Global Venture Investment Slips Further In Q1 With Asia Off The Most
A chill is continuing in global funding of VC-backed companies as investments dropped 8 percent and deal count fell 4 percent in the first quarter of 2016, following a major dip in the preceding quarter. Some $25.5 billion was invested across 1829 deals globally for the first three months of the year.
But don’t expect this downward trend to last long, judging from the level of fund raising as the second quarter kicks in. A slowdown in Asian funding, which has been the world’s fastest-growing region for startups, drove the overall decline. Deals in Asia were off by 9 percent while dollars were down by 34 percent from an already chilly last quarter of 2015. Tellingly, China investment for Q1 2016 was just 39 percent of the Q3 2015 peak. India investment deals slipped 4 percent while funding fell 24 percent.
Globally and in perhaps a good indicator of reality, only five new VC-backed unicorns were minted, less than half the quarterly total compared to 2015. In China, home to numerous unicorns, one new $1 billion-plus deal emerged, a $1.2 billion round in Lu.com.
This latest global tracking follows the record 2015 year for venture investment in startups, according to data from CBI Insights and KPMG. So it’s not a big surprise that the typically cyclical venture market is playing out another era.
In a sign that an upswing may be already be underway, GGV Capital raised $1.2 billion seeking to increasingly capitalize on cross-border U.S-China innovations from fast-moving startups. The total encompasses a $900 million fund for early- and growth-stage companies and $250 million for seed-stage startups in China. Indicating how the venture market has matured, the fund also includes $50 million in an entrepreneurs fund consisting of company founders as LPs. This latest fund raising brings GGV, which has one of the stronger track records in China venture investing thanks to early bets on Alibaba and other newer deals, to $3.8 billion spanning 13 funds.
Other fund raising news comes from Accel, Draper Associates and the new fund from Andrew Chung, 1995. Keep reading at Forbes.
ASIA – REGIONAL
In Alibaba’s latest deal in Southeast Asia and largest overseas acquisition to date, the Chinese conglomerate has put $1 billion into Lazada, the Singapore-based e-commerce platform serving Southeast Asia, becoming the site’s controlling stakeholder. The round includes $500 million in newly issued equity capital, in addition to stakes from Lazada’s earlier stakeholders: Germany’s Rocket Internet, the U.K.’s retail company Tesco, and Swedish investment firm Kinnevik. The transaction comes at a time when Lazada has been investing funds and posting net operating losses as it attempts to achieve profitability in a diverse region with several local rival marketplaces.
Venture investments in augmented and virtual reality, one of the hottest sectors around, hit $1.7 billion in the last 12 months ending first quarter of 2016. Approximately $800 million of the total was represented by Alibaba’s lead investment into VR firm Magic Leap, with executive vice chairman Joe Tsai joining the board of the fast-emerging startup based in south Florida. The large funding proportion reflects corporate recognition of a hot sector and highlights Chinese investors’ willingness to pursue promising opportunities cross-border.
Twitter is preparing to make a play for the world’s largest population of Internet users, with the hiring of regional director Kathy Chen for the Greater China region. Though the microblogging service remains blocked in China, Twitter is looking to sign up Chinese companies that want to reach a global audience to run ads on its platform—a move similar to that of also-blocked Facebook.
Innovation Works, founded by Kai-Fu Lee, the former China head for Google, has participated in the $360 million funding round of Meitu, the developer of an app that retouches photos. Meitu, founded in 2008, claims 270 million monthly active users who use its apps to help beautify their selfies and spice up their online appearance. The startup is also backed by IDG and Qiming Venture Partners. Funds from this latest round will be used to expand into facial recognition. A new partnership with Foxconn is intended to help Meitu expand in Southeast Asia and India.
Tencent is in talks with banks to raise $2 billion in a syndicated loan to fund acquisitions both in China and abroad, as well as to expand into new areas such as financial services. The firm’s billionaire Chairman Ma Huateng is building Tencent’s WeChat product into an all-purpose platform for e-commerce, investing billions of dollars along the way in startups that provide services from movie ticketing to food delivery.
Russian entrepreneur and VC Yuri Milner has invested an undisclosed amount of funding into China-based Horizon Robotics, a 10-month-old startup focused on AI. The company was founded by Kai Yu, former head of Baidu’s Institute for Deep Learning, and previously received seed funding from Hillhouse Capital, Morningside Ventures, GSR Ventures and Sequoia Capital.
Fosun International is purchasing control of Israeli cosmetics company Ahava Dead Sea Laboratories, in a deal that values the company at $77 million. Ahava offers skincare products made with minerals from the Dead Sea, and landed the investment at a time when Fosun has otherwise slowed its foreign deal-making, having dropped plans to buy Israeli insurer Phoenix Holdings from Delek Group in February.
