MoneyTree™ China TMT Report -- Q3/Q4 2014

The exponential growth of the Telecommunications, Media and Technology (TMT) industry in China reached new levels in 2014. Driven by a combination of factors such as new technologies, new applications and emerging market demand, a growing number of start-ups captured the public’s attention with their highly innovative products and services, demonstrating enormous growth potential and profitability.

This potential was reflected in PE/VC investments in the TMT sector. In H1 2014 alone, investments in TMT companies exceeded the full-year total of 2013. With a further 8% pickup in investment growth in H2 (relative to H1), total deal value in full-year 2014 hit US$15.9 billion, with total investment growing 118% from the US$7.3 billion in 2013; the total number of investments in 2014 increased to 1,241, a growth of 47% compared to 2013. In 2014, both the investment amount and volume in TMT companies reached a two-year high.

TMT investment in 2014 was characterized by increased merger and acquisition (M&A) activity. More and more TMT investors chose M&A as the preferred exit strategy, resulting in the number of M&As in Q4 outstripping IPOs. And while deal volume was up, individual deal value was on the low side. This report provides an in-depth overall analysis of PE/VC investments and exits by deal volume, deal value, quarter, stage of development and region in the Technology, Internet and Telecommunications sectors as well as a deep dive on the extremely active mobile segment.

For all the details, read or download the pdf of the full report, or check out the highlights below.

Preview some charts inside this report

Click on a figure below to see a full-size version

Comparison of overall PE/VC investments and TMT investments -- 2014

Comparison of PE/VC investments and TMT investments 2012-2014 (Deal value)
Deal value comparison in TMT sectors -- 2014

Deal value comparison in TMT sectors 2012-2014
Deal value in the Technology sector 2012-2014

Deal value in the Technology sector 2012-2014

In Q3 2014, the number of investments in the TMT industry hit a two-year high mark. The trend continued into Q4, and the largest ever TMT investment (exceeding US$1 billion) occurred in December. In Q3, investment was mostly concentrated in e-commerce and video sites, while mobile Internet took over the first place in Q4.

In H2 overall, first-round investments accounted for over 60% of the total, indicating investors’ bias towards early-stage projects. Of the companies receiving first-round investments, Internet enterprises remained the most popular options among investors, ranking first in terms of both volume and value and well ahead of the other three segments.

Beijing has established itself as the heartland of China’s TMT industry, generating half of the total volume of TMT investment and claiming 61% of the national aggregate investment. The city boasts advantages in human resources, funding and policy for start-ups in the TMT industry. A virtuous cycle has taken shape. Its leading position will not be in danger from any other Chinese city in the foreseeable future.

In Q3 2014, IPOs accounted for 50% of TMT investor exits; the figure dropped to 39% in Q4. With the dropping percentage among exits, IPO is no longer the most favorable choice for TMT enterprises. By contrast, in Q4 M&As replaced IPOs as the most popular exit channel and accounting for 61% of the total. This is attributable to the extremely lengthy IPO process as well as the influence of behind-the-scene investors.