The Chinese finance and investment sectors have seen booming increases since 2014. Though there was a slow down in 2016, called the “Winter of Capital,” investment in the Chinese market grew quickly in 2017. According to VC SaaS, a platform that collects the public data of financing and investment cases, there were 10,279 individual investment cases in 2017 in China. Almost half of these investments were targeted at early-stage startups as well as pre-Series A and Series A+ financing rounds.
Investment and financing cases mostly occur in large tech hubs including Beijing, Shanghai, Guangzhou and Shenzhen.
AllTechAsia has picked more than 200 investment cases that reveal the hottest insights into China’s startup and tech industry in 2017. These featured startups have mainly secured funding for Series A or later financing rounds. The most popular business models focus on enterprise services, the sharing economy, finance, AI, new retail, and the transportation industries.
Besides, most of the startups that secured financing in 2017 were founded in 2014 or later. According to the data from previous years, it is the prime time for enterprises to launch financing plans five years after their establishment.
Here are the “top 10” startups that reveal the investment trends in the Chinese investment market. These are Didi Chuxing, ofo, United Imaging, Face++, SenseTime, Hellobike, Dasouche, Tujia, Kingsoft Cloud, and Yiguo.
The sharing economy was the winning industry, as these 10 startups received among the highest amounts of financing and were some of the hottest companies. Ride-hailing giant Didi Chuxing secured the largest financing round, as it received USD 4 billion. Bike-sharing company ofo ranked second, securing USD 700 million for financing. Hellobike, ofo’s rival, grabbed its latest financing found of USD 500M for Series D1 and Series D2. All of these startups specialize in transportation services in the sharing economy.
Let’s take a closer look at the top 10:
Top 10 startups
China’s ride-hailing giant Didi Chuxing raises USD 4B in financing
Didi Chuxing is China’s top ride-hailing startup, and it has spread its services around the world. After purchasing Uber’s Chinese operations last year, Didi has been working on expanding its business globally. In March, Didi opened a research and development lab in Silicon Valley to focus on autonomous driving technologies and AI-oriented security. The lab now has about 100 staff members.
Bike-sharing giant ofo receives USD 700 million for Series E led by Alibaba
ofo is a bike-sharing startup that launched in 2015 in Beijing. It provides users with bicycle rental services in China and some other countries. The company claims that it has 6.5 million bicycles available in 150 cities. ofo is targeting an expansion and is aiming to place 20 million rental bicycles in 20 countries by the end of this year. In addition, it will install smart locks to its bicycles to form an IoT system to aid in its further development.
Medical imaging company United Imaging receives USD 510M for Series A
United Imaging is a medical imaging company dedicated to the development, manufacturing, and sales of a full range of large and high-end medical imaging equipment. It also provides a full range of healthcare solutions to relevant industries, such as diagnostic imaging equipment, radiotherapy equipment, medical service training, and healthcare IT. United Imaging has submitted a total of more than 1,000 patent applications, of which more than half are for inventions. The company has independently researched and developed its first batch of 18 products and successfully released them into the market.
Facial recognition firm Face++ receives USD 460M for Series C
Face++ is a facial recognition firm that offers artificial intelligence products and industry solutions to enterprise customers based on its deep learning algorithm, Brain++ engine, and IOT technology. Its enterprise customers are mainly from five industries: financial security, city security, mobile phone AR, business networking, and industrial robotics. Though AI technologies require massive amounts of data to learn and form algorithms, Face++ benefits from training its algorithms on China’s vast pool of cheap data by cooperating with public security departments and other partners.
AI technical service provider SenseTime receives USD 410 million for Series B
SenseTime is an AI technical service provider that supplies its partners with artificial intelligence applications and big data analysis services based on deep learning technology. It mainly develops AI technology in facial, text, and vehicle and image recognition. These technologies can also be applied to several industries including finance, mobile Internet, as well as security and surveillance. Some partners using its AI technologies include ChinaMobile, NVIDIA and Xiaomi.
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Bike-sharing startup Hellobike receives USD 152M in Series D2 funding
During the second half of 2017, Hellobike continued to attract investor and user favor due to its excellent user experience and operational efficiency. The recent financing of USD 152 million is the second completed funding round since Hellobike merged with rival Youon. The first round finished early this month and was provided by Alibaba’s financial subsidiary, Ant Financial.
