More than meets the eye
Early indications suggest that the next 12 months will be a bumper year for the private equity industry. It seems that every fund we talk to has a number of liquidity events in the making, while many notable names are looking to be back in the fundraising market with substantial offerings. Certainly some LPs are still feeling a bit hung over from their pre-GFC investments; most are now preparing to put more money to work. Most of these funds are in the growth capital and buyout markets however, with only a sprinkling in the venture space.
Top-tier brand name funds usually have no problem filling their war chests with early stage capital. But smaller local funds (especially those raising their first fund) face an uphill battle raising money from institutional investors. But, should they? It's clear that venture capital firms are now returning money to investors as the various stock markets gain buoyancy and investors follow the trend. AVCJ Research estimates that about $3.5 billion worth of VC funds was raised in 2010, up from the previous year but less than half the amount raised in 2008.
More capital means more investments and deal totals are also creeping up slowly to just over $15.6 billion of capital invested. The figure represents a five billion jump over 2009. However, there is plenty of work needed to be done before it comes near the 2007/ 2008 total of $26 billion. Chinese companies continue to be harvest the most money, although the average valuations of Indian companies are substantially higher.
Of course, a quickening investment pace doesn't really translate to more LP interest. But healthy returns will bring a smile to any investors' face. As Dan Schwartz reports on page 13 in this magazine, the venture industry in the US is returning to the time when venture-backed companies queued up to go public.
The same is happening here in Asia, where VC portfolio companies are raising record amounts on Asian bourses. A prime example is Xinjiang Goldwind Science & Technology, which garnered investments from IFC, Vantage Point China and Fortis, raising over a HK$1 billion (US$128) by listing on the Hong Kong Stock Exchange. In addition, Asian companies, especially Chinese entities, are still taking advantage of North America's fascination with anything from the East. Look at Youku's raising $200 million plus while seeing its stock price double its IPO level.
This all adds up to more of a future for venture in Asia than the statistics suggest. Investors need to see beyond the numbers and understand the Asian entrepreneurial mentality and the role venture capital should play.
More on Fundraising
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.