China's Innovation Works seeks $250m for Fund III
China-based early-stage investor Innovation Works, which was founded by former Google China head Kai-Fu Lee, is looking to raise $250 million for its third fund.
The International Finance Corporation (IFC), the investment arm of the World Bank, said in a disclosure that it was considering a commitment of $15 million to the vehicle. It goes by the name of Sinovation Fund III, having recently switched from Innovation Works Development Fund III.
Innovation Works launched in 2009 under an incubation-plus-investment model. The incubator identified companies or individuals with potential and got them started. Those deemed to have sufficient potential received early-stage backing from the Innovation Works, with other VC firms brought in as the companies gather momentum.
The firm's first fund closed in 2011 at $180 million, with commitments from WI Harper, Silicon Valley Bank, Baillie Gifford, Sequoia Capital, IDG-Accel, and Foundation Capital, as well as some North American pension funds and various Silicon Valley executives and entrepreneurs. WI Harper served as co-manager of the fund.
Fund II closed in 2012 at $275 million - above its $250 million target - with 42 LPs participating. There are also two renminbi-denominated funds and the firm is looking to list the onshore part of the business on the National Equities Exchange and Quotation (NEEQ), also known as the New Third Board.
While Innovation Works continues to work closely with founders, providing a variety of value-added services - such as product design, marketing, recruitment and legal services - in addition to capital, it is now purely an early-stage investor rather than an incubator.
The firm invests across the software-enabled IT space, including mobile internet, consumer internet, e-commerce and cloud computing. It participates in seed and Series A rounds, as well as Series B on a selective basis. Innovation Works has backed about 200 Chinese start-ups, half of which have gone on to raise later-stage financing. More than 20 have reached market valuations of over $100 million.
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