Corporate venture capital deal share in Asia close to overtaking North America

Singapore

GLOBAL corporate venture capital (CVC) deal activity reached a historic high in 2018, with Asia close to overtaking North America's deal share, according to a report by CB Insights.

Asia attracted 38 per cent of all CVC deals in 2018, up from 31 per cent in 2017, while North America's deal share receded 7 percentage points to an all-time low of 41 per cent. This came on the back of global CVC funding surging 47 per cent from 2017 to US$53 billion, across 2,740 deals.

The report only included investments by CVC funds, which are defined as separately demarcated corporate investment vehicles. Corporates making strategic investments directly off their balance sheet were not included.

In Asia, a large portion of CVC investments were taken up by Chinese startups - funding grew 51 per cent to US$10.8 billion in 2018, growing from 228 to 351 deals.

CVC interest in Japanese startups gained ground, with deals to Japanese companies more than doubling to 317 and funding growing 56 per cent to US$1.4 billion. The largest deal in 2018 for a Japanese startup was a US$63 million Series A round raised by wealth management platform Folio.

Global investments in artificial intelligence (AI) reached new highs, driven by more opportunities in Asia. On the whole, AI deals with CVC participation grew 27 per cent to 291, and funding with CVC participation was up 19 per cent to US$5.1 billion.

Deal share to AI startups in Asia grew 13 percentage points to 42 per cent, representing a second straight year of double-digit deal share growth. The largest AI deal of 2018 was a US$620 million deal to Chinese facial recognition startup SenseTime.

Asia also drove the growth of digital health investments in 2018. On the whole, CVC-backed deals to digital health startups broke from a recent plateau, rising 39 per cent to 192 deals in 2018. But total CVC funding dropped slightly, from US$3.4 billion in 2017 to US$3.2 billion in 2018. Asia accounted for 38 per cent of deals, up 7 percentage points.

Globally, the largest CVC-backed deal was a US$2 billion round to trucking logistics company Manbang Group backed by capitalG, a venture capital fund financed by Google's parent firm Alphabet Inc.

The largest CVC-backed deal in Q4 was a US$900 million Series H to Singapore-based Grab, backed by Yamaha Motor Ventures.

Starting a CVC firm is now in vogue, the report said, noting that there were 35 per cent more new firms compared to 2017, including Maersk Growth and Porsche Ventures. The number of CVC firms investing for the first time has climbed steadily over the years, from 64 in 2013 to 264 in 2018.

That said, corporates were more involved than CVC funds. Investment from corporates reached 3,820 deals in 2018, 33 per cent higher than in 2017. The number of deals that saw only corporate backing was 39 per cent higher than the total number of deals that were CVC-backed only, and both CVC and corporate-backed.