IDG, CreditEase target online finance
CreditEase, the largest peer-to-peer (P2P) lender in China, has introduced a new twist to its relationship with IDG Capital Partners. Two-and-a-half years after becoming an IDG portfolio company, CreditEase has become a principal investor in an IDG-managed microcredit fund, which will back financial services start-ups.
"CreditEase is actively looking for investment opportunities in early-stage financial innovative firms as they believe it will be the next big trend. That's also what we believed in years ago when we invested in CreditEase," says Li Feng, a tech-media-telecom-focused partner at IDG, tells AVCJ.
The IDG CreditEase Financial Innovation Fund recently reached a first close of $100 million. It will target internet finance technology, specifically lending, microcredit mechanisms, credit ratings, payment services and risk management enterprises in China and Silicon Valley. Each investment will be between RMB100,000 ($16,375) and RMB1 million.
CreditEase started as a P2P lending site in 2006, linking individual lenders to small-scale borrowers, typically the rural poor and urban micro-entrepreneurs. It received investment from IDG, Morgan Stanley Private Equity Asia, and existing backer KPCB in 2011.
The company has since expanded quickly and now provides a range of consultation services, including wealth management, credit rating and microcredit lending. In the context of the new fund, CreditEase is able to deliver its operational expertise to the investees chosen by IDG.
"Even before setting up the fund, we had started to make co-investments, with CreditEase coming into some deals sourced by IDG," Li adds.
Online financial services are booming in China. A host of manufacturers and retailers - including Alibaba Group, JD.com and Suning - are preparing to apply for bank licenses as the government seeks to introduce more competition and services to the financial sector.
The opportunities for venture capital lie further down the spectrum. Last month the new fund made its debut investment in Hangzhou Wacai Science, a Chinese personal finance management mobile app developer. Wacai's two apps, which allow people to record their daily spending, have more than 40 million users. It follows a similar transaction by Sequoia Capital, which committed $10 million across two rounds of funding for Beijing-based personal finance management site Feibee.com.
Li foresees more deal flow coming from larger retailers as they expand payment services to cover a wider variety of products. For example, last week Sunning won approval for a subsidiary to provide payment and settlement services for online mutual fund sales.
In the first six months of this year, China had 244 million registered user of online payment systems, up 10.8% year-on-year, according to China Internet Network Information Center. Nearly one third of these users make payments via mobile devices.
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