Fund focus: Lyfe attracts a diversified following for Fund II

James Zhao and Drake Yu, previously of Vivo Capital and IDG Capital, respectively, became acquainted when representing their former employers on the board of Chinese orthopedic devices maker Kanghui Holdings. The company went public in the US in 2010 and was acquired by Medtronic two years after that. In 2015, having made their own exits from Vivo and IDG, the two executives formed Lyfe Capital, an independent healthcare-focused GP.

Zhao and Yu soon raised $210 million for their debut US dollar fund – most of the LPs were regional and global fund-of-funds – alongside a RMB555 million ($88 million) parallel renminbi-denominated vehicle. A second fund, also divided into two tranches, launched last October. The fund-of-funds re-upped and also brought in a few of their own LPs, including pension funds, endowments and family offices. The US dollar vehicle closed at $288.8 million while the renminbi tranche came in at RMB900 million. Both were oversubscribed and above target.

“We have built a good team and have put valid investment strategies in place. We also delivered on what we promised our investors in Fund I, so there was a lot of interest when we raised Fund II,” says Zhao. “Our LP base has evolved significantly thanks to our existing LPs’ introductions.”   

Lyfe is expected to draw capital from the US dollar and renminbi pools on a 70-30 basis. However, this will not work for every single deal, given some entrepreneurs have a specific preference for one pool of capital over the other and foreign participation is prohibited in certain areas of healthcare. 

“Compared with TMT [telecom, media and technology], healthcare has a relatively smaller number of projects that are highly restrictive for US dollar investments – the exceptions include genetic sequencing and in vitro fertilization,” says Zhao. “As a healthcare fund, we don’t want to miss out on any opportunities in the sector; that’s why we need a renminbi fund which is strategically complementary to our US dollar fund.”

Of the 16 portfolio companies in Fund I, 14 are US dollar and renminbi co-investments. Fund II will continues its predecessor’s strategy of focusing on early to growth-stage companies involved in biotechnology, pharmaceutical, diagnostic devices, and healthcare services. There will be about 20 investments in total. Lyfe has also extended its reach into the US – establishing an office in Palo Alto – and the local team will help Chinese companies expand in the US and support US start-ups entering China.

“TMT is relatively localized – in the US people use Facebook and Twitter, in China they use WeChat. Healthcare is global in that the disease patterns and treatments to those diseases are more or less the same, whether you’re Chinese or American,” Zhao says. “Even though we’re a China-based fund, we follow trends in the US closely and think about how we can leverage our know-how in both countries in order to maximize investment returns.”

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• Topics
• Greater China
• Fundraising
• Venture
• Healthcare
• Technology
• LPs
• China
• Lyfe Capital