Is that hissing the sound of a bubble about to burst? Venture
capital investment in China soared more than 52% in 2006 to reach
$2.18bn and a record 362 deals were struck, a rise of more than 20% of
the previous year.
According to ChinaVenture,
which has just published a report on China's VC industry, the average
investment per deal was just over $6m, an increase of 25% on the $4.8m
average deal size in 2005, and the technology, media and telecoms (TMT)
sector got the lion's share of VC investment — more than 63%.
More than 85% of total VC investment came from foreign firms, with less than 7% sourced locally and 5.5% from joint ventures.
Of the $4.4bn of newly raised VC funds in 2006, local firms took a
greater share — almost 22% — but the average financing for a local
fund was just $87m compared to $125m for the funds run by laowai.
There were 99 exit deals in 2006, with IPOs and equity transfers
being the two main exit channels. IPOs on a foreign exchange accounted
for 33 exits, while local IPOs are gradually growing in importance and
contributed 10 deals in 2006.
As ChinaVenture's data show, foreigners are firmly in the driving
seat of China's fledgling VC industry, and this influence looks set to
grow with today's annnouncement that is set up a China office — see
today's earlier story.