Nexus Ventures predicts a stronger China in 2010Based on recent statistics some new characteristics and trends have cropped up in China's Venture Capital (VC) market in 2009:
In 2009, China's VC market declined both in number of deals as well as in deal size: 428 disclosed deals totalled USD 3.767 billion, down 20.0% and 24.8% respectively, compared with the previous year, largely in line with Nexus Ventures previous forecasts.
In terms of sectors, the domestic VC market experienced a moderate rise in investment concentration, with IT, Manufacturing, Internet and Healthcare accounting for most deals, comprising over 60% of all closed deals, which represents an increase of 3.6% from 2008.
In terms of funding stage, growth stage investment saw a strong rally in 2009 both in number of deals and in deal size, while other stages saw a sharp fall. This seemed to reflect a revived rational confidence in China's VC market, as those start-ups in growth stage with both tolerable risks and a reasonable investment horizon are once again being favored by investors.
In terms of funding rounds, the number of deals for each round decreased in 2009 due to a decrease in the total number of deals. For instance, Series-A round represented the major round of funding for most deals, totaling 303, while only two companies, Youku.com and PPLive, opted to do follow-up Series E round financing. Having thrived from the online video boom, Youku.com has managed to command the leading position in its sector so far. However, for Series-A round investors in Youku, 2010 will mark the fifth year of entry.
In terms of regions, VC institutions continue to stay mainly focused on investments in first-tier cities and eastern coastal areas, such as Beijing, Shanghai, Jiangsu, Zhejiang, and Shenzhen, though this regional concentration is declining. For example, Beijing saw 104 deals totaling USD 1.045 billion, with its total share falling across the country both in number of deals and deal amount respectively by 7.8% and 3.9% year-on-year, and Shanghai also declined by 3.0% and 7.9% respectively.
In terms of investors' funding origin, both the number and the combined amount of deals closed by local Chinese institutions saw a steep rise compared against their foreign partners over 2008 with their share of the total up by 62.4% and 25.2% respectively.
In Nexus Ventures opinion, the contraction seen within the domestic VC market in 2009 was simply a transient correction of its rapid development, rather than a cooling-off. Therefore, we are confident that both the number of deals and investment amount in China's VC market will rise in 2010. Some traditionally hot sectors, such as Internet and Healthcare, will continue to be the major destinations for domestic VC investments, while some promising opportunities will also crop up in emerging sectors, such as Telecom & VAS, Media & Entertainment and of course the Green Energy sector.
In venture capital, it often comes down to people and innovative ideas and the chemistry between these two key points. While each experienced Nexus Ventures partner brings a unique set of skills, we share a common set of core values. These are the values we stir our company by. At Nexus Ventures we have a passion for technology and we believe in the power of a true team approach. And above all, a deep respect for the entrepreneur and the entrepreneurial process.
Nexus Ventures PLC
33 Cavendish Square, 8th Floor
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