2010-02-28-投中研究院-Statistics_Analysis_of_China_44页_1mb

2009 China's IT VC/PE Investment Summary

Core Content

In 2009, China's venture capital (VC) and private equity (PE) investment markets in the IT sector experienced a decline compared to the previous year, with a notable recovery in the latter part of the year. The IPO market showed a rebound, while the M&A market also saw a recovery trend. ChinaVenture provided comprehensive analysis and insights into these investment activities, highlighting the performance of different subsectors, investment stages, regions, and investor types.

Key Findings

VC Investments

• Total Deals & Amount: 75 VC deals were disclosed, totaling USD 409 million, representing a 27.2% drop in deal number and a 42.6% decline in investment amount from 2008. The average deal size was USD 5.46 million, down 21.1%.
• Subsectors: Software was the most favored subsector, with 26 deals totaling USD 123 million, accounting for 34.7% of the total deal number and 30.0% of the total investment amount. IT Service and Semiconductor Chips ranked second and third.
• Investment Rounds: Series A-rounds dominated the market, accounting for 42 deals totaling USD 152 million (56.0% of the total deal number and 37.1% of the total amount). Series D-rounds had the highest average investment amount of USD 11.19 million.
• Investment Stages: Development-stage startups secured the most deals (36, 48.0% of total), while expansion-stage startups attracted the largest investment amount (USD 224 million, 55.0% of total). Early-stage and profitability-stage deals saw significant declines.
• Regional Activity: First-tier cities and eastern coastal areas were the most active. Beijing led with 31 deals totaling USD 196 million, up 15.1% and 13.2% year on year.
• Investor Activity: Chinese VC investors outperformed foreign ones in both deal number (47 vs. 20) and investment amount (USD 173 million vs. USD 162 million). Chinese institutions accounted for 62.7% of total deals and 42.1% of total investment amount.

PE Investments

• Total Deals & Amount: Five PE deals were disclosed, totaling USD 112 million, marking a 16.7% decline in deal number and a 71.2% drop in investment amount from the previous year. The average investment amount was USD 22.32 million, down 65.5%.
• Subsectors: Software had the most deals (2, 40.0% of total), while IT Service had the highest investment amount (USD 42 million, 38.0% of total).
• Investment Types: All five disclosed PE deals were from Growth Capital, up 66.7% in deal number but down 13.3% in investment amount.
• Investment Stages: Expansion-stage startups had the most deals (3, 60.0% of total), while profitability-stage startups had the largest investment amount (USD 60.23 million, 54.0% of total). Early and development-stage deals were not disclosed.
• Regional Activity: PE investments were scattered, with Beijing leading with two deals totaling USD 49.66 million, down 10.0% and 36.4% in terms of share in total.

IPOs

• Total IPOs & Amount: 16 IT enterprises launched IPOs in 2009, raising USD 846 million, marking a two-year high. Of these, 11 were backed by VC/PE, raising USD 640 million and generating an average book ROI of 4.61 times.
• Bourse Distribution: 12 enterprises were listed on domestic markets (GEM and Main Board of Shenzhen Stock Exchange), raising USD 629 million. Four were listed overseas, mainly on NASDAQ, raising USD 217 million.
• Subsector Distribution: IT Service had the most IPOs (4, USD 297 million), followed by Software and Hardware.

M&As

• Total M&A Transactions: 44 M&As were recorded, with 26 having disclosed amounts totaling USD 438 million. The market showed a recovery trend, with a 15.4% decline in deal number, 63.9% in amount, and 52.8% in average amount compared to 2008.
• Cross-border vs. Domestic: 15 cross-border M&As (USD 21.27 million average) and 29 domestic M&As (USD 15.79 million average) were recorded. No VC/PE-backed M&As were disclosed.

Major Viewpoints

• The VC market in IT was still weak, with a decline in both deal numbers and investment amounts.
• Despite the downturn, the market showed signs of recovery, especially in Q3/09.
• Chinese VC investors outperformed foreign counterparts in both deal numbers and investment amounts.
• The PE market was more volatile, with a sharp decline in early 2009 but some recovery later in the year.
• The IPO market showed a strong rebound in Q4/09, with a significant portion of fundraising coming from VC/PE-backed companies.
• M&A activity was limited, with no VC/PE-backed transactions reported.

Key Information

• VC Deal Numbers & Amounts: 75 deals, USD 409 million.
• PE Deal Numbers & Amounts: 5 deals, USD 112 million.
• IPOs: 16 companies, USD 846 million in total.
• VC/PE-backed IPOs: 11 companies, USD 640 million.
• M&A Transactions: 44 deals, USD 438 million.
• Top Subsectors:
  • VC: Software (USD 123 million), IT Service (USD 61.06 million), Semiconductor Chips (USD 45.65 million).
  • PE: Software (USD 9.36 million), IT Service (USD 42 million).
• Top Regions:
  • VC: Beijing (USD 196 million), Shanghai (USD 73.69 million), Shenzhen (USD 48.5 million).
  • PE: Beijing (USD 49.66 million).

Conclusion

2009 was a challenging year for the IT VC/PE investment market, marked by a decline in activity and investment amounts. However, the market showed signs of recovery, particularly in the latter part of the year. The IPO market rebounded significantly, and while M&A activity remained low, there was a gradual increase. Chinese investors increasingly dominated the market, indicating a growing influence in the IT sector.