Venture Capital Deals in Asia Lead the Way

An increase in venture capital activity in Asia topped a record in the second quarter of 2017, with a total of $47 billion (£35 billion) in deals announced. The record sums spent are representative of what financial experts and investors such as Henner Diekmann have seen in 2017: almost half of global venture capital deal value is in Asia. Mr. Diekmann is a partner at Diekmann Associates, a law firm that offers guidance and advice on company setups, corporate structures and contracts in Southern Africa.

Since 2013, Asia's rise in venture capital dealmaking has been on a consistent rise, with the majority of the deals occurring in Greater China. According to a report by Preqin Private Equity & Venture Capital, transactions in China accounted for $28 billion (£21 billion) of the total deal value, with India coming second ($6 billion/£4.5 billion). Within the southeast region of the continent, a large proportion of deals happened in Singapore, while the largest proportion of deal value happened in Indonesia.

Over the years, Asia has seen a steady rise in the number and value of venture capitals deals. Activity in Greater China has largely spurred this growth, as some companies have become prominent entities on the same level as firms backed by venture capital in the United States. This growth speaks to the rise of several economies in the region, which provides an avenue for investment opportunities by venture capital firms.

As much as the dealmaking is good news for Asia's economic growth, the excitement has not been matched in other areas of the venture capital industry, notably the exit and fundraising sectors. Slow fundraising activity means less capital goes to venture capital managers for acquisitions, while slow movement in exits means these managers are unable to dissociate from their holdings. For Asia's VC industry to thrive, it's going to require robust activity on all fronts.

An Inside Look

Approximately 200 funds are raising capital for investment opportunities in the region, with the China State-Owned Venture Investment Fund among them. The fund has a target of about $29 billion (£21.97 billion), and if successful, could become the largest venture capital fund ever. Activity in Greater China is beginning to rival that of Silicon Valley in the US and could enable the country to become the centre of venture capital activity. The Chinese government's encouragement of entrepreneurship by providing financing is helping reinforce this message.

In early 2017, 183 funds with a focus on Asia had a target of raising $56 billion (£42 billion) in venture capital, nearly triple the amount funds had aimed for at the beginning of 2016.

China's Role

China's prominent role in the growth of venture capital dealmaking in Asia is not by accident. In 2016, investments from venture capital firms reached more than $31 billion (£23 billion) as investors eyed an increasing number of innovative ideas. Venture capitalists located in Beijing invested more than half of the total amount, with the popular sectors being artificial intelligence, big data, and robotics. There was also a continued interest in healthcare, fintech (financial technology) and education.

This strong performance in venture capital investment was driven by a number of big-deals, including Alibaba's affiliate Ant Financial funding round that reached $4.5 billion (£3.39 billion) in April 2016. Additionally, provincial governments got in on the action, with many provinces starting to invest in companies. The Hubei provincial government, for example, armed itself with $81 billion (£60 billion) to invest in venture capital companies such as CBC Capital and Sequoia Capital LLP.

Across the country, local governments are keen to invest as they seek to modernise the economy and spur the development of sectors such as biotechnology, fintech and online solutions, to reduce the dependence on heavy industries for jobs creation and growth.

News UK Opens Incubator Lab for Start-Ups

News UK is a British newspaper publisher that is a subsidiary of the American media company News Corp. It publishes various newspapers in the UK, including The Sunday Times, The Times and The Sun. Between the late 1980s and 1995, News UK owned the first national newspaper printed in colour. In the years since, the company has strived to maintain a steady presence with readers and boost its revenues.

In 2017, News UK decided to venture into the start-up market by launching an accelerator programme aimed at helping start-ups improve their revenue streams. In a first for the newspaper publisher, the programme will be undertaken in partnership with Unruly, a video advertising firm, and Fluxx, a product innovation company. Unruly will host the programme, while Flux will run and staff it.

The venture is open to businesses from any sector that can use News UK's data, expertise and journalism to come up with new products and revenue streams for the publisher. The focus for the selected start-ups will be to work with News UK to generate more value for the start-up, the publisher and its audience. Furthermore, News UK will provide the mentoring and insights needed to get the start-ups working. When the month-long incubator programme ends, the publisher has yet to reveal concrete plans to invest or acquire the start-ups, instead choosing to support them and become champions of innovation.

Start-ups selected for the programme will spend four weeks at Unruly working on their proposition. To motivate them, they will receive £5,000 in cash, mentorship from other entrepreneurs, the use of News UK's image and written content, and product testing opportunities with the publisher's vast audience.

Incubator programmes have been around for a few decades, with their presence helping boost growth and innovation in the UK. Many investment experts such as Henner Diekmann – a partner at Diekmann Associates – appreciate their importance in speeding up the development of small businesses and guiding them to success. Entrepreneurs stand to benefit a lot by choosing to sign up for incubator programmes.

A Focus On Development

Incubators play an essential role in offering businesses the guidance and resources needed in their infancy. Many provide tangible benefits such as office space, legal advice and accounting guidance to start-ups. Having this infrastructure in place allows the start-up team to focus on the important matters – the core business of developing products and services.

Access To Business Networks

Many incubator programmes are run by a network of business partners, something the participating start-ups can use to their advantage. Having access to a reliable business network is beneficial in various ways. From a business perspective, it allows the entrepreneurs to cultivate meaningful relationships that can come in handy in the future. From a public relations angle, this network can help a small start-up gain the credibility and traction needed to position itself in the business market.

Worthy Support

Many of the mentors who guide start-ups through incubator programmes have learned through experience, making them the best sources of knowledge and guidance. These mentors are better placed to help young companies define their strategy and vision.

In the UK, it is estimated there are more than 300 business incubator programmes that have collectively supported thousands of businesses. Many of these ventures have been early-stage businesses that have reaped the benefits of access to funding, mentorship, business networks and infrastructure to achieve success, both domestically and internationally.

For entrepreneurs looking to establish their ventures, considering an incubator programme is increasingly becoming a more attractive option.