In China’s tech scene, where is all the money coming from?

With the Chinese public markets getting a lot of unwanted attention as of late, I thought it would be interesting to look at the health of its private markets.

Since early June public markets have wiped nearly 25 percent off the value of indices. Private markets on the hand have been strong; Q2 of this year alone saw USD$7.6 billion of capital deployed versus USD$3.2 billion for the whole of Europe. So far this year, there has been USD$12.3 billion* venture capital raised in China. This represents 230 percent year-on-year growth on funding and 43 percent growth on the number of deals in China.

*This includes the Didi Kuaidi mega-round of USD$2 billion.

Where’s the money coming from?

Sourcing of capital in China is strong due to the increasing presence of corporate investors. In particular the presence of Tencent, Alibaba and Baidu – who have collectively been active in over 40 deals in the last year alone.

Venture capital investors continue to show strength having invested USD$5.8 billion in the first half of this year. China specific investors such as Shunwei, IDG, QiMing, and Morningside have been joined by their US equivalent counterparts such as Sequoia,  Lightspeed, Matrix, and GGV – collectively they have been involved in 200 deals to date.

Beyond this, there has been a significant increase in the amount of foreign investment, with most investors believing that the local market is too strong to not have a foothold of some sort.

Where’s the money going?

Much like the US, late-stage deals in China continue to grow, with rounds coming later and larger, with the number of deals increasing markedly.

The first half of 2015 has seen some huge late-stage financing rounds in Chinese companies such as:

Dianping – is a location based restaurant review and dining information site, often compared to it’s western equivalent Yelp. They recently raised an USD$850 million Series E round at a USD$4.05 billion valuation; with investors such as Temasek (recently took a 20 percent stake in the company), Wanda, Xiaomi, Tencent,  Lightspeed, Sequoia and Google.

What’s the future?