Fundraising in Asia has undergone a transformational shift over the last few years, driven mainly by factors related to macroeconomics, technological advancements, and emerging investor preferences.
It is therefore quintessential that such knowledge of trends and how they emerge in real life enables investment bankers to swim ahead of others in the same pool.
1. Trend of Growth in Venture Capital and Private Equity
Asia, especially China and India have turned out to be the new liquidation hotspots for venture capitalists and private equity funds who are looking to liquidate huge amounts of capital in all such fast-growing sectors – technology, healthcare, and e-commerce. In 2021, Sequoia Capital China raised more than $9 billion across four funds and that is a record total it secured. The mega fundraise can be looked at as a testament to the firm’s confidence that China will continue digital and technology growth despite all the regulatory issues associated with it. More importantly, India’s Byju’s, a unicorn in edtech, managed to raise over $2.5 billion during 2021 from investors around the world, marking a gelling of the region’s edtech sector. All these mega-fundraises really speak of the magnitude and ambition of VC and PE firms in Asia.
2. Expanded scope of sovereign wealth funds
Asia’s SWFs, while much more active-investing both at home but increasingly abroad-are gaining prominence alongside funds from countries like Singapore (GIC, Temasek) and the Middle East, such as Saudi Arabia’s PIF and Abu Dhabi’s Mubadala. Singapore’s GIC has been an active investor in global tech companies like Alibaba, Uber and Ant Financial. A recent deal that GIC led was in 2022, investing $2 billion into TikTok’s parent company, ByteDance, showing that GIC is keen to invest in digital and tech-driven industries. The sizeable cross-border deals in this regard increase Asian SWFs’ willingness to diversify their assets.
3. Green and Sustainable Finance Growth
Hot buzzword for sustainable finance is sweeping across Asia’s capital markets; governments and companies alike increasingly focus on green finance. Sustainable finance is gaining more traction-from sustainability-linked bonds and green bonds to ESG investments-as climate commitments across the world leave no room for anything less in financial planning. Hong Kong’s MTR Corporation, the public transit company, has raised $1.2 billion in a 2021 green bond. Proceeds from the issue will be used to fund sustainable development projects, such as energy-efficient public transport. China meanwhile topped the global list after issuing more than $100 billion in green bonds this year alone. Asia’s fundraising ecosystem is becoming a progressively important role in the pursuit of green finance.
4. Family offices play a bigger role
Asia is rapidly becoming an important player in private fundraising by the trend, family offices. In China, Hong Kong, and Singapore, the wealthy individual and family groups have been capitalizing on the family offices so as to manage assets and direct investments in private equity, venture capital, and direct investment opportunities. In fact, Li Ka-shing is one of Hong Kong’s richest men, and the family office has invested heavily across virtually every sector-from technology to healthcare. Among those investments are Horizons Ventures, which is the investment arm of the family office of billionaire Li Ka-shing. It financed companies like Facebook, Spotify, and Impossible Foods. Thus, the growing involvement of family offices in fundraising reflects the manner in which private wealth is gaining further control over the region when investments are concerned.
5. Cross-Border Fundraising and Partnerships
Trend: Asian companies and investors are getting involved increasingly in cross-border fundraising and M&A activities. More deals, involving partnerships between Asian and Western companies, are brought to investment bankers, especially in sectors like biotech, fintech, and energy. South Korea’s SK Group is joining forces with Bill Gates’ Breakthrough Energy at the tail end of 2022 to invest in clean energy projects across the world. According to the deal worth $1.5 billion, the funds will go into green hydrogen and other sustainable energy solutions. A partnership of Asian conglomerates with Western investors has become increasingly important for cross-border synergies in fundraising.
Challenges and Considerations
Opportunities are abundant, but so too are the challenges surrounding fundraising in Asia:
Staying informed about such important trends, including sustainable finance, digital transformation, and more, could make a significant impact in investment banking on large-scale fundraising efforts and in promoting the Asian economy.
The fundraising landscape in Asia is very diverse and dynamic. With the latest developments such as emerging green bonds and sustainable finance to the rising dominance of family offices and cross-border partnerships, Asia’s capital markets change at a pace unprecedented by any other region.
To be attuned and sensitive to these trends and understand the nuances of fundraising in the region, these investment bankers would be well-positioned to maximize increasing opportunities within this vibrant market.