Source Code closes third China VC fund at $260m
Source Code Capital, a Chinese VC firm founded by Yi Cao (pictured), a former partner at Sequoia Capital, has closed its third US dollar-denominated technology fund at $260 million.
The US vehicle has attracted LP commitments from several sovereign wealth funds, US foundations, pension funds, fund-of-funds and family offices. The GP is also raising its third renminbi fund, which has reached a first close of RMB1.5 billion ($218 million). Onshore investors include government-backed funds, fund-of-funds, state-owned enterprises and Chinese entrepreneurs.
Founded in 2014, Source Code makes early-stage investments in the technology, media and telecom (TMT) space. It plans to source deals across nine verticals: media and entertainment, communication and online search, retail, travel, food and beverage, accommodation, education, finance, and enterprise software.
According to an announcement, opportunities will be driven by three trends: the "internet plus" strategy, whereby start-ups use technology to disrupt traditional industries; overseas expansion; and the emergence of intelligent technology such as articifial intelligence and virtual reality.
Source Code closed its debut US dollar fund at $100 million in 2014, and raised a $40 million annex fund in 2015 to make follow-on investments in existing portfolio companies. The firm then closed its second US dollar fund at $150 million later the same year. On the renminbi side, Source Code's first and second funds closed at RMB150 million and RMB200 million in 2014 and 2015, respectively.
Previous investors in these vehicles include Sequoia, GIC Private, Temasek Holdings, Meituan founder Xing Wang, and Yiming Zhang, who set up Toutiao.com, Kuxun.cn, fanfou.com and 99fang.com.
Since its establishment, Source Code has built a 30-strong team covering investment and post-deal support. It recently hired Hongjiang Zhang, formerly chief technology officer with Microsoft's China R&D team and CEO of Kingsoft, as a venture partner.
Over the past three years, the GP has invested in more than 80 Chinese companies, about 25 of which are now valued at more than $100 million. Previous investments include installment payment platform Qufenqi, personal lending platform Yongqianbao, B2B liquor platform Yijiupi and mobile news reading app Toutiao.
Source Code and Banyan Capital were among of the first batch of Chinese VC spin-outs from established firms. Banyan, which was formed by three investment professionals from IDG Capital, raised more than $725 million across two vehicles – one US dollar and the other in renminbi – earlier this month.
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