
China's Source Code confirms $1b close on US dollar funds

Source Code Capital has confirmed a final close of $1 billion on its latest set of US dollar-denominated funds, which takes the Chinese venture capital firm’s total assets under management to $2.5 billion.
Filings were made for Source Code Venture Fund V and Source Code Growth Fund II on March 12, specifying totals of $420 million and $580 million, respectively. LPs indicated that the hard cap had been set at $950 million, with the GP contributing making up the difference. The firm raised $570 million across venture and growth vehicles in its previous vintage in 2019.
Source Code said in a statement that the re-up rate was 100%. It added that distributions to date stand at RMB20 billion ($3 billion), generated by eight companies that have gone public. As of 2021, the portfolio includes two companies valued at more than $100 billion, three worth over $10 billion, and 20 valued in excess of $1 billion.
The strategy for the new fund is unchanged. Source Code’s investments are driven by three key trends: "internet plus," whereby start-ups use technology to disrupt traditional industries; "global plus," which involves backing companies with a China angle in the international arena; and “AI plus,” which leverages the emergence of technologies such as artificial intelligence and virtual reality. These encompass 2B and 2C models, ranging from intelligent manufacturing to new consumer brands.
“We will continue to partner with and work hand-in-hand with visionary and audacious entrepreneurs, and through the compounded power of technology and capital, strive to change the world. We are dedicated to being the most entrepreneurial investment institution, and through outstanding performance, generate long-term and outsized returns to our investors," said Yi Cao, the firm’s CEO and founding partner.
Cao, formerly of Sequoia Capital China, established Source Code in 2014 with fewer than 10 people. A debut US dollar fund closed at $100 million in 2014 and the firm later raised a $40 million annex fund to make follow-on investments. Fund II closed at $150 million in 2015 and a third vehicle of $260 million came two years later. On the renminbi side, Source Code has RMB8.8 billion under management, having closed its fourth local currency vehicle at RMB3.8 billion in 2020.
There are now more than 80 employees, including six partners and 30 investment professionals. The firm has a distinct post-investment team that focuses on 28 areas across recruitment, policy research, business development and growth, and financing. In the latter area alone, it has helped portfolio companies secure $1 billion in equity funding and RMB1 billion in debt financing.
Source Code also claims to have built an industry network comprising more than 30 leading new economy businesses and its 200-plus portfolio companies. The goal is to foster cooperation, experience sharing, and feedback.
The firm’s portfolio includes short video and news aggregation platform ByteDance, online-to-offline services business Meituan, electric vehicle manufacturer Li Auto, online property platform Ke Holdings, e-cigarette start-up Relx Technology, and apartment rental player Ziroom. It has also backed a string of B2B trading platforms such as Baibu, Yijiupi, Casstime, Zhongneng United, and Xiaoyaoyao.
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