DESPITE the impact of Covid-19, venture capital (VC) investment globally remained steady in Q1’20, primarily due to the strong pipeline of deals in many jurisdictions around the world.
The majority of sectors in China saw a downward trend in VC investment during the quarter, however, mega-sized deals were still closed, with six out of the top ten deals in Asia this quarter recorded from China. Edtech, life sciences and biotech, and logistics companies continued to attract attention, likely due to their relevance to the current situation, according to KPMG’s Venture Pulse Q1’2020 analysis released April 23.
After a resurgence in VC investment in Q4’19, Asia saw VC investment drop to a twelve-quarter low, driven by a slowdown in deal activity in China, where the fight against Covid-19 began much earlier than in other jurisdictions.
Both VC investment and deal volume in China dropped from US$18.7 billion across 1,021 deals in Q4’19 to US$8.9 billion across 481 deals in Q1’20. Despite a sharp decline in the number of deals, Asia saw a number of megarounds during Q1’20. China-based live video streaming company Kuaishou and Indonesia-based ridesharing company Gojek were the largest deals of the quarter, each raised US$3 billion.
In China, Education platform Yuanfudao raised US$1 billion, suggesting a rapid increase in interest in and use of education platforms due to Covid-19. In addition to Yuanfudao’s funding round, edtech company YunXueTang raised US$100 million during the quarter. Several life sciences companies also raised rounds in Q1’20, including Transcenta Holding (US$100 million), CANbridge Life Sciences (US$98 million), and CF PharmTech (US$89 million).
While VC investment in Q2’20 is likely to remain subdued given the ongoing challenges posed by Covid-19 globally, it is expected that a number of areas could start to see renewed investment. For example, AI has long been a hot area of investment in Asia; it could potentially see momentum rebuild quickly given its applicability for monitoring and tracking population health and disease spread.
Philip Ng, partner, head of technology, KPMG China, says: “China’s economy saw some signs of recovering at the end of the first quarter, and the central government is currently undertaking significant stimulus efforts. Given that China was the first to respond to the Covid-19 crisis, they will be the one to watch heading into Q2 and Q3’20 as it could be a bellwether for how other economies around the world could recover once the Covid-19 crisis has lessened.”