Car trading platform Dasouche receives USD 335M for Series E led by Alibaba
Dasouche is a car trading service provider that operates an O2O (online to offline) car trading platform based on Dasouche’s offline resources in the car trading industry and Alibaba-backed online resources. It aims to improve car trading efficiency via the Internet and big data technology. Currently, Dasouche’s car trading businesses are connected to Tmall and Alipay.
China’s Airbnb equivalent, Tujia, receives USD 300M in Series E led by Ctrip
Tujia is China’s equivalent to the property-rental site Airbnb, and it provides customers with multiple high-quality, personalized travel accommodation experiences all over the world. It also offers landlords high incomes and guarantees spare housing-sharing. Tujia’s services cover family travel, business travel, leisure vacations, parties, and transitional accommodation. Users can enjoy 24/7 booking services online through WeChat and other platforms. Moreover, it provides tenants with up to RMB 10 million in pre-payment protection funds to ensure that consumers feel at ease every time.
Cloud service provider Kingsoft Cloud receives USD 300M for Series D
Kingsoft Cloud is a cloud service provider that mainly provides online cloud storage and distribution services for businesses and developers. Its commercial version is based on fast disk Jinshan cloud services architecture and business-oriented cloud storage products. Its cloud services and products support large-scale concurrent user access to ensure the security of user data.
Fresh food e-commerce platform Yiguo receives USD 300M for financing
Yiguo is a fresh food e-commerce platform that provides customers with a range of fresh food in most of China’s first and second-tier cities. It manages each step of the food procurement process, from cold-chain quality control and order processing to food distribution.
The venture capital market, after its explosive growth in 2015 and 2016, was basically saturated in 2017, which led to decreases in both overall operation quality and fundraising. Though the rate of funding growth slowed a bit during the year, 850 venture capital firms injected trillions of RMB into the market.
When reviewing the past year’s most active investors, it is clear that ZhenFund was the most active venture capital firm in 2017, as it participated in 135 investment cases. Besides, Chinese tech giants Tencent and Alibaba also showed their leading investment positions, as Tencent contributed to 124 cases and Alibaba accounted for 65. Furthermore, JD invested in 48 companies, and JD put money into 47 startups.
Below are the “Top 10” investors that contributed capital and energy to support a prosperous investment market in China.
Top 10 investors
ZhenFund
ZhenFund is a Beijing-based seed fund founded by Bob Xu and Victor Wang, who previously founded New Oriental. ZhenFund was established in 2011 in collaboration with Sequoia Capital China with the aim of promoting innovation among Chinese youth.
ZhenFund’s investment preferences target the IOT, mobile internet, gaming, O2O, and education sectors.
We have featured several of the hundred-plus investment cases in which ZhenFund participated in 2017, including UrWork and FlowerPlus.
IDG Capital
IDG Capital has focused on Chinese technology investments since the early 1990s. IDG has previously invested in Baidu, Xiaomi, and Meitu. It prefers to invest in advanced technologies and business models serving vast consumers, including internet-related technologies, healthcare, and travel services.
It invested in AI company SenseTime’s USD 410 M Series B financing round in 2017, which was the largest single financing round in China’s AI industry.
Yunfeng Capital
Established in early 2010 and named after one of its co-founders, Mr. Jack Ma (Yun), Yunfeng is a private equity firm that was started by a group of successful entrepreneurs and influential industry leaders. It currently manages a number of USD funds and RMB funds. It focuses on the Internet, technology, healthcare, media & entertainment, financial services, logistics and consumer products sectors. Yunfeng Capital is headquartered in Shanghai, with offices in Hong Kong, Beijing, Hangzhou, and other cities across China.
It was active in the educational and consumer fields in 2017, as it led online short video platform Ergeng’s USD 22M Series B financing round.
Matrix Partners China
Matrix Partners China is committed to building long-term relationships with outstanding entrepreneurs and helping them build significant, industry-leading companies. Affiliated with Matrix Partners, a premier U.S. venture capital firm, Matrix Partners China was founded in 2008 to focus exclusively on investments in China.
It participated in many companies’ financing rounds, including those for workforce management solutions provider GaiaWorks, English teaching platform VIPKID, and others.
Banyan Capital
Banyan Capital manages four USD funds and three RMB funds, with a total of around RMB 11 billion (USD 1.6 billion) under management. It mainly focuses on early and growth stage investments in the TMT sector.
