $20 billion in aggregate capital. While it was a decline from the fundraising peak of $28 billion in 2016, it is not necessarily an indication of a slowdown, but rather shows that funds are now focusing on deploying rather than fundraising.
Annual Asia-Focused Venture Capital Fundraising, 2006 – 2018 YTD (As at July 2018)http://cdn.dealstreetasia.com/uploads/2018/11/annual-fundraising.png?resize=300,110 300w, http://cdn.dealstreetasia.com/uploads/2018/11/annual-fundraising.png?resize=768,280 768w" sizes="(max-width: 901px) 100vw, 901px">
Fundraising Success of Asia-Focused Venture Capital Funds, 2006 – 2018 YTD (As at July 2018)http://cdn.dealstreetasia.com/uploads/2018/11/fundraising-success.png?resize=300,110 300w, http://cdn.dealstreetasia.com/uploads/2018/11/fundraising-success.png?resize=768,282 768w" sizes="(max-width: 922px) 100vw, 922px">
“The meteoric rise of the Asia venture capital market has been the story of the industry over the past few years, but much of the capital involved has come from corporate and strategic investors,” said Christopher Elvin, Head of Private Equity.
“The fund management industry itself remains relatively small compared to North America’s, but the signs of growth are good – strong performance and record capital calls have seen assets under management approach a quarter of a trillion dollars. This looks likely to grow further: investors across the globe are seeking venture investments in Asia, and many are looking to commit more capital over the next 12 months,” he added.
The number of Asia-based venture capital investors has also doubled to 803 as of June 2018 from 403 seen in December 2014.
Largest Asia-Focused Venture Capital Funds Closed, 2006 – 2018 YTD (As at July 2018)http://cdn.dealstreetasia.com/uploads/2018/11/top-funds.png?resize=300,218 300w" sizes="(max-width: 758px) 100vw, 758px">
The post Asia-focused venture capital industry trebles in size in 3 years, AUM swells to $221b appeared first on DealStreetAsia.
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