Asia leads global VC arena with US$129b in deals for 2018: Preqin

Singapore

ASIA surpassed North America in Venture Capital (VC) deals in 2018, recording US$129 billion worth of deals for the year, as opposed to North America's US$113 billion, a report by alternative assets data provider Preqin showed.

Globally, VC deals hit a record of US$274 billion across 14,889 transactions in 2018, according to the 2019 Preqin Global Private Equity and Venture Capital Report. The average deal size was about US$25 million.

Singapore chalked up 227 VC deals, with an aggregate deal value of US$4.9 billion.

"Supported by the headline growth in the Asian industry, 2018 was a standout year for the venture capital industry worldwide, with deal value increasing in each region in comparison to 2017," Preqin noted in the report.

By region, Asia saw the most activity with 5,780 deals, followed by 5,510 in North America, 2,781 in Europe worth US$22 billion and 818 across South America, Africa, the Middle East and Australasia valued at US$9.1 billion in total.

Separately, VC firms also enjoyed a "bumper year" in exits, with US$165 billion realised from 1,094 exits. The average VC exit was valued at US$431 million, or nearly 20 times the average VC deal for the year. In comparison, the average exit size was US$197 million in 2017.

Average exit value was driven up by the rising number of exits completed for US$1 billion or more. The largest VC-backed exit for 2018 was Walmart's purchase of a 77 per cent stake in Indian e-commerce startup Flipkart for US$16 billion in May.

"While the annual number of exits has continued its decline from 2014, the increase in exit value is a positive sign for managers seeking commitments for new vehicles, as there is more capital to be re-invested," Preqin said in the report.

About 70 per cent of VC-backed exits were trade sales in 2018. Some 17 per cent of the exits were initial public offerings, above the average figure of 15 per cent for the prior 10-year period.

There were 13.6 times as many VC deals compared to exits in 2018. This ratio stood at 10.7 times in 2017. Meanwhile, the aggregate value of VC deals slipped to 1.7 times the aggregate value of exits in 2018, down from 2.2 times in 2017.

Growth in the Asian VC landscape last year was dominated by China, with 4,281 venture capital deals completed in Greater China, adding up to US$107 billion, or 83 per cent of Asia's total deal value. This was supported by blockbuster deals involving Chinese unicorns. For instance, e-payments provider Ant Financial raised US$14 billion in June 2018 from investors including Singapore's GIC and Temasek Holdings and private equity giant Warburg Pincus.

The increased activity in Asia may also be due to more comprehensive data gathering by Preqin. For instance, fundraising and Asset Under Management (AUM) figures for Asia-focused funds reported by Preqin have increased significantly since end-2016.

"This can partly be attributed to Preqin's additional research efforts to strengthen our coverage of the Chinese private equity and venture capital market with the opening of our Guangzhou office in October 2017," the firm stated in the report.

By sector, Internet firms accounted for 29 per cent of global VC deal value in 2018, with 3,297 deals worth US$80 billion. Software firms accounted for 15 per cent of total deal value, worth US$39 billion. The telecoms and healthcare sectors accounted for 20 per cent and 16 per cent of total deal value, respectively.

For 2019, both investors and fund managers are concerned about valuations and many expect a market correction, according to a survey among market players by Preqin. However, the majority of private equity and VC fund managers are still planning to deploy more capital this year than in 2018. "Competitive conditions notwithstanding, it is likely that more capital will flow into venture capital in 2019," the report concluded.