Matrix China pushes out final close on Fund VII
Matrix Partners China has sought a three-month extension to the deadline for closing its latest venture capital fund with a view to reaching the USD 1.6bn target.
LP commitments for Matrix’s seventh China fund stood at USD 1.3bn as of February 2023, two sources familiar with the situation told Mergermarket, AVCJ's sister title. The final close was supposed to happen in March but Matrix wants to delay it until June, those sources and a third source claimed.
The USD 1.6bn target is referenced in a US regulatory filing from June 2022.
When asked about the fundraising environment for China-focused GPs, Harry Man, a partner at Matrix, observed that “everyone has been extending their rounds” based on LP feedback. He added that a final close on Fund VII would come “soon.”
Matrix focuses on early- and growth-stage deals in China’s technology sector. It seeks to make initial investments of USD 1m-USD 10m in early-stage rounds, preferring to enter as the first institutional investor and largest non-management shareholder.
The firm has over 40 investment professionals and it has backed more than 700 start-ups since its founding in 2008. It primarily focuses on investments in the new economy, deep technology, industrial digitalisation, healthcare, frontier technology, and new consumer brands.
Investments include online property platform Beike, online stockbroker Futu Securities, travel platform Klook, drug maker RemeGen, medical devices manufacturer Peijia Medical, electric vehicle maker Xpeng, data centre operator 21Vianet, and Alibaba Group’s food ordering unit Ele.me.
Some past Matrix portfolio companies have been caught up in China’s regulatory clampdowns of recent years. It was an early investor in ride-hailing platform Didi, which was investigated by regulators following its US IPO in June 2021, and online tutoring service VIPKid, which was hurt by guidelines issued later the same year banning for-profit curriculum-based tutoring.
Regulatory uncertainty, valuation corrections in the technology sector globally, and China-US tensions have contributed to a challenging fundraising environment for China VC managers. A record USD 14.2bn was committed to US dollar-denominated funds in 2022, but about three-quarters of that was raised by two managers, Sequoia Capital China and Qiming Venture Partners.
Only USD 420m was raised in the first quarter of 2023, according to AVCJ Research, and some managers are pushing out final closes. Hopu Magnolia recently reduced its fund target by half and sought an extension from the first quarter of 2023 to the start of the third quarter, as reported.
Matrix raised USD 1.2bn for its sixth fund, according to a filing dated January 2021, and USD 130m for a parallel vehicle later the same year. Fund V closed on USD 750m in 2018. The firm’s China business – an affiliate of US-based Matrix Partners – has over CNY 60bn (USD 8.7bn) in assets under management.
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