Vol. 58 October 31st , 2016

Latest Report

VC Investment Maintains Steady in Q3’16; RMB100B-sized State-owned

VC Fund Gives Impetus to Innovation and Development of Central

Enterprises

By Emily Shen , Zero2IPO Research Center

According to data released by Zero2IPO Research Center, a famous VC/PE research institution in

Greater China, in Q3’16, China’s VC market witnessed reduction in fundraising, but significant

increase in fundraising amount, as evidenced by the emergence of multiple super-large funds,

indicating that large-amount fundraising has become a trend. According to the statistics of PEdata.cn,

in Q3’16, Chinese and foreign VC firms raised a total of 94 funds investable in Chinese mainland, and

62 of them with the fundraising amount disclosed raised a total of US$20.67B, which averaged up to

US$333.38M, indicating significant year-on-year and quarter-on-quarter increases in average

fundraising scale. Moreover, in Q3’16, a total of 698investment deals were closed, which was basically

equal to the previous quarter. Among them, 631 investment deals disclosed the amount, which

totaledUS$3.16B, down 47.2% year on year and averaged US$5M. In Q3’16, altogether 354VC exit

deals were completed, with New Third Board as a major exit channel. There were 231 exits through

listings on New Third Board, accounting for 65.3%.Exits through IPO and equity transfer ranked

second and third, with 71 and 19deals respectively. Due to increases in the number of Chinese

enterprises going for domestic and overseas IPOs and the growth rate of IPO exits, the number of IPO

exits in Q3’16 was even basically equal to that in H1’16.

Large-Amount Fundraising Becomes A Trend; Number of Fundraising Drops

InQ3’16, Chinese and foreign VC institutions raised a total of 94 new funds investable in Chinese

mainland, down 49.2% year on year and 11.3% quarter and quarter. And62 of them with the

fundraising amount disclosed raised a total of US$20.67B,up 72.7% year on year and even 227.2%

quarter on quarter. In Q3’16, the average fundraising amount was US$333.38M, an increase of 376.2%

year on year and 248.3%quarter on quarter. In 2016, although fundraising has become less active, there

were still plenty of big-sized funds, as evidenced by the seven funds valuated at above US$299.4M.

China State-owned Venture Capital Fund recorded the largest fundraising amount, with the target scale

of US$29.94B and the first phrase scale of US$14.97B. It was jointly set up by China Reform Holdings

2

Co., Ltd., Postal Savings Bank of China Co., Ltd., China Construction Bank Co., Ltd., Shenzhen

Investment Holdings Co., Ltd. and other firms, and managed by its fund management company. The

fund specializes in the investment in technological innovation, industrial upgrading projects and

promotion of cooperation among enterprises directly under the central government.

Figure 1 Comparison of Fundraising of Funds of VC Firms in China in Q1'13-Q3'16

In Q3’16, RMB funds were still active, as evidenced by the fact that a total of 584 new funds were

raised, occupying about 90.4% of the total number of newly raised funds. Meanwhile, only nine

foreign-currency funds were raised, accounting for merely 9.6%. In Q3’16,China’s VC market

registered a total fundraising amount of US$20.67B, includingUS$19.27B of RMB funds, accounting

for 93.2% of the total, and US$1.4B of foreign-currency funds, taking up 6.8%. In terms of the average

fundraising scale, RMB funds surpassed their foreign-currency peers for the first time with their

average fundraising amount up to US$350.45M.

3

Figure 2 Comparison of Newly Raised VC Funds in Q3'16 by Currency (By No.of Funds)

Figure 3 Comparison of Newly Raised VC Funds in Q3'16 byCurrency (By Amt. Raised, US$M)

4

No. of VC Investments Almost Equal to Previous Quarter; Early-stage Investments Account for

Nearly 60%

In Q3’16, there were a total of 698 VC investment deals, a decrease of 34% year on year. Among

them,631 deals disclosed their investment amount, i.e. US$3.16B, down 12.5% year on year. The

average investment scale of the deals disclosed amounted to US$5M. After the boom in 2015, China's

VC market has become more stable and investors tended to be more prudent in 2016. In Q3’16,

Chinese VC investments almost were equal to that in the previous quarter and mainly took in

seed-stage and early-stage companies. The number of investment deals in seed-stage and early-stage

companies was 383,occupying 54.9% of the total.

Figure 4 Comparison of VC Investments in China’s Market in Q1'13-Q3'16

5

Figure 5 Comparison of VC Investments in China’s Market in Q3'16 by Investment Stage

Internet, IT and Bio/Healthcare Rank Top Three; Beijing, Shanghai & Shenzhen Take up Nearly

60.0% of Total Fundraising

In Q3’16, 698 VC investments took place in 22 grade 1 industries in China. In terms of the number of

investment deals, Internet continued to rank first with 187 deals; IT came next with 102 deals; And

bio/healthcare ranked third with totally 74investments. With respect to investment amount, Internet

ranked atop with US$924.7M,closely followed by bio/healthcare and IT with US$489.97M and

US$402.84M.

