Asia to play larger role in Eurazeo's second smart city fund

Smart City II Venture Fund, which focuses on new energy, mobility, property technology, advanced manufacturing, and deep technology, has a full target of EUR150 million and a hard cap of EUR200 million. Its 2016 vintage predecessor closed at EUR137 million, having received commitments from 15 corporate LPs. That fund was raised by Idinvest Partners, prior to its acquisition by Eurazeo.

Among the investors participating in the first close on Fund II is Thai real estate developer Sansiri. A second Thai LP is expected to come into the second close, while a further five Asian groups – from Malaysia, Singapore, China, and Korea – are conducting due diligence, according to a source close to the situation. They are corporates from the property, energy, and transportation sectors.

“It is tough fundraising right now, especially with new investors. Even if they want to invest, most of our LPs are corporates, and doing due diligence under the current circumstances is difficult,” the source said, noting that Sansiri had to hire a third-party due diligence provider to act on its behalf. 

There were two Asian corporates in Fund I: electricity and gas distributor SP Group, which was formerly known as Singapore Power, and Singapore’s Changi Airport Group.

Fund II investors from outside Asia include electric utilities EDF and Mainova, Total Energy, carmaker Stellantis – the product of the Fiat Chrysler and Peugeot merger – mass transit operator RATP, logistics specialist Duisport, French pension fund PRO BTP, and several family offices. In addition, Eurazeo is contributing 10% of the fund corpus.

Duisport represents a departure for Eurazeo in that it is a logistics hub but also a city. Julien Mialaret, who leads the fund’s China and ASEAN investments, told AVCJ last year that he was seeing more interest from municipal authorities. “They want to build sustainable cities and they want to do it directly by investing in start-ups rather than waiting for SAP or Cisco to provide master plans,” he said.

Fund I made nearly 25 investments across Europe, Asia, and North America. Asian exposure was capped at 30%, but this will rise to 40% in Fund II. Current investments in the region include China-based green vehicle logistics fleet operator DST, Southeast Asia ride-hailing and services platform Grab, and Chinese autonomous driving technology developer WeRide.

Mobility was a prevalent theme in Fund I because of significant changes happening in the space globally. Energy and property-related technologies are expected to feature strongly in Fund II. The most recent Asian investment was Cove, a Southeast Asia co-living platform that provides accommodation for students and young professionals.

The investment strategy is underpinned by a desire to take legacy city infrastructure and make it more efficient through the application of technology. As part of this, Eurazeo looks to establish joint ventures between portfolio companies and corporate LPs, which often involve taking solutions into new geographies or helping businesses with cross-border expansion.

An early smart city-related investee was Forsee Power, a China-based manufacturer of batteries and battery management systems for electric buses. These are the most expensive components, and customers wanted to pay for them as an energy-storage-as-a-service rather than upfront. Forsee teamed up with EDF and Mitsubishi Corporation to form NEoT Capital, an energy transition financing business.

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• Topics
• Greater China
• Southeast Asia
• Europe
• Cleantech
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• Fundraising
• Venture
• Asia
• Eurazeo
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• Real estate