BlueRun Ventures China cuts ties with US brand

BlueRun opened a China office in 2005 and has since invested in nearly 200 local start-ups, according to a statement. However, the entity now known as Lanchi has been managed independently since 2010.

Jui Tan, a managing partner at Lanchi, told the South China Morning Post in July that this longstanding separation means geopolitical risk is less of an issue for the firm than others with US ties. In addition to independent decision-making, there was no pooling of carried interest or sharing of back-office services.

Tan added that Lanchi would not be deterred from investing in artificial intelligence (AI) start-ups despite US-driven restrictions on semiconductor exports to China. The firm remained committed to investing over half of its latest fund, which closed at CNY 5.5bn in May 2022, in AI-related businesses, he said.

In August, US President Joe Biden upped the ante by signing an executive order prohibiting outbound foreign investment in China that targets certain sensitive technologies, including semiconductors and microelectronics, quantum information technologies, and AI.

US persons – individuals as well as entities organised under US law or in US jurisdictions – will be held responsible for adhering to the prohibition, the US Treasury Department said. The same obligation may apply to US persons with respect to foreign entities under their control. This prompted questions about US VC firms that invest directly in China or have relationships with China-based VC firms.

In the weeks prior to the executive order, a select committee of the US House of Representatives wrote to GGV Capital, GSR Ventures, Qualcomm Ventures, and Walden International asking for information regarding investments in Chinese AI, semiconductor, and quantum computing businesses.

Lanchi’s rebranding comes three months after Sequoia Capital’s China and India-Southeast Asia operations announced plans to formally separate from the Sequoia entity in the US and become independent partnerships. Sequoia Capital China has changed its name to HongShan.

As early as 2005, Sequoia adopted a decentralised model, partnering with established local players and allowing local entities to be independent in terms of ownership and investment decision-making. Best practices were absorbed from the US in the early days and certain back-office functions were centralised to ensure operational consistency.

Lanchi made no reference to the uncertain regulatory environment in a statement announcing the rebranding, merely stating the need to “provide greater clarity and differentiation” from the Silicon Valley-headquartered entity.

"Our mission for supporting Chinese entrepreneurs remains unchanged since our inception in 2005. We will continue to focus on early-stage venture investment and helping Chinese entrepreneurs to go global," said Tan. He added that Lanchi would “continue to embrace our Silicon Valley heritage and maintain a disciplined and systematic investment approach."

Lanchi has more than USD 2bn in assets under management across US dollar and renminbi-denominated funds. The firm operates out of offices in Beijing and Singapore. Notable portfolio companies include electric vehicle manufacturer Li Auto, cloud services player QingCloud, digital insurer Waterdrop, mobile charging business Energy Monster, and consumer internet plays Mogujie and 58.com.

In February, Georgetown University’s Center for Security and Emerging Technology (CSET) published a study of outbound investments into Chinese AI companies between 2015 and 2021. BlueRun – the report did not distinguish between the US and Chinese entities – was the fourth most prolific investor, with China accounting for 20 out of 24 AI deals globally.

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• Topics
• Greater China
• North America
• GPs
• Regulation
• China
• USA
• BlueRun Ventures
• Lanchi Ventures