China is changing into a superpower within the tech business. In line with Straits Occasions, China is the one place on the earth the place it takes lower than six years for a startup to turn into a unicorn — it takes seven years within the U.S., eight years within the U.Ok. and 11 years in Germany. Regardless of geopolitical tensions and up to date amendments in CFIUS, it’s laborious to disregard China.
After I joined Runa Capital virtually a yr in the past, my process was to assist our portfolio firms enter the Chinese language market, discover the proper companions and lift funding from Chinese language buyers. And virtually on each name with our startups, colleagues from Runa or different world VCs, I heard: Is it a good suggestion to boost from a Chinese language VC? Is it OK to co-invest with Chinese language buyers? I used to be shocked to study that there’s little analysis answering such questions, as there’s a lack of sufficient data in English about Chinese language investments.
Entry to the Chinese language market appears to be an apparent purpose to ask Chinese language funds aboard, however solely about 20% of Western startups with Chinese language capital have operations in China.
In order a Mandarin-speaking specialist, I made a decision to fill this hole by conducting a examine based mostly on Chinese language VC database ITjuzi (the Chinese language model of Crunchbase) with the assistance of our highly effective information science assets developed by Danil Okhlopkov.
Under, I’ll attempt to reply the next questions utilizing statistics and a case-based strategy:
- How a lot do Chinese language funds make investments overseas?
- What’s the present pattern?
- Can Chinese language buyers convey any worth to Western startups?
- Who’re essentially the most energetic Chinese language buyers overseas?
- Through which areas can Chinese language funds convey essentially the most worth?
- What worth can Chinese language buyers convey?
- When is it higher to ask a Chinese language investor?
Chinese language buyers are fascinated with Western startups
After learning information from ITjuzi, we estimated that Chinese language funds invested round $250 billion in 2020 (3 times larger than the determine reported in Crunchbase). This determine places Chinese language VC investments solely 30% decrease than investments by U.S. funds, however 3 times that of U.Ok. funds and 12.5 instances greater than German funds.
Nonetheless, solely 15% of investments in 2020 and 17% of investments within the first half of 2021 had been in firms outdoors China, considerably decrease than in 2019. This seems to be as a result of throughout COVID, China’s economic system recovered a lot sooner than different nations’, so many Chinese language buyers most popular to redirect their capital flows to the home market.
Then again, there’s nice potential for abroad investments to rebound as quickly because the borders reopen and the worldwide economic system begins to recuperate.
We are able to additionally see that Chinese language buyers are eyeing European startups favorably, which is expounded to U.S.-China geopolitical tensions in addition to the truth that the European VC market is changing into mature.