GGV seeks $1.1b for VC investments in China, US

The GP has yet to release a private placement memorandum, but even in this soft marketing stage, LP interest is said to be very strong. The fundraising process is expected to be completed in the first quarter of 2016, although there is no firm deadline, according to a source familiar with the situation.

GGV has set the hard cap for its sixth core fund at $600 million, with a further $200 million targeted for a parallel top-up vehicle, and $300 million for the early-stage fund. This is broadly comparable to the approach to Fund V, although the core and top-up vehicles were raised separately.

Fund V closed in April 2014 at $620 million, comprising an institutional tranche of $600 million plus an entrepreneurs fund that included contributions from the GP and business associates. GGV Capital Select, a top-up fund of $457 million dedicated exclusively to follow-on investments in portfolio companies from Funds IV and V, closed in May of this year.

GGV Capital IV was raised in 2011, receiving $509 million from institutional investors and $10.8 million via the entrepreneurs fund. Subsequent to that, the VC firm raised an additional $105 million from Chinese investors, taking the total to $625 million. Fund III closed at $610 million in 2008.

GGV was founded in 2000 and has offices in Silicon Valley and Shanghai. It invests in early- and growth-stage companies across the internet and digital media, cloud computing and mobile industries in the US and China. It typically leads expansion rounds of financing worth $5-25 million, while the existing top-up fund targets investments of $20-50 million.

The fact that the GP is dividing its new fundraise into three parts, with a dedicated early-stage vehicle, reflects the increased focus among China VC firms on growth and even late-stage technology deals. Sequoia Capital's strategy of running venture and growth funds is now well-established, while a host of other players have raised top-up or annex vehicles.

Morningside Technologies completed its most recent fundraise in early 2014 having accumulated $412 million for a core fund, a special opportunity fund and a co-investment vehicle. Earlier this year, DCM, Qiming Venture Partners and Banyan Capital reached final closes on a top-up fund, an annex vehicle, and a co-investment fund, respectively. These came several months after core funds were raised.

An annex fund is specifically for follow-on investments in existing portfolio companies. An opportunity fund may have the same purpose, but in certain cases these vehicles have been used to pursue separate later-stage deals as well.

In July, Shunwei Capital Partners hit the $1 billion mark, with the capital split equally between a core fund and an opportunity fund. The GP said that it not only wanted to make follow-on investments in existing portfolio companies but also invest in new companies seeking expansion rounds.

China VC fundraising hit $7.6 billion in 2014, including final and incremental closes, as a number of well-established GPs made their once-every-three-years return to the market. The total was markedly lower than in 2011 - when $14.9 billion was raised - due to a decline in renminbi-denominated vehicles. VC fundraising for 2015 to date stands at $4.1 billion, according to AVCJ Research.

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