Vertex China closes Fund V on $390m

The LP base comprises a mix of new and existing investors, among them asset managers, sovereign wealth funds endowments, insurance companies, fund-of-funds, and family offices.

China-headquartered LPs represent 10% of the fund in terms of number of investors and 3% in terms of quantum of capital raised. The rest are from Europe and Southeast Asia.

“This is one of the toughest cycles to fundraise for China since the VC industry started in the country a few decades ago,” said Ricardo Felix, a partner and head of Asia Pacific at Asante Capital, which acted as the exclusive global fundraising adviser.

“We have a limited universe of investors which must filter opportunities more than ever, resulting in the need for adequately adapting fundraising models. This approach coupled with working with best-in-class GPs is a good recipe for achieving capital raising goals in the current environment.”

Felix observed that the sum raised is 97.5% of the USD 400m target, more than 40% the size of the previous fund, and represents one of the largest China fund closings so far this year despite significant negative sentiment around the market.

Vertex Holdings was the sole LP for the first two vintages, which were set up with USD 80m in 2008 and USD 160m in 2013. Vertex China became independent in 2015 and launched Fund III in the same year, targeting external investors for the first time. The fund closed on USD 225m in 2015, supported by fund-of-funds, endowments, corporate investors, and family offices.

Fund IV closed in 2019 on target with USD 275m in commitments after 15 months in the market. Vertex Holdings provided USD 100m; the rest came from Asia and Europe. There is also a separate renminbi strategy, with Vertex securing CNY 3bn (USD 416m) for a debut fund in 2020.

Fund V comes on the back of a string of IPOs. They include battery start-up SES, which went public in the US through a merger with a special purpose acquisition company (SPAC) in February 2022, electronics supplier PlayNitride (Taiwan IPO, April 2022), vaccine developer Recbio (Hong Kong IPO. March 2022), and semiconductor designer Smarter Micro (Star Market IPO, May 2022).

Vertex China has otherwise attributed the response from LPs to its focus on deep tech. Strategies under this theme are considered more securely in line with Chinese government policy than consumer-focused sectors and at times more palatable to international investors concerned about Sino-US tensions.

Areas of interest include artificial intelligence, robotics, enterprise services, and cleantech. Health-tech and consumer-tech are considered opportunistically. Recent activity includes participation in a USD 34m round last April for Chamlion Technology, which makes 3D-printed dentistry implements.

Deployment and portfolio support operations will leverage best-practice knowledge sharing and collaboration with Vertex's network of funds across the US, Israel, and Southeast Asia. The fifth vintage in the Southeast Asia and India business launched last year with a target of USD 500m.

Vertex China was founded in 2008 and has six partners based out of offices in Beijing, Shanghai, and Shenzhen. The managing partners are Choonchong Tay, previously of GIC, and Zhijin Xia, an engineer by training with experience in media-related technologies. Assets under management now stand at USD 2.5bn.

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• Topics
• Greater China
• Fundraising
• GPs
• Venture
• Technology
• China
• Vertex Ventures
• Vertex Holdings
• Temasek Holdings
• deep-tech