Secondary investors pay $600m for LP stakes in IDG VC funds

The positions have been bought by a syndicate of six investors led by HarbourVest Partners, according to sources familiar with the situation. Most of the investors are existing LPs in IDG funds. It is said to be comfortably the largest venture capital secondary deal ever seen in Asia.

The transaction was initiated by the death of Pat McGovern, co-founder of International Data Group, in 2014. His ownership stake transferred to the McGovern Foundation, which retained Goldman Sachs to run a sale process. No deal came to fruition. Then in early 2017 IDG Capital agreed to buy the business in conjunction with privately held conglomerate China Oceanwide Holdings Group.

IDG Capital assumed ownership of IDG Ventures, a global network of venture capital funds, with Oceanwide and China Everbright participating in a minority capacity. Meanwhile, Oceanwide took a 90% interest in International Data Group’s operating assets, which cover technology-related media, data, and marketing services. IDG Capital assumed a 10% stake.

IDG Ventures was established in the 1990s and grew to cover the US, China, India, Vietnam, and Korea, leveraging other resources in the IDG network. As of March, more than $7 billion was under management across the network, which comprises independent partnerships managing funds with International Data Group serving as one of multiple LPs in each entity.

Secondary investors had been expecting these LP interests to come up for sale ever since International Data Group was put on the block, almost regardless of who actually bought the business. It is unclear which IDG funds are involved in the deal, although they are unlikely to be recent vintages. 

IDG Capital manages 10 China-focused funds, covering both US dollars and renminbi. Several dollar vehicles were raised in conjunction with Accel Partners, the most recent closing at $586 million in 2014. Last year, IDG Capital and Breyer Capital raised a $1 billion growth fund, while an M&A fund was launched with China Everbright.

According to AVCJ Research, IDG Ventures India closed its first fund at $150 million in 2006. The firm raised approximately $100 million for its second vehicle in 2014 and then closed Fund III on $200 million earlier this year. AVCJ Research has records of two IDG Vietnam funds; one closed at $100 million in 2013 and the other launched in 2011 with a target of $150 million.

The IDG transaction is the second this year in Asia involving a high-profile venture capital firm that is still active under its original name. It follows a $180 million sale by Sequoia Capital India of stakes in eight portfolio companies to Madison India Capital, which was supported by Lexington Capital. The purpose of the deal was to allow Sequoia to return capital to LPs in several of its more mature funds.

While the IDG situation is in many respects unique, a number of venture capital firms are said to be pursuing similar actions to Sequoia's, either carving out sections of their portfolios or selling off individual stakes in companies. LP positions in VC funds are also increasingly being put on the market and there are various restructuring opportunities involving funds nearing the end of their lives.

Some of the largest and best-known VC secondary deals in Asia were restructurings of funds controlled by US firms that had decided to withdraw from the region.

In 2014, the team that ran KPCB and Sherpalo Ventures’ India joint venture spun out to form Lightbox, with several secondary investors supporting an acquisition of the existing portfolio. Canaan Partners sold its India VC portfolio to J.P. Morgan Asset Management for a reported $200 million in 2015 and then last year NewQuest Capital Partners bought the majority of Draper Fisher Jurvetson’s India portfolio.

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• Topics
• Greater China
• South Asia
• Southeast Asia
• Venture
• Secondaries
• China
• India
• Vietnam
• IDG Capital Partners
• IDG Ventures
• Secondaries
• HarbourVest Partners