"Even when we remove the $430 million deal from our statistics, the China region still recorded its highest level of venture capital investment since the third quarter of 2003," said Jessica Canning, Global Research Director for Dow Jones VentureSource.
"In all, some $968 million, or 71% of all capital invested in China in the second quarter, went to companies in the 'information services' and 'media, content and information' sectors." Ms. Canning added. "By comparison, in the U.S., only 12% of venture capital investment went into these areas during the second quarter."
In total, the report found that China's Information Technology (IT) industry accounted for the most deals and investment in the second quarter with 28 deals garnering $899 million. This is a 184% increase over the $316 million invested in 34 IT deals in the second quarter last year. In particular, China's "information services" sector, which is where Oak Pacific Interactive falls, saw 17 deals completed in the quarter for $805 million, a five-fold increase over the $161 million invested in 15 deals in the space during the second quarter of 2007.
Elsewhere, Dow Jones VentureSource found that the Consumer Services industry, which includes the "media, content and information" sector, saw 17 deals garner a record $246 million in the quarter, up 34% from $183 million invested in eight deals last year. The Business & Financial Services industry saw 13 deals close in the quarter, garnering $99 million, 25% less than the $132 million invested into 17 similar deals over the same period in 2007.
Health Care still remains a small investment industry in China, as the second quarter saw only three biopharmaceutical deals close, accounting for $13 million. This is 28% below the $18 million invested in five health care deals in the second quarter of 2007.
"Larger deals drove investment in the second quarter as the median deal size in China reached $10 million, the highest total we've seen to date," said Ms. Canning. "Nearly 98% of all capital invested during the quarter went to companies that are already profitable or generating revenues. This is due in large part to the significant amounts of capital China-focused venture funds have raised over the past 18 months. VCs have to invest larger and larger amounts and they're looking to back later-stage, established companies which are seen as lower in risk than early-stage companies."
The majority of capital invested in the second quarter went to developed and later-stage companies, according to the report. Even so,
smaller, early-stage deals were more prevalent, as seed and first rounds made up 52% of all venture rounds in the quarter, which is down from 65% in the second quarter of 2007. Second rounds made up 20% of the deal count, up slightly from 19%, and later stage rounds accounted for 21%, up from 7%.
