According to management firm KPMG’s Venture Pulse Q3 2018. Q3 2018 venture capital totalled US$317 million across 27 deals, exceeding every other quarter in the dataset excepting Q2 2014.
KPMG lists key Australian deals as Judo Capital, Airwallex, Culture Amp, Flare, Gilmour Space Technologies, Simple, AgriWebb and GO1, and says that software dominated investor interest, with five out of the top eight deals being business productivity, financial or educational software.
"Most importantly, that rate of growth, despite sliding volume in terms of total deals closed, indicates the ongoing health of the Australian venture ecosystem," Amanda Price, KPMG Australia’s head of High Growth Ventures, said.
But, despite the slowdown, the KPMG report shows that Asia dominated the top global deals in the quarter, with eight of the top 10 deals, including three US$1 billion+ megadeals: Grab (US$2 billion), Bitmain (US$1 billion), and Oyo Rooms (US$1 billion).
The 10 largest deals in Asia totalled US$8.2 billion, and KPMG noted that the strong quarter led to Asia reaching an annual high of VC investment with a quarter still remaining.
"Such a rate only could have occurred if the venture landscape was transformed far beyond what traditional notions of VC entailed, and driven in large part by China’s entrance of non-traditional players such as state-affiliated investment corporations and corporate venture arms, that transformation has definitely concluded in the region and roared full steam ahead ever since," Price said.
Globally, KPMG reports that venture capital investment remained strong in Q3 with US$52 billion invested across 3045 deals. Overall, US$183.3 billion invested globally by the end of Q3 has already surpassed the 2017 total of US$171 billion.
“Globally, the amount of venture capital invested has already surpassed 2017’s annual total – driven in large part by ever-increasing deal sizes,” said Arik Speier, head of Technology, KPMG Somekh Chaikin in Israel.
“However, this quarter we continued to see a decline in the volume of seed and angel investments, particularly in Europe and Asia."
The KPMG report also reveals:
Trends to watch for in Asia
Heading into Q4, AI is likely to remain a very strong area of VC investment in Asia given its widespread applicability across sectors. Many investors are particularly interested in AI for financial services, such as solutions aimed at helping identify and avoid fraud and money laundering. Autonomous driving will likely also remain a big priority in Asia moving forward. In Hong Kong, the IPO market is expected to remain strong, as evidenced by Bitmain’s recent filing. There will also likely be an increase in Chinese companies looking at IPO exits on foreign exchanges.
Will China rival Silicon Valley?
China’s current statistics place it as the most prolific and lucrative venture ecosystem by far in the APAC region. While Singapore accounted for the largest deal in Asia this quarter with a US$2 billion raise by Grab14, China continued to be a key driver for VC investment and market activity in the region. But it’s not yet possible to conclude whether China’s significant fostering of innovation and flood of funds is truly laying the groundwork for an epicentre of regional or even global venture.
"As far as can be seen, there is no appreciable reason for mega-deals largely driven by Chinese investment firms to cease within that nation, nor for multinational investment firms to cease investing in start-ups from India to Australia," Price said.