What Makes Asian Cities Venture Capitalists' Favourite

Nine of 10 of the largest deals announced last year were for companies based in the region

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The year 2018 was a record-breaking year for venture capital deal-making. It witnessed 14,889 deals worth an aggregate $274 billion.

According to the UK-based capital market company Preqin, the total deal value of the previous year has surpassed the last high of $192 billion set in 2017.

The 2019 Preqin Private Equity & Venture Capital Report, which is yet to be released, says North America and Greater China (including China, Taiwan, Hong Kong and Macau) were responsible for the majority of global activity, accounting for $113 billion and $107 billion in deal value, respectively.

Money Flow

Nine of the ten of the largest deals announced were for Asia-based companies, seven of which were in China, it adds. This, Preqin says in a blog post, includes the largest venture capital deal ever announced: the $14 billion funding of Ant Financial, the payments giant controlled by Jack Ma, in mid-2018. The financing, which equipped the world's largest fintech firm with enormous resources for expansion, was backed by Singapore's sovereign wealth fund GIC Pte. as well as Warburg Pincus, Canada Pension Plan Investment Board, Silver Lake and Temasek Holdings Pte.

Global venture capital exit activity also had a record year: 1,094 exits were made for a total of $165 billion, the post mentions.

Asia Growth

Christopher Elvin, head of private equity at Preqin, says, "2018 marks another year of record-breaking deal-making in the venture capital industry. Asia, in particular, has seen further growth in venture capital-backed activity, seeing activity on pace with that of North America."

"Not only were the vast majority of the largest deals announced this year based in Asia, but we also saw the announcement of the largest venture capital deal ever, for Ant Financial Services Group. It looks like China and North America will continue to vie for the position of the foremost venture capital deal market in the coming months," he adds.

Things to Know

Among the other key findings related to 2018's venture capital-backed deals and exits, mentioned in the blog post, are that 2018 was the fifth consecutive year the industry saw a record-breaking aggregate venture capital-backed deal values.

It was also the year that saw the largest venture capital deal made in the US ever: Marlboro cigarette maker Altria Group Inc buying a 35 per cent stake in Juul Labs Inc, which has risen quickly over the past few years to become the market leader in e-cigarettes in the US, for $12.8 billion.

About 35 per cent of deals announced in 2018 were angel/seed deals, while 28 per cent of transactions were series A deals. Series C deals, meanwhile, witnessed a rise in average deal value, increasing from $48 million in 2017 to $82 million in 2018.

Given the growing Internet penetration, investments in the Internet sector accounted for the largest proportion of deal value, at 29 per cent. Internet and software, on the other hand, made up the largest proportions of deals announced, 22 per cent and 23 per cent, respectively.

Venture capital-backed exits also saw a record 2018, as 1,094 exits were made for a total of $165 billion, the post says.