Here we present the key insights of ZEMU VC's Talent Tsatse at the recent EqualOcean event.
2021 has been quite a year for everyone. It has allowed entrepreneurs and innovators to dig deeper and discover new trends. For VCs, the pandemic brought about enormous changes and challenges. With all the innovations coming up, the rapidness is now propelling VCs to think about the new trends and dwell on whether they are currently in the right direction.
On December 9, 2021, at the 'VC Angle: Trends and Startups to Watch in 2022' Summit, a part of EqualOcean's World Innovators Meet (WIM2021), Talent Tsatse shared his insights on the new trends happening in the VC space and startups worthwhile watching in 2022.
Talent Tsatse is the investment director at ZEMU Venture Capital. The firm seeks to invest in pre-seed, seed, pre-Series A and Series A stage companies focused in the artificial intelligence, biotech, IoT and smart city sectors. Having lived in Asia for almost 15 years, Mr. Tsatse is keen on speaking to forward-thinking startup founders about investment opportunities and China commercialization strategies.
While other countries are struggling with the pandemic, China, with the zero-COVID policy, has brought its economy back to normal and attracted global capital to enter the market where life is not disturbed that much. Domestically, due to border control and global supply chain disruptions, a growing number of local VCs have begun to bet on local projects, especially those involved in import substitutions. On the same basis, some domestic innovators and startups can now compete with global peers.
According to research firm Zero2IPO, venture capital and private equity investment in Chinese startups for the first three quarters of 2021 rose by 75% from a year earlier to USD 165 billion. While dropping from the peak in 2017, the deal value of VC investment in Chinese startups in 2021 is almost twice as large as the entire year of 2020 and is on track to beat the peak set in 2017.
It is now an opportunity for global investors to enter the market that dealt with the pandemic quite well and plans to maintain the same policy.
Over the past five years, Chinese investors have been actively seeking opportunities in the Asian Pacific region, especially in India. Alibaba and its affiliate Ant Group, along with others, invested over USD 2.60 billion in four Indian unicorns (Paytm, Snapdeal, BigBasket and Zomato), while Tencent alongside others invested more than USD 2.40 billion in five unicorns (Ola, Swiggy, Hike, Dream11 and BYJU's). There was a 1,200% growth of Chinese investments in Indian start-ups, from USD 381 million in 2016 to USD 4.60 billion in 2019. In addition, at the end of 2020, 17 out of the 24 Indian unicorns were backed by Chinese companies. As the pandemic flattened out this trend, we are yet to see in 2022 how this is going to play out.
There is currently a lot of anxiety with the pandemic, not only on the individual level. As companies start to allow remote work, there is a great need for services to ensure employees' health that can be potentially provided digitally. A lot of investment is going on in this area.
This trend will last within five to eight years, as business intelligence predicts that digital therapeutics will be around USD 56 billion by 2025. Moreover, in China, AI is not a trend anymore. The country currently holds at least 40% of registered patents globally, while the US and Japan share around 30%. The situation implies a big room for collaboration between Chinese startups and international players and an opportunity for VCs and startups to dig deeper. More startups to engage in healthcare AI can be expected.
In the first phase, VCs tend to be more into the integration of the solutions or the functions that a startup provides. But now, VCs have come to the stage of asking what the startups bring. Solutions are good, and we have seen a lot of solutions that can potentially address the situations we are in. But it is now getting into the phase whereby more results are expected.
For example, VCs care about how the software or system provides digital prescriptions in digital healthcare. Now, they want to know how these solutions can engage their users. In digital healthcare, investors care more about how the system intervenes with employees' behavioral changes as well as indicators to expect (such as monitored blood, BMIs being put to check, people losing weight, and better mental state). All in all, VC is always about the outcome.
Digitalization is going to be a secret weapon for the acceleration and development we are about to witness. On an individual level, we can expect an age when every consumer can appreciate the use of digitalization. With the development of AI technology, we will also see devices communicating to each other, asking for and (re-)allocating resources. Furthermore, we are going to see the global manufacturing sector collaborating as machines become able to source materials, negotiate prices and arrange logistics.
For venture capitals, a topic worth tracking is whether there is still a chance in digitalization. To explore the answer, investors are supposed to keep their eyes open, maintain an open mind, and carefully track various evolutions going to happen within the digitalization and AI domain. More is to watch in digitalization, and we all should have a good seat in the front.
For Talent Tsatse's slides and presentation recording, please subscribe to our weekly newsletter: we will be sending them out in the following weeks.
As a part of WIM2021, China & The World Summit was hosted on December 9-10, 2021. It was focusing on the world's second-largest economy's global impact and interaction with the rest of the world.
WIM 2021 China & The World Summit is built around two major topics:
Ⅰ. Investing in China: Seeking value amid global turbulence.
Over the past decade, China has been an attractive investment destination. But will it remain one in years to come? WIM 2021 gathered global investors, senior executives, and market participants to discuss this and other questions concerning the world's second-largest economy's past, present and future.
Ⅱ. Localization & Globalization: Global enterprises' 'China story' and Chinese companies' global expansion.
China's role in the global economy has been continuously changing. As the country's market matures, the world's largest enterprises have been venturing into it – with varied success. Meanwhile, Chinese new-economy companies are also expanding their presence in foreign markets. At WIM 2021, a number of eminent experts and industry insiders discussed the most important trends and narratives at the interface of China and the rest of the world.
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WIM2021 'Digital Reshaping the World' will be hosted offline in Shanghai and New York while broadcasting globally. The event covers 11 topics, including the hottest industries (from automotive to healthcare) and concepts (like Carbon Neutrality and 'Zhuan Jing Te Xin').
World Innovators Meet (WIM) is a yearly flagship event hosted by EqualOcean for the past 6 years. It is a time where international delegates gather to discuss hot button topics in China's key industries.
We see innovation as the biggest driving force to building a better world. Hence, through WIM we seek to create a platform for global innovators to connect. By uniting bright minds, we seek to foster learning, inspiration and wonder – and inspire conversations that matter.
In a short span of 6 years, WIM has grown from a local event in China to a global event that bridges the world and China by bringing together 1,500+ international speakers (including several Nobel laureates), 50,000 global attendees, and 2,000+ media and community partners.