GGV closes debut renminbi VC fund at $236m

It continues a trend of managers best known for US dollar funds entering the renminbi space or seeking to enlarge existing pools of local currency capital. In the past 12 months, the likes of Morningside Venture Capital, Lightspeed China Partners, and Redpoint China Ventures have all closed their first renminbi funds.

GGV’s new vehicle received commitments from investors including: the Zhongjin Qiyuan National Emerging Industry Venture Capital Guidance Fund, a RMB40 billion government-backed entity managed by China International Capital Corporation (CICC); China Industrial Bank; Ping An Insurance; Shanghai Technology & Innovation Center; Zero2IPO Group; Zhangjiang Hi-Tech Venture Capital; Zhenshang Innovest Capital Management; Yimei Capital; and CreditEase.

The fund will target early-stage and growth companies involved in internet services, consumer sector upgrades, new technologies and smart hardware, and enterprise and digital services. In this respect, the strategy is like that of GGV’s US dollar funds, which have invested in start-ups such as smart phone retailer Xiaomi, ride-hailing platform Didi Chuxing, e-commerce discovery site Red, and news and entertainment aggregation service Toutiao.

The venture capital firm’s last US dollar fundraise in early 2016 saw $1.2 billion committed across three vehicles. In addition to a $900 million flagship fund – comprising the $657 million GGV Capital VI and a $225 million parallel top-up vehicle – GGV raised $250 million for an early-stage fund, most of which was to be deployed in China. As in previous vintages, there was also a $50 million entrepreneurs fund that allows start-up founders in GGV’s network to participate in deals.

GGV is expected to return to market this year with a similar overall target. Qiming Venture Partners has already completed its fundraising activity by hitting the hard cap on three vehicles. Its sixth US dollar fund closed on $935 million – up from $648 million last time around – while there was a new addition in the form of a $120 million US-China healthcare vehicle. Qiming also raised RMB2.1 billion for its fifth renminbi fund, having secured RMB1.5 billion in the previous vintage.

International managers are seeking to raise renminbi capital because it affords them additional flexibility. Offshore funds are barred from participating in certain industries while the approvals process is much longer than for local currency vehicles. Moreover, if it is thought that a portfolio company can achieve a higher valuation by listing domestically rather than overseas, a renminbi-denominated investment might make more sense for regulatory and practical reasons.

Another factor is the greater availability of capital. In the past seven years, the Chinese LP landscape has become more diversified, with insurance companies, university endowments, and wealth managers gaining prominence. However, more recently government involvement has spiked with the launch of several guidance funds. The National Emerging Industry Venture Capital Guidance Fund, for example, has a remit to back third-party funds and make direct investments.

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• Topics
• Greater China
• Venture
• Renminbi fund
• Technology
• North America
• Fundraising
• China
• GGV Capital
• TMT