6

Figure 6 Industry Breakdown of VC Investments in China’s Market in Q3'16(By No. of Deals)

7

Figure 7 Industry Breakdown of VC Investments in China’s Market in Q3'16(By Investment Amt., US$M)

Geographically speaking, Beijing, Shanghai, Shenzhen and other tier 1 cities remained the major

investment destinations. In Q3’16, Beijing reported 215 investments, involving the investment amount

of US$1.04B; Shanghai registered 106 investments, with the investment amount of US$620.96M

involved; and Shenzhen had 76 deals and investment amount of US$288.17M. The total number of

investments in Beijing, Shanghai and Shenzhen occupied 56.9% of the total in Q3’16, and their total

investment amount 61.9%. Meanwhile, they were closely followed by Jiangsu, Guangdong (excl.

Shenzhen) and Zhejiang.

8

Figure 8 Geographical Distribution of VC Investments in China’s Market in Q3'16(By No. of Deals)

9

Figure 9 Geographical Distribution of VC Investments in China’s Market in Q3'16(By Investment Amt., US$M)

New Third Board Remains as the Most Important Exit Mode; IPO Exits Increase A Bit

In Q3’16, there were a total of 354 domestic and foreign VC exits, declining by 23% year on year. In

Q3’16,231 exits were completed through listings on New Third Board, which accounted for up to

65.3%. Listing on New Third Board has been recognized as a major exit option. In Q3’16, 71 IPO exits

were completed, which took up 20.1% of the quarterly total; Exits through equity transfer took the third

place, involving a total of 19 deals and accounting for 5.4%. In Q3’16, the number of exits dived year

on year, because of the nosedive in the number of exits via listing on New Third Board. This also

demonstrates that Chinese and foreign VC institutions took more rational attitude towards New Third

Board.

10

Figure 10 Comparison of VC Exits in China’s Market in Q1'13-Q3'16

Figure 11 Comparison of VC Exits in China’s Market in Q3'16 by Exit Option(By No. of Deals)

11

BPEA News

The third training about ‘the belt &road’: investment in German held successfully

On October 19th

, 2016, the third training about ‘the belt & road’ : investment in German was held

successfully in Beijing, organized by CAPE, BPEA and Jones Day. The theme of this training is

investment in German. Mr. Li Weiqun, Secretary-General of CAPE, expressed our warm welcome to

foreign legal consultants from Jones Day. >Read more

The 59th BPEA Monthly Training held successfully

On October 21st, 2016, the 59th BPEA Monthly Training held successfully in our meeting room. This

month’s training focused on the topic of ＂The Interpretation of New Tax Policy for Equity

Incentive＂. Mr. Leo Chiu partner of department of Transaction Tax of EY and Mr. Brooke Xia, Senior

Manager of department of People Advisory Services of EY, shared their experiences with the

attendees. >Read more

The fourth training about ‘the belt &road’: M&A in Italy and Spain held successfully

On October 26th

, 2016, the fourth training about ‘the belt & road’ : M&A in Italy and Spain was held

successfully in Beijing, organized by CAPE, BPEA, Cathay global legal service network and Cathay

Associates. The theme of this training is investment and acquisitions in Italy and Spain. Mr. Rupert

VÁRNAI, CEO of Cathay global legal service network, gave a welcome speech. >Read more

12

BPEA Upcoming Events

The 8th Global PE Beijing Forum

The Transition Period of Private Equity Industry:

Confidence and Opportunity

Date: December 10th, 2016 (Saturday)

Location: Shangri-la Hotel, Beijing

Hosted by：

China Association of Private Equity (CAPE)

Beijing Municipal Bureau of Financial Work

The People’s Government of Haidian District, Beijing Municipal

Beijing Private Equity Association (BPEA)

Agenda

December 3rd

, 2016

09:00-09:05 Opening Speech

09:05-10:45

Keynote Speech by Chairman of China Association of

Private Equity, Mr. Shao Bingren

Opening Speech by Senior official from Beijing

Municipal Government

Opening Speech by Senior official from Beijing Municipal Bureau of

Financial Work

Opening Speech by Senior official from The People’s Government of

Haidian District, Beijing Municipal

Keynote speech by Prestigious Economist

Keynote speech by senior official from SSF/CSRC

13

10:45-10:50 Rotating Ceremony of BPEA 8th

Interim Chairman

10:50-11:05 Tea Break

11:05-12:05

Keynote Speech by Oversea Government Senior official

Keynote Speech by Chairman of Oversea PE/VC

Associations

Keynote Speech by BPEA 8th

Interim Chairman

12:05-12:15 Release the 4

th Edition of ‘The Guiding Principle

for China PE and VC Industry’

