Fund focus: Qiming's triumph of quick thinking

China-focused PE and VC managers have raised $5 billion so far this year. At $1.1 billion, Qiming Venture Partners' seventh US dollar-denominated vehicle represents the largest final close. It is also the only fund of meaningful size to launch and reach a final close under the shadow of the coronavirus outbreak.

This was achieved thanks to loyalty from the existing LP base and no small degree of nimbleness. Investors were scheduled to come to Shanghai for on-site due diligence the week of February 11. However, with COVID-19 cases in China on the rise, a last-minute decision was taken to run the sessions out of San Francisco. Qiming's senior management team immediately booked flights and spent 14 days in quarantine on arrival. The fund closed on schedule.

"Even when we visited some LPs, a week later the campuses started closing in New York and Boston and some other places. We were lucky we squeezed it into the timeframe. It is so difficult with the pandemic – no one is seeing people, let alone fundraising," says Nisa Leung, a managing partner at the firm. "It's probably the most challenging fundraising environment we have ever seen."

Qiming started out as a technology, media and telecom (TMT) investor, but healthcare has become more prevalent in recent vintages. For Fund VI, which closed at $935 million in 2018, the split was 60-40 in favor of TMT. Fund VII is expected to be 50-50, but that is only for early-stage deals, which will account for 75% of the corpus. The 25% earmarked for later-stage rounds – follow-on rounds and pre-IPO deals – will mostly go into healthcare.

The later-stage allocation is still relatively small, given most established China VC firms now have separate top-up funds. "Our LPs feel that having it in one fund allows the flexibility to deploy into early stage or late stage, depending on the opportunity," Leung explains.

Meanwhile, the decision to combine previously separate teams covering consumer internet and hardware, respectively, puts Qiming in line with most other VC firms, according to Leung. This was in part driven by the expectation of more deal flow in areas such as artificial intelligence, robotics, and smart manufacturing.

As for healthcare, there is no change in strategy. Qiming will continue to focus on biopharmaceuticals, medical devices, diagnostics, and healthcare services. Biotech has become a priority for many investors on the back of in-licensing molecules from overseas. This is perhaps best exemplified by Zai Lab, a Qiming portfolio company trading at a 250% premium to its IPO price.

More attention is being now paid to out-licensing – selling Chinese-designed drugs to the world – but Leung preaches patience. "There aren't many innovative drug discovery companies in China, which makes it difficult to out-license," she says. "Some of our companies are in discussions with big pharma about out-licensing, which is encouraging, but there is still a long way to go."

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• Topics
• Greater China
• Fundraising
• Venture
• Technology
• GPs
• China
• TMT
• Qiming Venture Partners