Asia leads the world in tech investment growth

(Image by 401K)

Follow the money and it’ll lead you to Asia. It’s where all the action is happening.

Asia and the Pacific saw US$8.59 billion worth of tech investment deals in the third quarter, a whopping 188 percent growth from US$2.98 billion the same quarter of 2014, Right Click Capital’s Internet DealBook shows. Those deals included all funding stages – seed to late-stage – as well as acquisitions.

The region certainly bucks the trend worldwide. Although deals in other parts of the world were still being done, the numbers are just gloomy:

• North America: down 3.6 percent to US$18.19 billion in third quarter 2015 from US$18.87 billion in same period of 2014
• South America: down over a thousandfold to US$7 million from US$9.46 billion
• Europe: down 88 percent to US$1.89 billion from US$15.75 billion
• Middle East: down 13 percent to US$262.72 million from US$303.32 million
• Rest of the world: down 91 percent to US$6.88 million from US$85.17 million

Those numbers bring total investment deals worldwide to US$28.9 billion. That’s a crazy amount but it’s down 39.2 percent from US$47.5 billion the previous year. The DealBook tracked 925 deals from public sources this year, versus 1,133 last year. The operative word there is public so it means a lot more deals might have been inked, we only didn’t know about them.

In love with ecommerce

Where are venture capitalists and investors throwing their pennies? China and India are leading the way in capital-raising, according to Right Click Capital partner Benjamin Chong.

The top deals in Asia and the Pacific in the last quarter involved China’s Didi Kuaidi (raised US$2 billion in July, then US$1 billion in September), India’s Flipkart (US$700 million in July), and China-based food delivery startup Ele.me (US$630 million in August).

The hottest sectors are easy to guess. Investors are handing big checks to ecommerce and transactions businesses, judging by the above deals. “While we’ve continued to see cross-border transactions in the third quarter, we’ve also seen regional behemoths like Alibaba, Snapdeal, JD, and Tencent participate in these regional later-stage capital raises,” Benjamin explains.

Those two sectors, along with media, are also the sexiest ones for deals around the world. Hardware and infrastructure, games, marketing, mobile and apps, software and services all posted growth declines.

Growth of deals by sector worldwide

Part of the reason why there are so many ecommerce deals is because there’s some consolidation happening. Yet Benjamin says marketplaces are still the safest bets. “As double-sided marketplaces, on-demand services, and payments companies continue to scale in the Asia-Pacific region, we’re continuing to see investors back these companies. While these companies have a tendency to be capital-intensive, at scale they can be highly profitable, as the platforms automate, innovate, and increase margin. We’re expecting to see continued investment into these sectors prior to consolidation that will produce some very large deals.”

The full report is available for download here.