Hopu Magnolia cuts fund target, seeks to delay final close
Hopu Magnolia, a growth capital unit of Chinese private equity firm Hopu Investment Management, has cut its planned new fund size to USD 250m, almost half of the original target.
The development was reported by Mergermarket, AVCJ's sister title, which cited three sources familiar with the situation
Hopu Magnolia launched the fund in early 2021, seeking USD 450m, two sources and a fourth source familiar said. A regulatory filing in the US dated April 2022 indicated that USD 140.6m had been raised from 18 investors. These filings do not necessarily reflect the full extent of a fundraise.
Two of the sources added that, with the fundraising period due to expire in the first quarter of 2023, Hopu Magnolia has asked LPs for an extension to the start of the third quarter.
Investments to date include leading a USD 70m Series C extension for Laiye Technology, a Beijing-based robotic process automation provider, in April 2022, as announced.
Hopu Magnolia is helmed by co-heads Jacqueline Zhang and Gunther Hamm. Last October, while participating in a China private markets outlook webinar hosted by AVCJ, Mergermarket’s sister publication, Hamm described the firm as “a USD 300m fund with the resources of a USD 15bn platform,” referring to the broader Hopu business.
Focusing on the B2B technology space, Hopu Magnolia backs established companies with USD 20m-USD 40m in annual revenue that are growing at 50%-100% per year, Hamm said. These are typically platform-as-a-service (PaaS) specialists in areas like cybersecurity, IT operations, and databases that enable the development of cloud services.
The firm responded to high private company valuations by taking a cautious approach to deployment. Only one investment was completed in 2021 and Hamm said there would be one or two in 2022. He expected to be more active in 2023 as companies grow into the inflated valuations they achieved in 2021.
“There will also be a flight to quality. Even if your valuation compared to your revenue is a decent multiple, if you have high cash burn no one is going to want to give you capital. Companies with reasonable valuations but also higher efficiency will receive capital,” Hamm told the webinar.
Hamm holds board seats at chipmaker Arm China, retail analytics specialist Trax Retail, and Ceva Animal Health, as well as Laiye Technology.
Hopu Investment Management was founded in 2007 by former Goldman Sachs bankers Fang Fenglei and Richard Ong. Three years later, Ong departed and went on to launch RRJ Capital.
Hopu raised USD 2.5bn for its first US dollar-denominated fund, USD 1.85bn for its second, and had achieved a first close of USD 2bn, against a target of USD 2.5bn, on its third as of year-end 2018.
Notable investments include participation in the SGD 15.9bn take-private of warehouse operator GLP in 2017. Other portfolio companies include artificial intelligence business SenseTime and cybersecurity player NextData.
Hopu Magnolia did not respond to requests for comment.
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