China's Hike Capital seeks $300m for Fund III

A first close came in January, said a source close to the situation, without stating the amount of money raised. LPs include fund-of-funds from Asia and the US, as the firm looks to institutionalize its LP base. A renminbi fund of about $200 million is also being raised.

Hike raised $100 million for its first fund in 2016, a year after the firm's establishment. As of the first quarter of 2021, the vehicle had achieved a 4x multiple and distributions to paid-in (DPI) of more than 50%. Fund II closed at $200 million in 2017 and is marked above 5x. Both funds comprised US dollar and renminbi tranches.

There is a relatively high GP commitment for Fund III of 10%, the source added. This reflects the nature of the firm's ownership.

One of Hike's two co-founders is Mark Yang, who entered the venture capital industry not long after selling Ganji to 58.com at a valuation of $3.6 billion. He provided almost the entire Fund I corpus, while 20% of Fund II came from the management team, including Yang.

The other co-founder is Anna Xu, formerly head of the mobile internet division at NetEase, where she created the NetEase News app. Xu is responsible for Hike's day-to-day operations with Yang - who is also the founder and currently CEO of car trading platform Chehaoduo - providing support at a strategic level and in deal-sourcing. He also advises portfolio companies. 

Hike employs what Xu describes as a "2+20 catcher strategy," based on an understanding that an average of one or two $10 billion companies and 20 $1 billion companies have emerged every year over the past decade. "This shows that good companies are scarce and good founders are even scarcer. We are not a megafund, so we must converse our ammunition," Xu told AVCJ in a previous interview.

The firm normally reviews about 2,000 companies every year, with dozens going through to the due diligence stage. This results in seven or eight investments, shared out across four partners.

"Each partner fire one or two shots a year. We need companies to meet three criteria – be from a top industry segment, have talented founders, and represent good timing. In addition, we favor transportation, online education, and consumption, because we have backed numerous unicorns in these areas," Xu added.

Portfolio companies include online education platforms Yuanfudao and Huohuasiwei, electric vehicle manufacturer Li Auto, delivery business Flash Ex - also known as Shansong - e-cigarette maker Relx Technology, and Chehaoduo. Li Auto listed in the US last year, while Relx followed suit earlier this year. 

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