US$3.2b raised in venture deals

PUBLISHED : Wednesday, 03 August, 2011, 12:00am
UPDATED : Wednesday, 03 August, 2011, 12:00am


Mainland companies raised a total of US$3.2 billion from venture-capital investments in the first half of the year, fuelled by interest in social media firms and other internet companies in the world's second-biggest economy.

That amount was generated from about 145 deals from January to June, which was in line with deal activity in the same period last year, according to venture-capital industry tracker Dow Jones VentureSource.

It estimated that the median size of venture-capital deals in the second quarter rose 50 per cent year on year to reach US$10.5 million, while the median size of deals in the first quarter climbed 20 per cent to hit a record US$15 million.

In a report, VentureSource said 69 deals made in the consumer-services category raised US$1.7 billion in the first half.

Investment in that industry was driven by interest in the internet-heavy consumer information segment, which includes social media, entertainment and shopping companies. These companies raised US$942 million through 44 deals in the first half of the year, more than triple the amount raised in the 23 deals in the same period a year ago, VentureSource said.

Leading online group-buying-services operator, for example, brought in US$110 million in its round of fund-raising in April. GSR Ventures, an early-stage venture-capital firm focused on China, was joined in the fund-raising by Milestone Capital, Norwest Venture Partners and Tenaya Capital.

Describing the investment rush in the domestic internet sector at an industry event earlier this year, Sohu. com chairman and chief executive Charles Zhang Chaoyang said: 'The global capital firms are rushing to China now because they see 1.3 billion people and think: all these people are going to need the internet.'

VentureSource also found that large corporations played a bigger role in investing in venture-capital-backed Chinese companies in the first half, compared with the same period last year. It is a trend that picked up in the fourth quarter of last year, when five such deals raised about US$38 million.

In the first half, corporations invested a record US$584 million through six transactions with venture-backed mainland firms, VentureSource said.

More than half of that capital was invested last month in Qunar, a Beijing-based price-comparison search engine for air and rail tickets, hotels, and tour packages.

Baidu, the mainland's leading internet search-services operator, invested US$306 million to obtain a controlling stake in Qunar.

'Travel has long been one of the top categories on Baidu, and the number of travellers in China has been growing very rapidly, so this is a market of obvious strategic importance to us,' Jennifer Li Xinzhe, the chief financial officer at Baidu, said last month.

According to a January report by the state-run China Internet Network Information Centre, searches were the most popular internet application among 81.9 per cent of China's 457 million internet users.