China's Rockets Capital hits $200m first close on debut fund

Xpeng anchored the first close, with additional commitments coming from the likes of IDG Capital, eGarden, Sequoia Capital China, 5Y Capital, and GGV Capital. All bar eGarden were early investors in Xpeng, which listed in the US in 2020 and now has a market capitalisation of around USD 24.6bn. Rockets is said to be approaching institutional investors to participate in subsequent closes.

The firm will focus on venture and growth-stage investments – typically Series A through C rounds – in the EV industry value chain, clean energy, and frontier technology.

“In the EV supply chain, batteries, LiDAR, and semiconductors will be priorities. These are the biggest cost components in EVs compared to traditional cars. We will also look at smart car technology and charging stations and related technology,” Yuan told AVCJ. “Most of the first fund is likely to be EV related because that’s where our differentiation and uniqueness is.”

Angel investments will be considered when strong teams spin out from established companies. Rockets is also seeing numerous carve-out opportunities, with some listed conglomerates keen to restructure their new energy units into standalone entities as a means of maximising value.

Yuan’s involvement with XPeng stems from early 2018 when he looked at the company as a potential investment. The EV maker had formed a direct investment team and completed a few deals, but then decided it made better economic and strategic sense to support a third-party independent manager.

Xpeng is an LP in the Rockets fund but does not hold a stake in the GP management entity. Senior management team members at Xpeng do have GP stakes.

The goal is to promote synergies between Rockets and Xpeng while eliminating conflicts of interest by creating an independent governance structure. Rockets will have access to Xpeng’s industry expertise and resources – the EV maker may refer investment opportunities to Rockets – but this doesn’t mean every Rockets portfolio company will become part of the Xpeng sourcing ecosystem.

“In that respect, nothing is guaranteed,” Yuan added. “But the Xpeng connection is a competitive advantage. Companies may open rounds just for us or let us in at a discount to previous rounds.”

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• Topics
• Greater China
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• Hony Capital
• Electric Vehicles
• Rockets Capital