Data & Intelligence

China Data Insight (Q1 2017)

In the first quarter of 2017, fund managers invested US$4.4 billion in China, a seven-quarter high. In stark contrast with the muted investment activity in 2016, much of the Q1 2017 surge can be attributed to intensifying competition among portfolio companies, specifically in the consumer services sector, which accounted for 69% of total capital invested. Reminiscent of the car-sharing wars of 2014, a new wave of companies has recently raised substantial capital in the battle for market share, the largest being the US$1.1 billion club deal for on-demand service platform Koubei. Additionally, competing bikesharing companies Ofo and Mobike raised US$450 million and US$215 million, respectively. As competition in new verticals such as bike-sharing continues to increase, investors should proceed with caution: the number of now-defunct, GP-backed companies from the previous wave of competition suggests that the odds of backing the eventual industry winner are low. In contrast to the surge of investments, fund managers raised only US$1.3 billion in Q1 2017, a 44% decrease year-on-year. However, a handful of mid-sized funds closed in April, assuring a stronger second quarter to come.

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