Investors in Banyan Capital include world-class sovereign wealth funds, university endowment funds, family foundations, pension funds, and funds of funds, as well as successful entrepreneurs, including the founders and management personnel of Tencent, Alibaba, Baidu, JD, Xiaomi, Focus Media and VIPShop. These investors provide Banyan Capital with valuable industry resources, entrepreneurial experience, and global perspectives.
Banyan Capital invested frequently this year, as it led Qianbaocard’s Series B financing round with USD 150 million.
Qiming Venture Partners
Qiming has backed over 210 young, fast-growing and innovative companies across China in the internet, consumer, healthcare, information technology, and clean technology sectors. Over 30 of them are already listed on NYSE, NASDAQ, HKEx, Gretai Securities Market, Shanghai Stock Exchange, and Shenzhen Stock Exchange or have completed mergers. Some companies that Qiming has backed include Xiaomi, Dianping, iTutorGroup, Mogujie, Meitu, Bilibili, and Tigermed.
Qiming Venture Partners invested USD 18M in the Series B financing round of medical image diagnosis company Infervision.
Hillhouse Capital Group
Hillhouse Capital Group is an investment management firm founded by Lei Zhang in 2005. Before founding Hillhouse, Mr. Zhang worked with Yale University’s endowment and a global emerging market fund covering South Africa, Southeast Asia, and China. Hillhouse makes long-term investments, employing a fundamental, bottom-up approach. Hillhouse focuses on consumer, TMT, industrial, and healthcare sectors and invests in companies across all equity stages. Hillhouse manages capital for institutional clients such as university endowments, sovereign wealth funds, pensions, and family foundations.
Hillhouse invested USD 45 million in fitness O2O platform Lefit.
Legend Capital
Legend Capital is an early and expansion-stage investment capital firm. Legend Capital now manages several USD and RMB funds totaling around RMB 35 billion. It focuses on innovation and growth enterprises with operations in China and on enterprises related to China.
By 2016, Legend Capital had invested in over 300 companies, of which over 50 are listed on domestic or overseas capital markets. Around 40 achieved exits through M&A (mergers and acquisitions).
Legend Capital facilitated the vending machine startup Vingoojuice’s unmanned retail businesses, contributing USD 60 million in the company’s Series B financing round.
Capital Today
Capital Today manages dedicated Chinese funds amounting to USD 1.5 billion. Founded by Kathy Xu in 2005, Capital Today mainly provides growth capital to small and medium-sized Chinese companies and helps them build sustainable businesses and brands in China.
The company has primarily focused on the consumer, retail, and internet sectors. Its portfolio includes JD.com, Youku Tudou.com, Ganji.com, Dianping.com, Three Squirrels online snack food brand, and others.
Capital today participated in car trading group Chehaoduo’s Series B+ financing round to support its plans to improve its car leasing business. Additionally, Capital Today invested in house sharing platform Xiaozhu’s Series E to enhance the security of house-sharing and build a sustainable platform.
Northern Light Venture Capital
Northern Light Venture Capital is a China-focused venture capital firm targeting early-stage opportunities in innovation and disruptive technology. It mainly engages in the TMT, advanced technology, and health care sectors. The company mainly supports startups with capital and relevant resources to enable startups to grow quickly.
Northern Light Venture Capital participated in speech and language therapy startup Orient Speech Therapy’s Series B, which totaled USD 25 million.
Top trends
As startups enter rapid growth periods due to support from venture capital firms, some of them achieve leading positions in specific industries. When this happens, investors are usually willing to provide more funding. The amount of capital investment in startups is increasing, especially for those in later stages with leading advantages in specific industries, such as Didi, ofo and Hellobike. Meanwhile, these startups earn higher valuations due to their outsized influence in their industries.
Also, more and more government-backed venture capitalists are entering the market to make sure industry development is guided by the state. This state involvement enables the startups to pay close attention to R&D of advanced technology for commercial utilization, especially in the fields of energy, manufacturing, Internet security, AI, finance, and infrastructure.
Based on the data and insights we collected in 2017, we can expect that more big money from investors and governments will find its way into several industries, including enterprise services, healthcare, and manufacturing due to their unique positions as vertical industries. Besides, many startups that secured financing will continue to hold their dominant position in the future, and they are more likely to win the trust of investors and secure funding for further development. This means it will be more difficult for new participants to compete with these existing leaders. New players should pay more attention to making a difference and competing for support in this fierce investment market.
(Top photo from 699pic.com)
