Fund focus: LPs queue up for a piece of Long Hill

When a young VC firm finds its fund is 33% oversubscribed during what is described as one of the slower periods in China's fundraising environment, it can raise an eyebrow of interest. When the vehicle achieves a final close in half the time of its predecessor, a closer look at the GP's appeal may be in order.   

The firm in question is Long Hill Capital, which has closed its second China-focused VC fund at $265 million, beating a target of $200 million after only three months in the market. The GP took six months to raise $125 million for its debut vehicle in 2016.

"It wasn't something that we were expecting or planning for, especially given that there's been a precipitous drop-off in PE fundraising in China in the first half of the year," says Xiaodong Jiang, a managing partner at Long Hill. "We initially thought it would be too early for some of the pensions and endowments because it's been less than two years since we closed our first fund. So, we're especially gratified and humbled that they've participated."

New LPs include San Francisco Employees Retirement System (SFERS), while the vast majority of Fund I investors re-upped. These include Asia Alternatives and New Enterprise Associates (NEA), the US-based VC that Long Hill spun out from in 2016. It brings Long Hill's total assets under management to some RMB2 billion ($295 million), after factoring in a first close for the firm's debut renminbi fund that came to about $30 million.

Early-stage investments are expected to be the focus going forward. More than 80% of Fund I deals were at the Series A stage and those companies are said to have gone on to raise some $300 million in follow-on funding collectively. Three investees – Hygeia Medical Services, GST Clinics and LinkDoc Technology – are said to have valuations in excess of $700 million.

Fund II, like its predecessor, will concentrate on technology-enabled healthcare and consumer plays. This, as it turns out, has been the key to the enterprise for Long Hill, with LPs such as SFERS, Asia Alternatives, and NEA, expressly noting that much of their confidence was rooted in the VC's sector knowledge and specialized approach.

"They all do the usual performance and team due diligence, but what the LPs really liked, including some that could not come into the fund for timing reasons, was the fact that we have a very thesis-focused strategy within these two sectors," Jiang says. "But more importantly, they like that we're not just saying we were thesis focused – we actually act according to specific strategies within these sectors, which was very obvious when they looked at our portfolio. That was a consistent theme."

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• Topics
• Greater China
• Fundraising
• Venture
• Healthcare
• Technology
• Consumer
• GPs
• China
• Long Hill Capital
• New Enterprise Associates
• San Francisco Employees’ Retirement System (SFERS)
• Asia Alternatives Management