12:15-14:00 Lunch

14:00-15:10

Panel 1:VC and Innovation Technology

Panel 2:M&A Investment

15:10-16:20

Panel 3:FoF Investment

Panel 4:Exit Panel

16:20-16:35 Tea Break

16:35-17:45 Panel 5:TMT Investment

Panel 6:Cultural Industry Investment

17:45 Ending

18:00-20:00 2016 China PE/VC Award Ceremony

More information, please contact Jenny chen, 010-88087202,

kemeng.chen@chinacape.org

联系方式：电 话：8610-88087061 88087229 传 真：8610-88086229邮 箱：bpea@bpea.net.cn 网 址：www.bpea.net.cn地 址：北京市西城区金融大街甲 9 号金融街中心南楼 902邮 编：100033

Contact us: Tel:86-10-88087061 88087229 Fax:86-10-88086229Email:bpea@bpea.net.cn Website:www.bpea.net.cnRoom No.902, South Building of Financial Center, 9A Financial Street, Xicheng District, Beijing, P.R.China Zip:100033

协会主要成员：

单祥双 创始人、董事长兼总裁中科招商集团Shan Xiangshuang Founder,Chairman and President of CSC GROUP

BPEA main members include:

吴尚志 董事长鼎晖投资Wu Shangzhi, Chairman of CDHInvestments

邵秉仁 原国家经济体制改革委员会副主任Former Deputy Director of theState Economic System ReformCommission

方风雷 董事长厚朴投资Fang Fenglei, Chairman ofHOPU Investment

刘乐飞 首席执行官 中信产业基金投资管理有限公司Liu Lefei,CEO of CITIC Private Equity Funds Management Co., Ltd.

赵令欢 弘毅投资总裁联想控股有限公司常务副总裁John Zhao, CEO of Hony Capital, Executive Vice President of Legend Holdings

沈南鹏 创始及执行合伙人红杉资本中国基金Neil Shen, Founding Managing Partner of Sequoia Capital China

衣锡群 常务副会长中国股权投资基金协会Yi Xiqun, Executive Vice Chairman of CAPE

李爱庆 董事长北京科桥投资Li Aiqing, Chairman of Beijing Co-Bridge Investment Advisor Ltd.

张懿宸 首席执行官中信资本Zhang Yichen, CEO of CITIC Capital

靳海涛 董事长 深圳创投Jin Haitao, Chairman of Shenzhen Capital Group Co.Ltd

于剑鸣 管理合伙人 新天域资本Yu Jianming, Managing Partner of New Horizon

刘晖 合伙人 太盟产业基金Allan Liu, Partner of PAG Capital

殷荣彦 董事长北京股权投资发展管理有限公司Yin Rongyan, Chairman of Board, Beijing Equity Investment Development Management Company

田溯宁 创始合伙人、董事长宽带资本Edward Suning Tian, Founder and Chairman of CBC Capital

阎焱 首席合伙人 赛富亚洲投资基金Andrew Y.Yan, Managing Partenr of SAIF Partners

熊焰 董事长、总裁北京金融资产交易所

杨向东 董事总经理凯雷投资集团凯雷亚洲基金联席主管

唐葵 总裁、合伙人方源资本

Xiong Yan,Chairman and President of China Beijing Financial Assets Exchange

Xiang-Dong (X.D.)Yang, Managing Director and Co-Headof Carlyle Asia Partners ("CAP")

Frank Tang, CEO and Managing Partnerof FountainVest Partners

何小锋 教授、博导北京大学经济学院金融系Professor and Doctoral Advisorof the Finance Department of theEconomics School at Peking University

熊晓鸽 创始合伙人IDG 资本Hugo Shong , Founding General Partner of IDG Capital Partners

北京股权投资基金协会成立于2008 年 6 月 20 日

协会服务中心 :为会员及相关从业人士提供 : 专业咨询、辅

导，基金注册、备案，商务会议、培训等服务。

协会致力于：

促进行业环境建设 建立自律监管机制

维护会员合法权益 研究行业发展动向

培养相关专业人员 组织内外交流合作

BPEA committed to:Promote the issuance of preferential policies for PE industryBuild the self-regulatory discipline of PE industrySafeguard the legitimate rights of membersResearch development trends of PE industryTrain relevant professional individualsCooperate with domestic and overseas institutions

BPEA Service Center:BPEA provides services for members and relevant industrial individuals: professional consultation and guidance, fund registration and recording, business conference,training and so on.

Beijing Private Equity Association (BPEA) was established on Jun 20, 2008