Venture capital jumps 55% on mainland

Venture capital jumps 55% on mainland

VENTURE capital investments on the Chinese mainland jumped 55 percent last year, reaching a three-year high, an industry report said yesterday.

Venture capital valued at US$1.89 billion poured into the mainland last year in 214 deals, said a report jointly released by Dow Jones VentureOne and Ernst & Young.

It marked a 37 percent increase in the number of deals year on year.

Information technology remained the dominant industry for investment.

By industry, 131 IT companies were financed last year, receiving US$920.7 million, up 34 percent from 2005 in terms of capital.

Meanwhile, there was significant growth in areas such as healthcare, retail companies and clean technologies.

The business, consumer and retail industry category posted 57 deals and US$613.3 million last year, 20 more deals and 40 percent more capital than in 2005.

The energy segment climbed with 10 deals, up from one in 2005, and US$212.6 million invested, up from US$80 million a year earlier.

“The continuous growth of the Chinese economy and the middle class in China – as well as the increased focus on innovation – are the primary drivers for the significant investment growth in these sectors,” said Bob Partridge, China leader of Ernst & Young’s Venture Capital Advisory Group.

Stephen Harmston, director of global research for VentureOne, said: “Another sign of the strength is that investors are helping their companies to ramp up quickly in the global marketplace by funding them with increasingly larger sums.”

The median deal size in China is now US$5.9 million, up 59 percent from US$3.7 million in 2005.

In addition, the level of second round investment activity illustrates the growing maturity of the venture capital market in China, Harmston said.

“Investors are helping companies to move past the start-up stage into the next phase of development,” he said.