Bertelsmann spinout BAI Capital closes $700m China fund

The firm said in a statement that it had exceeded the target size. It added that investors include sovereign wealth funds, insurance companies, technology companies, and fund-of-funds. Bertelsmann also remains an LP.

According to a source close to the situation, BAI Capital initially set a hard cap of USD 750m and there was every expectation of reaching it until China’s technology sector became embroiled in regulatory issues last year. This effectively led to the fundraising process being put on hold for six months.

The hit to LP sentiment has impacted all China strategies. GPs raised USD 20.1bn for US dollar-denominated funds in 2021, consistent with the average for the previous five years. However, more than 70% of the capital was raised before the end of June. Fundraising in the first half of 2022 came to USD 8.6bn, according to AVCJ Research. VC managers alone attracted USD 1.7bn.

Some significant final closes this month demonstrate the widening gulf between managers that can raise substantial sums and those that struggle to raise anything at all. Qiming Venture Partners collected USD 2.5bn for its latest US dollar fund, while Sequoia Capital China hit the hard cap on each of the four vehicles in its latest China vintage, accumulating USD 8.8bn.

The BAI Capital team has been active in China since 2008, during which time it has backed more than 200 companies, of which more than 40 have achieved unicorn status. Exits include 17 IPOs to date.

Now independent and wholly owned by management – still under the leadership of Annabelle Long, who established the business and serves as managing partner – BAI Capital has two key areas of focus for the new fund: China-based companies with the capacity to go global and domestic structural transformation.

Global plays will likely involve consumer retail and services, financial technology, media and content innovation, and web3 and metaverse. On the transformation side, infrastructure technology, electric vehicles, autonomous driving, and industrial upgrades driven by enterprise software are the major touchpoints.

William Zhao, a partner at the firm, previously told AVCJ that up to 20% of the new fund would go into web3 and blockchain-related investments. BAI first backed crypto businesses in 2018 as an extension of its financial technology and web2 coverage. It now has two partners spending over 40% of their time in this area.

Long said that the success of the fundraise is evidence of the sound investment strategy employed by the BAI team.

“We will continue to utilise our deep industry network, operational insights and investment expertise to identify and access compelling investment opportunities and build a diversified and balanced portfolio of early to growth-stage companies to generate meaningful and differentiated returns for our investors," she said.

Bertelsmann continues to run captive investment operations in other markets in Asia. Last month, it was announced that Bertelsmann India Investments would receive USD 500m from its parent for deployment in local start-ups.

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• Topics
• Greater China
• Fundraising
• Venture
• Technology
• China
• BAI Capital
• Fundraising
• TMT
• hard-tech