Sinovation seeks $1b for China AI fund

The Sinovation Disrupt Fund is essentially a continuation of the firm’s AI Institute, which was established in 2016 to conduct research into the practical application of AI and to serve as a base for AI talent development. The firm now has a team of 350 engineers who will play a value creation role in investments made by the fund, according to a source familiar with the situation.

While Sinovation’s previous funds have focused on early-stage deals, the Disrupt Fund will pursue a growth capital strategy with a separate investment team. It will concentrate on more mature businesses and spend time assessing the potential scope for AI-driven industrial transformation before investing, the source added. A filing indicating a target for the new fund was made last week.

Led by Kai-Fu Lee (pictured), founder of Sinovation and formerly head of Google China, the institute develops industrial solutions based on machine learning, computer vision, and natural language processing. It is headquartered in Beijing – where there are dedicated engineering labs focused on healthcare, education, and robotics – and has research bases in Nanjing and Guangzhou. The former specializes in computational finance.

Sinovation already has a subsidiary that provides AI consulting services to corporate customers. AInnovation – or Chuangxin Qizhi – was established in 2018 to deliver AI-related products and customized business solutions that improve efficiency. It has worked with the likes of Foxconn Technology Group, CISDI Group, Mars, Yonghui Superstores, Carlsberg, Nestle, and Postal Savings Bank of China. AInnovation has raised third-party VC funding.

AI is also a key investment theme under the venture capital strategy. Last year, Sinovation raised RMB2.5 billion ($362 million) for its third renminbi-denominated fund, which targets AI, big data, and related areas. The final close was announced at the unveiling of the firm’s Greater Bay Area (GBA) headquarters in Guangzhou. Local branches of the institute and AInnovation were launched at the same time.

Established in 2009 as Innovation Works, Sinovation has $2 billion in assets under management across seven US dollar and renminbi funds. The firm closed its fourth US dollar fund at $500 million in 2018, up from $300 million in the previous vintage. Its second renminbi fund closed at RMB2.5 billion in 2016.

Sinovation claims to have invested in more than 350 companies across AI and big data, consumer internet, education, healthcare, and enterprise services. Its website lists 79 start-ups that achieved valuations of $100 million and above, among them bitcoin mining company Bitmain, AI technology developers Megvii and 4Paradigm, autonomous driving specialists WeRide and Momenta, online education platform VIPKid, and co-working space provider Ucommune.

Leveraging technology to disrupt traditional industries is a prevalent theme among Chinese private equity and venture capital firms. Applications range from using AI to improve customer service and cybersecurity in banks to introducing automation and smart manufacturing to factory production lines.

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• Topics
• Greater China
• Fundraising
• Growth
• Technology
• Industrials
• China
• Sinovation Ventures
• artificial intelligence