China’s Yunqi seeks $300m for fourth VC fund
Yunqi Partners, which makes early-stage investments in China’s enterprise software and services space, is targeting USD 300m for its fourth US dollar-denominated fund.
Mergermarket, AVCJ's sister title, was informed of the development by two sources familiar with the situation.
Pre-marketing began in the first quarter of 2022 and a first close of USD 150m came in November of last year, the first source said. LPs include fund-of-funds, family offices, and pension funds from Europe, the US, and Asia.
Yunqi declined to comment on fundraising. Thrive Alternatives, which the first source claimed is serving as placement agent for the fundraise, also declined to comment.
Founded in 2014 by Yipin Ng (pictured) and Michael Mao, who previously worked for GGV Capital and IDG Capital, respectively, Yunqi closed Fund III on USD 300m in October 2021. The vehicle spent about 16 months in the market, surpassing a target of USD 200m. Fund II closed on USD 150m in 2018.
The firm also manages multiple renminbi funds and some specialist vehicles. It has offices in Beijing, Shanghai, Shenzhen, and Singapore.
Several of Yunqi’s portfolio companies have achieved unicorn status. They include cloud-native database PingCap, robotaxi player Deeproute.ai, home decoration software provider Kujiale, cross-border financial services business Xtransfer, B2B trading platforms Baibu and XiaoPangXiong, smart robot developer Keenon, and plastics recycling business Yingke Rejuvenate.
The firm has remained focused on early-stage opportunities even as its funds have increased in size. Growth-stage investments in existing portfolio companies are made on a selective basis.
Yunqi has invested heavily in China’s emerging software-as-a-service (SaaS) industry, seeing it as a proxy for the government-led push towards digitalisation. Any company that can be tracked based on annual recurring revenue (ARR) and net dollar retention rate (NDR) is classified as SaaS, but China differs from the US in that customer acceptance of standardised products is not widespread.
The firm is also an active investor in platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS), which comprise product offerings that go beyond a single layer of software typically associated with SaaS.
VC fundraising in China has been challenging since 2021, which saw a government crackdown on certain parts of the technology sector and questions being raised about the viability of offshore IPOs.
Approximately USD 13.9bn was committed to US dollar-denominated China funds in 2022, exceeding the 2021 total of USD 9.1bn, according to AVCJ. However, three-quarters of the capital went to funds raised by two managers, Sequoia Capital China and Qiming Venture Partners.
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