Software Industry in Eastern Asia: Top 13 Private Equity Investors Over the Last 5 Years

Intro

In the software industry, professionals are working to develop, maintain, and publish software to be utilized by individuals and businesses of any size, from small teams to world-known corporations and giants. Some industry sectors have been significantly flourishing recently; for instance, the SaaS market, which delivers so-called on-demand software, was predicted to expand at a CAGR of 20.8% in a year, growing from USD 225. 6 billion in 2020 to USD 272.49 billion in 2021. Another potentially booming branch of the software industry is automation, which, according to a McKinsey report, can replace 45% of currently paid jobs and save costs and time. In addition, the software industry includes operating systems, desktop apps, gamification, internet and consumer software, and more. Together, the mentioned domains are estimated to generate around $507 billion of revenue by the end of 2021.
Given the strong potential for development and innovation, the industry is attractive to investors worldwide. In Eastern Asia, this field accounted for almost half of all private equity in the last five years, totaling $33.4B (or 46.4% of the money raised in private equity rounds). Of all backers, 13 venture capitals and corporate investors were especially active over the last half of the decade. Arranged by the amounts of money contributed, they can be depicted as follows:

Software Industry in Eastern Asia: Top 13 Private Equity Investors Over the Last 5 Years
data provided by Unicorn Nest

Key takeaways

• Funds Geography – All 13 VCs are located in two countries, China and Japan, with the former hosting 11 funds and the latter – 2. The most frequently appearing city is Beijing with 4 companies. The rest are distributed between Tokyo, Shanghai, and Hong Kong Island. For the majority of VCs, the country of establishment and the most frequent investment coincide. Therefore, the top country to receive financing is China, with Japan and the United States following.
• Industry Focus – Although the funds sometimes consider Transportation, Telecommunications, and Mobile/Apps spheres, the main field to attract their attention is Finance.
• Important Years – The oldest and the newest funds, Matrix Partners China and NIO Capital, were established in 1977 and 2016. The majority started operating in 2002. From 2014 to 2021, the sampled firms accomplished the most deals; for some of them, this happened in 2018. In almost the same period, from 2014 to 2020, they performed the most successful exits, with the peak falling on 2020.
• Investments – Usually, the VCs take part in 2 deals per year, less often – in up to 6. The maximum of funding rounds equals 527; the minimum equals 22. On average, a company participates in 136.4 deals, having a median value of 109.0. For the lead investments, the two extremes equal 3 and 123. The average value and the median for this type of funding are 36.5 and 24, respectively. Most commonly, the firms participate 26 times as standard investors and 8 times – as the leads. Overall, some VCs choose to act as lead investors less often than others since the difference between the two types of investments ranges from -29.82 to 22.6 percentage points. This index’s average value is -1.49, and the median is 0.55.
• Typical Rounds – Usually, the funds present 3-4 investors per deal; less often, their number ranges from 5 to 6. Although sometimes the round size falls between 100 and 500 million USD, the more typical amount of money issued exceeds 1 billion. The funds’ portfolio companies present an average multiple of 0.03 at minimum and 20.11 at maximum. This figure’s average value equals 4 and has a median of 0.94.

In summary, East Asia’s most active private equity investors in the software industry are based in China and Japan. The same two countries and the US are most likely to receive financing. As for the sectors, the funds’ attention is attracted by the Finance, Transportation, Telecommunications, and Mobile/Apps fields. Usually, they give out more than 1 billion US dollars and have 3 or 4 partakers per round.