China VC deals catching up to U.S.

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China VC deals catching up to U.S.

Venture capitalists poured a record $37 billion into China start-ups last year, more than double the previous year’s tally, as the country emerges as a legitimate challenger to the U.S. for leadership of the technology industry.

The surge came as venture firms invested in 1,555 China deals, according to London consultancy Preqin. The pace of deals slowed in the fourth quarter, with the value of investments dropping about 40 percent amid a shakeout in Internet services.

China’s venture boom created some of the world’s most valuable start-ups, including smartphone manufacturer Xiaomi, ride-hailing service Didi Kuaidi and peer-to-peer lender Lu.com. The doubling of venture deals last year came after a tripling in deal value the year before, suggesting there may be more breakout companies on the way.

“The annual shift from $4.5 billion to $15 billion to $37 billion demonstrates the immense appetite that the VC industry in China is currently experiencing,” Felice Egidio, head of venture capital for Preqin, said.

Venture funding globally rose 45 percent to a record $135.8 billion last year, according to Preqin. Still, exits declined for the first time since the financial crisis in 2008 with fewer initial public offerings or sales of startups. The decline in the number of U.S. and European VC deals was offset by a rise in Asia, especially China, Egidio said.

China is narrowing the gap with the United States, the birthplace of modern venture capital. The value of U.S. deals hit $68 billion last year, up from $56 billion, according to Preqin.

“In the next five years, there will be more innovation, more invention, more entrepreneurship happening in China, happening in Beijing than in Silicon Valley,” Travis Kalanick, founder of Uber, the world’s most valuable start-up, said last week at a Beijing conference. Bloomberg



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