US$3.25B VC Investment Touches New High

Fundraising and Exit are Active

BEIJING, Jan. 22 /Xinhua-PRNewswire/ -- The year 2007 has not only been a
Golden Year for Venture Capital (VC) investment, but also a Fruitful Year for
VC funds.
Zero2IPO Research Center -- the research wing of Zero2IPO -- recently
released new findings in its China Venture Capital Annual Report 2007. The
report says that the total investment amount touched US$3.25B recording an
82.7% year-on-year increase. The amount raised and the number of new funds
created new records. The 100 VC-backed IPOs indicate that exit was quite
active during 2007.
Various 2007 annual and quarterly surveys and reports provide the data and
conclusions given in this document. Zero2IPO began conducting Chinese VC
surveys and creating reports in 2001 based on real time data collected from
300 active Chinese and overseas VCs in China Mainland.
Capital raised by overseas & Chinese VCs creates new record

Figure 1: Newly Raised Funds & New Funds from 2002 to 2007
(Please click the link at the bottom of the release)

The overseas and Chinese VC firms raised US$5.48B for 58 funds during
2007.
Compared with 2006, the annual capital raised and newly raised funds rose by
38.1% and 48.7%. In March 2007, SAIF raised US$1.10B for SAIF Partners III.
Chinese VCs raised 32 funds that included trust and limited partnership
funds. Established in accordance with the "New Trust Policy" and the modified
"Law of the People's Republic of China on Partnership Enterprises," these new
funds have been attracting huge private capital amounts and enriching the
management modes of VC funds.
Overseas VCs began following the trends of establishing RMB-denominated
funds to adapt to the regulatory changes brought in by the issue of Provisions
for Overseas Investors to Merge and Acquire Domestic Enterprises (M&A Rules)
and seek for exits on domestic capital market.
Chinese VC market witnesses highest ever investment amount

Figure 2: Total Investment Amount between 2001 and 2007
(Please click the link at the bottom of the release)

The 2007 total investment amount was US$3.25B -- 82.7% higher when
compared with 2006. The year witnessed 440 investment deals -- a 35.8%
year-on-year increase. Year 2006 recorded 324 deals.
The Chinese VC market is all set for high-speed growth after a temporary
downward trend in 2005. Compared with 2005, the total investment increased by
176.8% with the investment deals almost doubling.
The drastic improvement of the investment environment and the prosperity
of the capital market, led to the gradual steady growth of the Chinese VC
market. The regulation Provisions for Overseas Investors to Merge and Acquire
Domestic Enterprises (M&A Rules) issued in 2006 seemed not very effective on
Chinese VC investments.
IT investments fall, but Traditional and Services investments gain
Broad IT took the lead by gaining 202 deals and US$1.38B investment.
However, the IT investment density fell to 42.6%, and IT deals to 45.9%. The
past years before 2007 recorded above 50%.
Unlike in the IT investment situations that led to downward trends, the
venture capitalists favored the Traditional and Services sectors in 2007.
Machinery Manufacturing, Media, Education & Training, and Entertainment became
hot investment areas. VCs closed deals in less-favored sectors such as
Agriculture, Restaurant & Food, and Food & Beverage during 2007. The VC
investments are diversifying and non-TMT sectors are gaining favor from VCs.
Figure 3: Industrial Distribution by Deal No.
(Please click the link at the bottom of the release)

Figure 4: Industrial Distribution by Amount Invested (US$M)
(Please click the link at the bottom of the release)

Beijing & Shanghai attract above 50% investment

Figure 5: Geographical Distribution by Deal No. and Amount Invested
(Please click the link at the bottom of the release)

The geographical distribution of Chinese VC investment represents a
three-tier regional pattern. Beijing and Shanghai constitute the first tier
region. Jiangsu, Shenzhen, Guangdong and Zhejiang comprise the second tier
region. The other provinces and cities belong to third tier regions.
Similar to 2006, Beijing and Shanghai received the lion's share of VC
investments during 2007. In all, 228 deals in Beijing and Shanghai secured
US$1.95B representing 51.8% of 2007 total deals and 60.0% of the total
investment.
Jiangsu, Shenzhen, Guangdong and Zhejiang occupy second place in terms of
the VC density in China. Each region recorded above 10 deals and over
US$100.00M investment. The VC investment recorded by 17 other regions
constitutes 13.6% of deals and 14.5% of investment.
The VC investment allocation in the second and third tier regions is
varying. For instance, Liaoning garnered more investment than Jiangsu during
2006. The share of Beijing and Shanghai slightly shrank. More VC investments
shifted to other regions, especially in Central and Western China, backed by
national Chinese industrial policies.
Overseas VCs play lead
Similar to 2006, overseas VCs still dominated the investments. Chinese VCs
could not match them in terms of deals and investment amount. Overseas VCs
contributed 79.0% of the investment, while Chinese counterparts contributed
16.9%.
Figure 6: Investor Distribution by Deal No.
(Please click the link at the bottom of the release)