Think Uber will lose in China, like many other American brands have? No, says Andy Mok, founder of Red Pagoda Resources and a moderator at Silicon Dragon’s upcoming Beijing event on April 28. In a viewpoint, “5 Reasons Uber will win in China,” he asserted that ride-hailing is not a winner-take-all-market; that Uber’s partnership with Baidu and its related AI technology is strategically valuable, and that Uber sets itself apart from other tech companies as primarily a logistics platform. Read Mok’s full piece here.
Goldman Sachs’ Principal Strategic Investments Group (GSPSI), the 20-person arm of the investment giant that focuses on making bets on fast-growing technology companies, has stated its intention to start investing in companies in fintech companies in India, beginning in Bangalore and then expanding to the rest of the country. The firm’s move to seek out strategic partnerships shows an optimism for the continued opportunities in India’s fintech sector.
Meanwhile, overall VC and PE investments in Indian startups were down 24 percent in Q1 2016, trending down for the second quarter in a row, according to a joint report by KPMG and CB Insights. The largest deals of the quarter included $150 million raised by online marketplace Shopclues, $150 million channeled into online grocer BigBasket, and $50 million invested in Snapdeal, India’s second most valuable e-commerce frim after Flipkart.
In emerging markets like India, it’s a given that it’s possible to build large and profitable businesses through sheer excellence in execution, remarkably without a technological advantage. In the steamy Indian market where tenacity counts most of all, venture investments climbed by more than 60 percent in 2015 to $1.9 billion. Much of this capital comes from offshoots of American VC firms, including large players such as Sequoia Capital, SAIF Partners, Accel Partners, Japan’s SoftBank, and China’s Alibaba. This phenomenon shapes what gets funded, which has been centered on Indian versions of well-known U.S.-based tech brands such as Amazon and MakeMTrip. The New York Times reports on venture investments in India here.
Japanese Internet company GREE is launching a $12 million fund aimed at backing early-stage VR startups. Named GREE VR Capital LLC, this new venture initiative will fund both gaming and nongaming VR content companies, and has made a first investment in VRChat, a platform that lets users build their own VR worlds in Unity and share them in large VR chatrooms. With VR expected to become a $30 billion industry by 2020, the fund is a timely move.
Rakuten Ventures, the corporate VC arm of Japanese e-ecommerce conglomerate Rakuten, has added $100 million to its Global Investment fund, doubling the fund size to $200 million. Earlier this year, Rakuten Ventures had launched an $85 million fund for Japanese startups.
Vietnamese e-learning startup Kyna.vn has raised a seed round from Japanese investment firm CyberAgent Ventures. The startup is the first company in Vietnam to receive funding from CyberAgent Ventures’ $50 million launched in June 2015, its second Southeast Asia fund.
Sequoia India has led a $7.5 million Series A investment in Singapore-based 90 seconds, a cloud video production platform. The six-year-old startup lets users handle nearly every aspect of the video production process in one place. Other investors in the round include pay television provider Sky TV New Zealand, Airtree Ventures, Beenext and Oleg Tscheltzoff, founder of stock image agency Fotolia.com.
Walden International has led a $2.6 million for Singapore’s TabSquare, a startup offering a cloud-based restaurant management platform. Infocomm Investments, Philips PE, and serial investor Ivan Lee’s private investment vehicle, Raging Bull, also participated.
PicMix, an Indonesia-based photo sharing app, has raised $3 million in a funding round that includes Gobi Partners ($1 million) and an undisclosed strategic investor ($2 million). Founded in 2012, PicMix is best known for its mobile sharing and editing apps, and had previously raised an undisclosed amount from Indonesian handset distributor Erajaya Group.
Uber has brought its motorcycle-taxi hailing service (uberMotor) to Indonesia, where it faces strong competition from similar apps locally. Notably, market leader Go-Jek (whose co-founder and CFO Kevin Aluwi was nominated by Silicon Dragon as a Forbes Asia 30 Under 30 honoree) has collaborated with Line to let users hail motorcycle-taxis directly from the company’s chat app, as well as with e-commerce firm Lazada Indonesia to improve its delivery service.
Northeastern University has launched a new Program in Entrepreneurship Studies, with content from Silicon Valley-based faculty to help entrepreneurs develop management skills to grow successful companies. The program is offered as an on-site class in Silicon Valley or in a fully online format.
- Silicon Dragon weekly digest of news by contributor Ying-Ying Lu