E-commerce venture capital: Asia drives Q2 flows

Internet retailing has traditionally always attracted sizeable financing due to its ability to generate revenues and attract consumers relatively quickly. As a share of total capital venture deals, e-commerce is always a major player, unlike cleantech or hardware for example. Business transfer agents are able to easier find acquirers for e-commerce platforms and such companies are always innovating due to the continued evolution of devices and digital payment methods. A major trend that has been recorded in this space in the second quarter of this year is that the momentum of investment is shifting to emerging economies, as surging growth in Western markets over the past few years starts to even out.

China, led by its heavyweights Alibaba and Tencent, has been especially dynamic in 2014. It is estimated that e-commerce in China will be worth $540 billion by 2015 and by 2020 worth more than e-commerce in the US, the UK, Japan, Germany and France combined. China is the spearhead driving growth in Asia Pacific’s e-commerce boom.

Around $511 million has been invested across eight deals in the second quarter in China. In 2013, $1.9 billion was invested in 40 Chinese e-commerce deals, making up 7% of global VC investments in the year. One of the biggest investments in Q2 was CTrip’s $200m investment in Shanghai-based online travel agency LY.com. Although firms such as CTrip and Qunar have emerged from China’s domestic online travel industry to grow into major players, the space is still fragmented even as revenues increase.

Tencent has continued to its attempts to catch up to Alibaba’s stronghold in e-commerce, buying a 19.9% stake in Nasdaq-listed 58.com. Beijing-based 58.com provides users with local information such as job postings and rentals, and the purchase gives Tencent a strong platform in terms of increasing market share in China’s second- and third-tier cities.

Among innovative e-commerce solutions, Uber, the taxi-hailing app, has been making major noise in the landscape, having expanded to Asia and received a somewhat overvalued $18.2 billion price tag after its latest $1.2 billion Series D funding round. As things stand, the valuation is 90 times its predicted turnover of $200 million. There is strong investor appetite for disruptive taxi services, with VC backers investing $840 million globally over the past two years in this field.

Another notable investment was in Indian e-commerce platform Flipkart, which attracted $210 million. The round is just another boost for the country’s growing online retail sector. Investors are looking to Flipkart to become the Indian Alibaba, although the entrance of Amazon into the market presents a major challenge to its presumed future dominance.

In the catering business, Priceline bought restaurant booking service OpenTable for $2.6 billion, which has expanded the online travel giant’s offerings into a new field as some of its more established brands mature. Priceline has grown strongly over the past decade through acquisitions of travel websites like Booking.com and Kayak.com, and the e-commerce veteran continues to look at fresh ways to stay relevant in new industries.

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