VC Investment in China Up, Demand for Talent Grows
China remains a hot destination for venture capital investment. Last year, venture capitalists invested $2.49 billion (the most since 2001) across 241 deals in China, according to AltAssets citing the China Quarterly Venture Capital Report, released by Dow Jones VentureSource. That’s a 5% jump from 2006. Looking ahead, a separate survey of 350 venture capitalists, entrepreneurs, corporate buyers, investment bankers and research analysts conducted by U.S. audit, tax and advisory firm, KPMG LLP, finds that more than half of those polled expect venture capital activity to continue rising in 2008.
Perceptions of the investment community are also changing, says KPMG. The firm’s study shows that 66% of respondents expect private equity firms to continue to increase their presence in the venture capital market. ”We are seeing continued convergence between private equity and venture capital. Venture capital funds are adding private equity investments, and private equity funds are adding venture capital investments blurring the lines between the asset classes, says Brian Hughes, KPMG Partner and Co-Leader of the firm’s Venture Capital Practice.
Executive recruiting firm, A.E. Feldman says the trend is increasing demand for global private equity, investment banking and venture capital professionals with interest and expertise in China. Law firms are also heading to China in an attempt to capitalize on growth in buyout business. The recruiting firm says attorney jobs are opening up as firms pursue M&A and private equity work throughout Asia. Transactional attorneys, including attorneys specializing in securities financings, private equity and mergers & acquisitions are in rising demand.
The fourth quarter of 2007 saw 60 deals and $660m invested in China, a 6% increase from the same period in 2006, according to the China Quarterly Venture Capital Report as reported by AltAssets. In particular, the business/consumer/retail sector saw a record $1.25 billion invested in 94 deals in 2007. That’s an 83% jump from the year before. Moreover, seed and first-round deals make up the majority of deal flow in China, while second and later rounds now make up half of total venture investment.
In keeping with these findings, a separate poll conducted by KPMG shows that outside of the U.S., China and India are overwhelming investment favorites. The majority of respondents, 64%, believe that China and India are the most attractive locations for entrepreneurs to find funding. Additionally, 61% of those polled expect increased IPO activity in both countries over the next two years.
China has achieved staggering economic success over the past two decades, with an average annual GDP growth rate of more than 9%. There is a clear indication that growth investors have become more global, spreading their capital worldwide. Not surprisingly, they continue to be bullish on emerging markets and industry sectors that project the most growth in the near future, according to Packy Kelly, KPMG Partner and Co-Leader of the firm’s Venture Capital Practice.
