China's Unity Ventures hits first close on US dollar fund

Unity, a technology-driven investment firm that focuses on early-stage deals, was established in 2011 by Shaw Wang (pictured). He was one of seven founding members of Chinese search giant Baidu. 

The GP was among the first backers of cloud computing start-up Qingcloud in 2012, which has since become a major player in the space. Wang leveraged his experience at Baidu in identifying the opportunity. "I built Baidu's first server room system, so I am very familiar with cloud computing and cloud-based data center. That's why we entered the segment quite early," he said.

Unity is also plugged into the Baidu ecosystem, including Broadway, an alumni-style group of former senior and middle-level executives. The firm says it gets first-look at many start-ups launched by ex-Baidu employees, while Baidu Venture is an occasional investment partner and sometimes an exit channel for Jiuhe.

The Unity portfolio features Xiaoduo Technology, an artificial intelligence (AI)-enabled customer service platform established in 2015 by Ling Jiang, who formerly led Baidu's machine learning business. The company claims to have handled 25% of the customer service volume on Alibaba Group's Taobao platform during last year's November 11 Single's Day shopping festival. Unity was the start-up's first institutional investor.

The venture capital firm raised RMB100 million for its first renminbi fund in 2011. This was followed by vehicles of RMB300 million and RMB500 million in 2014 and 2016, respectively. A fourth fund is currently in the market with a target of RMB800 million. It has already surpassed RMB600 million. The first three funds have achieved an average gross IRR of about 40%.

Wang told AVCJ that moving into the US dollar fund space represents a logical progression. The renminbi vehicles focus on angel and pre-Series A rounds, with the dollar fund participating from Series A onwards. "I think it's comparatively easy to expand from early-stage to Series A because the risk gets lower, but it's challenging to go from Series C or D back to angel rounds," he said.

The US dollar fund launched at the end of last year. Fundraising hasn't been delayed much by the COVID-19 because LPs are primarily Chinese family offices, tech company founders, and corporates. "We have a close relationship with the founders of internet enterprises. When their companies list in the US, they have US dollar-denominated assets, but they might find few good investment opportunities," Wang said. 

Unity made 12 investments during the first quarter of 2020, taking advantage of a 30-50% discount in valuations as a result of COVID-19 dislocation.

The firm's investment thesis has evolved over the years. It initially concentrated on mobile internet and pan-technology, media and telecom (TMT) plays such as media group 36Kr, online cooking app Xiachufang, and financial supermarket 91Jingrong. The focus has since switched from internet traffic-based business models to those where technology brings greater efficiency to traditional operations. Examples include AI diagnostics platform Airdoc, drone logistics provider Antwork, and deep learning solutions provider Oneflow.

"My knowledge of an industry is no match for that of senior practitioners within that industry," Wang added. "What I know is to what extent data and algorithms can change that industry. I use this aspect to analyze a company's potential."

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• Topics
• Greater China
• Fundraising
• Technology
• Venture
• China
• artificial intelligence
• TMT
• Venture
• Unity Ventures