"It's clear that venture capital investors are still eager to put money into this emerging marketplace and, in many areas, they're actually accelerating the pace of their investments," said Jessica Canning, Global Research Director for Dow Jones VentureSource. "Already this year, the Business and Financial Services, Consumer Goods and Consumer Services industries - three areas closely tied to emerging economies due to their focus on retail, manufacturing, media and advertising - have set annual investment records."
Specifically, Dow Jones VentureSource found that China's Consumer Services industry accounted for $267 million in investment with nine deals completed in the third quarter, up 57% from the $170 million put into 15 deals during the same period last year. Overall, through the first nine months of 2008, the industry has seen a record $731 million invested in 37 deals. Within Consumer Services, $143 million was invested in four deals for retail companies in the third quarter.
China's Business & Financial Services industry saw 13 deals completed in the third quarter, garnering $254 million, a 38% increase over the $184 million put into the same number of deals during the same period last year. The industry as a whole has seen a record $712 million invested in 44 deals thus far in 2008 with the "business support services" sector producing the vast majority of deal activity and investment. In just the third quarter of 2008, the sector accounted for 10 deals and $238 million in investment.
Elsewhere, Dow Jones VentureSource found that the Information Technology (IT) industry is China saw investment decline 17% to $230 million in the most recent quarter from $277 million in the third quarter of 2007 while the industry's deal count dropped to 18 from 29. The IT sector to see the largest drop was the Web-heavy "information services" sector, which saw investment decline 32% to $128 million from $188 million as the deal count fell to eight from 17. Even so, the "information services" sector has seen a record $1.1 billion in investment to date in 2008.
"Larger deals drove investment in the third quarter as the median size of a venture deal in China remained at $10 million, which is the highest on record and the most out of any region we track, including the U.S.," said Ms. Canning. "In the third quarter, we also saw the vast majority of deals and capital investments in China go to companies that are already generating revenues or are profitable."
While the majority of capital, some $640 million, went to companies that raised second or later-stage rounds, smaller early-stage deals were more prevalent. Seed and first rounds made up 63% of all venture rounds in China during the third quarter, while second rounds made up 22% of the deal count and later-stage rounds accounted for 15%.
