China records six out of Asia's top ten deals in first quarter despite deal volume drop amid pandemic, finds KPMG analysis
Edtech, life sciences and biotech, and logistics companies continue to attract attention
HONG KONG, April 23, 2020 /PRNewswire/ -- Despite the impact of COVID-19, venture capital (VC) investment globally remained steady in Q1'20, primarily due to the strong pipeline of deals in many jurisdictions around the world. The majority of sectors in China saw a downward trend in VC investment during the quarter, however, mega-sized deals were still closed, with six out of the top ten deals in Asia this quarter recorded from China. Edtech, life sciences and biotech, and logistics companies continued to attract attention, likely due to their relevance to the current situation, according to KPMG's Venture Pulse Q1'2020 analysis.
After a resurgence in VC investment in Q4'19, Asia saw VC investment drop to a twelve-quarter low, driven by a slowdown in deal activity in China, where the fight against COVID-19 began much earlier than in other jurisdictions. Both VC investment and deal volume in China dropped from USD 18.7 billion across 1,021 deals in Q4'19 to USD 8.9 billion across 481 deals in Q1'20. Despite a sharp decline in the number of deals, Asia saw a number of megarounds during Q1'20. China-based live video streaming company Kuaishou and Indonesia-based ridesharing company Go-jek's were the largest deals of the quarter, each raised USD 3 billion.
Egidio Zarrella, Partner, Head of Clients and Innovation, KPMG China, said: "COVID-19 is the black swan event of our time. It is causing changes that will propel us further into the digital age. Online businesses are going through the roof. Delivery, logistics, productivity, cybersecurity -- these are taking center stage for almost every business. Traditional organizations that have been lagging behind are going to go through a massive shift because they have no other choice. They are seeing their weaknesses in a big way -- and the world will be changed because of it."
In China, Education platform Yuanfudao raised USD 1 billion, suggesting a rapid increase in interest in and use of education platforms due to COVID-19. In addition to Yuanfudao's funding round, edtech company YunXueTang raised USD 100 million during the quarter. Several life sciences companies also raised rounds in Q1'20, including Transcenta Holding (USD 100 million), CANbridge Life Sciences (USD 98 million), and CF PharmTech (USD 89 million).
Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China, said: "Many businesses in China have had to write off the entire first quarter this year because they're not generating any meaningful revenue. Underfunded startups have a very difficult time since fundraising is tough. However, being the first responder to what became a global pandemic, China's government is taking the lead in combatting the personal and commercial consequences of COVID-19 with a host of targeted relief measures."
While VC investment in Q2'20 is likely to remain subdued given the ongoing challenges posed by COVID-19 globally, it is expected that a number of areas could start to see renewed investment. For example, AI has long been a hot area of investment in Asia; it could potentially see momentum rebuild quickly given its applicability for monitoring and tracking population health and disease spread.
Philip Ng, Partner, Head of Technology, KPMG China, said: "China's economy saw some signs of recovering at the end of the first quarter, and the central government is currently undertaking significant stimulus efforts. Given that China was the first to respond to the COVID-19 crisis, they will be the one to watch heading into Q2 and Q3'20 as it could be a bellwether for how other economies around the world could recover once the COVID-19 crisis has lessened."
About KPMG China
KPMG member firms and its affiliates operating in mainland China, Hong Kong and Macau are collectively referred to as "KPMG China". KPMG China is based in 24 offices across 22 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Xi'an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have more than 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG's appointment for multi-disciplinary services (including audit, tax and advisory) by some of China's most prestigious companies.