Figure 7: Investor Distribution by Amt Invested (US$M)
(Please click the link at the bottom of the release)

Early stage investment shrinks, but expansion stage investment gains

Figure 8: Investment Stage Distribution by Deal No. and Amount Invested
(Please click the link at the bottom of the release)

The investment stage distribution during 2007 had similar patterns to that
of 2006. About 184 early stage deals accounted for 41.8% of the 2007 total.
The early stage deals comprised 51.5% of total deals during 2006. The
expansion stage deals garnered US$1.59B comprising 49.0% of the 2007 total
investment and increasing 16.7% year-on-year. Later stages witnessed fewer
deals and smaller amounts invested, but higher average amounts invested.
Active exit market & shining Domestic Capital Market

Figure 9: Exit Distribution by Industry
(Please click the link at the bottom of the release)

Figure 10: Exit Distribution by Option
(Please click the link at the bottom of the release)

One hundred and forty-two exit transactions took place during 2007, i.e.
42 more when compared with 2006. The Broad IT industry with 58 exits
outstripped the Traditional industry that had only 47 events. Of the 142
exits,
100 are IPO events -- 70 more than compared with 2006. This shows the
prosperous capital market bringing attractive investment returns for VCs.
The Shenzhen SME Board recorded 42 IPOs. One was on Shanghai Stock
Exchange. In all, they comprise 43% of the 2007 total.
During 2007, 53 VC-backed enterprises including 28 listed on Shenzhen SME
Board or Shanghai Stock Exchange went public. The domestic capital market has
turned out to be the main exit platform for VCs.
For more information please click:
http://www.zero2ipo.com.hk/china_this_week/detail.asp?id=5753

About Zero2IPO Group
Founded in 1999, Zero2IPO is a leading integrated service provider in the
China venture capital and private equity industry. Over the past seven years,
Zero2IPO has become an unbeatable dealflow and networking source in China.
Zero2IPO's mission is to be the preferred service provider to businesses
in the venture capital and private equity industry by offering an unparalleled
knowledge and expertise to their clients and partners. To ensure this,
Zero2IPO provides a broad and deep array of services enabling entrepreneurs
and investors to reach the next level of success.
Financial Advisory Services: Financial Advisory Services (FAS) represents
China startups seeking venture capital or private equity funding. Through its
extensive network of investors worldwide, FAS channels over US$200M to
startups each year. These startups are distributed across a broad spectrum of
industries, including biotechnology, health care services, telecommunications,
media, education, Internet and e-commerce.
Financial Information Services: Financial Information Services (FIS)
releases annual, quarterly, and customized research reports covering China
venture capital, private equity, M&A, and IPOs. Also known as the Zero2IPO
Research Center, FIS is viewed as the most trustworthy information source in
the industry. FIS reports are used by investors, LPs, investment banks,
auditing firms, law firms and entrepreneurs worldwide. Each year, FIS
publishes the China venture capital ranking results which are widely accepted
and quoted among these professionals.
Media & Network Services: Media & Network Services (MNS) strives to
provide a networking platform for entrepreneurs and investors. Since 2001, MNS
has organized more than twenty China Venture Capital & Private Equity Forums
and over sixty Z-club activities. Each year, over 5000 participants attend
these conferences and club events held in Beijing, Shanghai, Tokyo, London,
and Silicon Valley. Together, the China Venture Capital & Private Equity
Forums and Z-Club events constitute the largest networking platform for
investors and entrepreneurs in China.
Zero2IPO Capital: Formed in late 2006, Zero2IPO Capital is a venture
capital arm of the Group targeted at high-potential, high-growth China
enterprises. Leveraging Zero2IPO's vast network in China, Zero2IPO Capital
does not compete with other venture funds, but rather pursues a two-prong
investment strategy, i.e. to co-invest with active venture capital firms in
growth and late stage companies and to lead or co-lead in early stage startups
in China.
Zero2IPO Group is headquartered in Beijing with offices in Shanghai, Hong
Kong, and Silicon Valley.
About Zero2IPO Research Center
Founded in November 2001, Zero2IPO Research Center provides the cream of
business research reports and custom researches for professionals in the
Greater China Region. Our research ranges from Venture Capital, Private
Equity,
IPO, M&A to TMT industries. Zero2IPO Research Center stands tall as the most
prestigious research institute in Chinese VC and PE spheres.
Note about Citation
For any quotation, please note it is quoted from "Zero2IPO -- China
VentureDatabase" and send two copies of your newspaper or email link to:
Aileen Huang
Suite 1203, Tower A, Eagle Plaza, No. 26,
Xiaoyun Road, Chaoyang District, Beijing, 100016, China
Tel: +86-10-8458-0476 x8037
Email: aileenhuang@zero2ipo.com.cn

SOURCE Zero2IPO Research Center

Aileen Huang, +86-10-8458-0476 x8037, or aileenhuang@zero2ipo.com.cn