China's VC fundraising, deals, exits fall

Investors committed almost $1bn less to China’s venture capital firms during the first nine months of 2013, while transaction value and exits also declined.

Venture capital firms in China appear to be struggling with the same drop off in LP sentiment as private equity funds are. 

During the first three quarters of 2013, venture capital funds raised $1.62 billion from LPs, a 36 percent decline from the $2.52 billion raised during the same period last year, according to data from Dow Jones VentureSource.

The number of funds also decreased to 19 from 33. 

However, some firms have had success. Sequoia Capital’s China Venture IV Fund was the largest venture fund in the third quarter this year, raising $350 million for its first close and at the same time exceeding its target amount of $325 million. It accounted for 43 percent of the total amount raised in Q3, according to the data.

However, the fund was clearly a step down from the firm's third vehicle, which raised $1 billion to invest in Chinese technology companies, PEI reported earlier.

Deal value has also declined compared to last year, Dow Jones data shows.

IPO freeze stalling VC exits, too

Venture capital firms in China invested $1.74 billion in companies during the first nine months of the year, a 47 percent decline from the $3.34 billion invested during the same period last year.

Moreover, during Q4 2012, venture capital firms invested $1.6 billion across deals in China – close to $1 billion more than in any single quarter this year. 

The most active venture firms in China during Q3 2013 in terms of deals were IDG Capital Partners, which made six investments, and Shenzhen Capital Group, GGV Capital and Morningside Group, who each made five investments. 

Exits, too, have dropped significantly in China. There were only 18 exits during the first three quarters of 2013 by China’s venture capital funds, compared to 52 during the same period in 2012. This was also a huge drop from the 93 exits made during the first nine months of 2011, the data showed.