Asian Venture Capital Deal Flow Quadruples In Two Years by Preqin
Total venture capital deal value in Asia is $31.6bn for 2015 YTD, up from $7.7bn in 2013.
Aggregate deal value in Asia for both venture capital and buyout funds hit record highs in 2014. While buyout activity does not look likely to match that in 2015, venture capital deals have already surpassed 2014’s total of $22.4bn, reaching $31.6bn by the end of August. Although the 1573 deals in the region do not yet exceed the 1783 deals in 2014, totals in South Asia and the ASEAN region already match or surpass those of last year. Over the past two years, average venture capital deal size has increased by 259%, from $5.6mn in 2013 to $20.1mn in 2015 YTD.
Reputed short-seller Spruce Point Capital Management released its latest short report this week. The firm is shorting Canadian dairy and grocery manufacturer Saputo. Spruce Point chief Ben Axler believes the company is entering a phase of declining growth and highlights the financial stress and growing challenges he sees it facing, not only in Canada but Read More
The increase in venture capital deals is reflected in the attitudes of both managers and investors. Twenty-one percent of managers have a primarily venture capital-based investment strategy, while the proportion of investors who think that venture capital offers the greatest opportunities at present is 43%, the highest proportion of any private equity fund type.
Other Key Asian Private Equity Facts:
- Buyout Activity: Having hit a record fundraising total of $22.9bn in 2014, Asia-focused buyout funds closed in 2015 YTD have only secured $1.4bn. Aggregate deal value has fallen from $46.5bn in 2014 to $18.4bn this year, while average deal size has fallen from $152mn to $134mn in the same period.
- Falling Fundraising: The number of Asian-focused private equity funds closed each year has fallen since 2011, when 291 funds closed. So far in 2015, only 92 funds have closed, and only 27% of Asia-based investors report making new commitments to funds this year.
- Superior Growth: In five of the last eight years, growth funds have accounted for 25% or more of the total capital raised for Asia-focused private equity funds. In four of those years, growth funds have raised the most capital of any fund type. The proportion of capital raised for each private equity fund type has fluctuated by a margin of up to 10% year-on-year.
- Median Performance: Primarily Asia-focused funds have higher median net IRRs than North America- and Europe-focused funds across 1998-2001, and 2010-12 vintages. However, the PrEQIn quarterly index, when rebased to the end of 2000 and 2007 puts Asia-focused funds second and third respectively.
- Investor Preferences: Forty-three percent of Asia-based investors think that venture capital currently offers the best investment opportunities, up from 15% in 2014. The proportion that thinks that small and mid-market buyout funds are best has fallen from 40% last year to 29% in 2015. The number of investors favouring large and mega buyouts and secondaries is 10% each, down from 30% and 20% respectively.
For more information and analysis, please see the full report via the link below:
“The years since the Global Financial Crisis have seen the Asian private equity industry grow in importance, despite recent turmoil in public markets. Investors that have remained committed to Asian private equity over the long term have enjoyed attractive returns, and the private equity industry in the region has matured immensely in recent years. Investors can now select between a range of managers with local and regional strengths, and with established track records.
The prominence of growth and venture capital funds reflect the differences that still remain between Asian markets, and the more developed geographies of North America and Europe. With fewer stable, mature companies to target for buyout investment, there is more emphasis on enabling the growth of younger companies and start-ups as part of rapidly-growing economies. The record values for deals and exits for such funds are a mark of the success of managers and investors in identifying early opportunities.”
Mark O’Hare, CEO Preqin