APAC Venture Capital Deals in Decline

Venture capital deals in Asia Pacific dropped by one-fifth in the third quarter, attributed to a Chinese economic slowdown, but tailwinds await due to upcoming policy reforms.

Total venture capital deal value in the region dropped to $14.92 billion in the third quarter, compared to $18.61 billion in the second quarter, according to recent KPMG data. The decrease is notably steeper than the 14 percent decline in overall global transactions in the period, which totaled $55.71 billion.

There is a lot of interest in the Asian market but investors have really slowed down their activity,» said Egidio Zarrella, partner and head of clients and innovation at KPMG China. «They are being conservative, waiting to see where things go from an economic and geopolitical perspective.

With Alibaba’s $700 million minority stake acquisition of music streaming service NetEase Cloud Music topping the quarterly transactions, no deal surpassed the $1 billion mark compared to four in the first six months. But despite a slowdown from the region’s major contributor – seven of the 10 deals in the region involved mainland Chinese companies (with Indian startups making up the rest) – KPMG remained optimistic about the near-term outlook.

Despite the challenges in the market, a number of sectors continued to attract investment, including fintech, Autotech and biotech, said Philip Ng, partner and head of technology, KPMG China, who also underlined upcoming tailwinds for insurance, finance, capital markets and healthcare due to policy reforms.

While the number of funds raised for IPOs have dipped, the number of mainboard deals in the first three quarters is similar to that of last year and Hong Kong remains a top destination for IPOs,» added Irene Chu, partner and head of new economy & life sciences, Hong Kong, KPMG China. «The pipeline of companies applying for IPO in Hong Kong is still very strong – but whether they will go out before the end of the year will depend on changing market conditions.