China's Inspiration Capital closes Fund II on $82m

Inspiration was set up in 2020 and raised CNY 500m for its debut fund in the same year. The largest LP, Hailang Group, a metals and agriculture-focused conglomerate with five listed subsidiaries, returned for Fund II. Shanghai Jiaotong University also re-upped.

Peter Yin, a founding managing partner at Inspiration, said that all the capital is "market-oriented." He added: "We pursue projects that we believe will be the most profitable. We didn’t want our approach to be distorted by constraints imposed by certain LPs, so we didn’t take any money that came with investment restrictions."

Government guidance funds account for the bulk of capital in the renminbi fund ecosystem. However, their commitments often come with a requirement that a certain portion of the target fund corpus must be invested in certain cities or administrative jurisdictions. Inspiration turned down several guidance funds that wanted to include this requirement.

The new fund will focus on early-stage investments in advanced manufacturing, sustainable energy and mobility, and environmental technology. Opportunities are expected to be shaped by China's industrial upgrade and green transition policies.

Yin noted that renminbi funds are well-suited to Inspiration's strategy at present because most target companies are looking to list domestically. He said that the firm would be open to raising a US dollar fund in the future.

Many industry participants see US dollar and renminbi strategies as fundamentally different. It feeds into a perception that some small and medium-sized enterprises now favoured by China’s policymakers for their role in addressing critical bottlenecks – often under the domestic substitution theme – wouldn’t meet US dollar fund criteria in terms of addressable market or upside.

“After IPO, such projects could have market capitalisations of CNY 4bn-CNY 30bn, which might be too small for some US dollar investors. But for us, entering at a valuation of CNY 200m-CNY 300m and exiting at CNY 7bn-CNY 8bn, that’s a good fit. It translates into a ticket size of several tens of millions of renminbi,” said Yin.

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• Topics
• Greater China
• GPs
• Renminbi fund
• Technology
• Fundraising
• China
• Cleantech
• Inspiration Capital
• Qiming Venture Partners