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China Became Second Largest Venture Capital Market by Total Capital Invested in 2018, According to PitchBook Report

March 19, 2019

SEATTLE, March 19, 2019  -- PitchBook, the premier data provider for the private and public equity markets, released a new report entitled, Venture Capital in China, which provides an overview and analysis of trends shaping Chinese VC activity. According to the analysis, China is now the second largest country in terms of venture deal value, primarily due to a variety of programs intended to develop Chinese economic and technology infrastructures like Torch, Innofund, state-sponsored VC funding and foreign RMB funds. Also aiding the growth and maturity of the Chinese VC ecosystem are the set of internet giants known as BAT (Baidu, Alibaba, Tencent) that command significant sway in Chinese VC and the economy with their expansive platform-based strategies. At least 19 of the 71 Chinese unicorns are backed or controlled by BAT companies. While these market drivers, along with other macroeconomic factors are attracting VC investment, there are several risks to China's burgeoning VC ecosystem, including regulations and government oversight, lack of regulatory transparency, evolving contracts, overestimation of market size, investment sector limitations and exit market considerations.

"China has seen a meteoric rise in tech startups and VC activity in recent years and we expect the country's growing proportion of VC investment will only increase as the ecosystem continues to mature, and as both domestic and foreign investors look to China for its increasing rate of technological innovation," said Alex Frederick, VC analyst at PitchBook. "One significant challenge that could interfere with continued growth is Chinese government oversight. With both local and central governments administering regulations that limit investment and exit options, it creates an opaque and selective environment that puts foreign investment at risk."

Key Takeaways:

  • Global investors are pouring increasing amounts of capital into China's startup ecosystem, with 29.4% of global VC directed into Chinese startups in 2018.
  • China has undertaken major entrepreneurial initiatives including a massive national technology incubator, seed funding, and a series of funds-of-funds (FoFs) to develop the entrepreneurial and technological ecosystem in China.
  • China's largest tech firms (including Baidu, Alibaba, and Tencent) are using expansive platform strategies to saturate every moment of Chinese consumers' digital lives, acting as one-stop shops for all entertainment, shopping, finance, and other needs.
  • Although exit paths for Chinese startups are limited, evolving regulations, investor strategies, and new high-tech boards leave us with an optimistic outlook.

Additional coverage in this report includes:

  • History of VC in China
  • Chinese Tech Giants
  • Factors Driving Chinese VC Trends
  • Risk Regulation and Exit Considerations

Download the full report here.

About PitchBook
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, San Francisco, New York and London and serves more than 23,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

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