Fund focus: Lightspeed ends 2018 with a flourish

While venture capital fundraising in the renminbi space tailed off over the course of 2018, it was a very different story for China-focused US dollar vehicles. Two-thirds of the capital committed came in the second half of the year as fundraising hit a record annual high of $13.5 billion – easily outstripping the local currency total of $8.1 billion, according to AVCJ Research.

The year ended on a high note as Lightspeed China Partners reached a final close of $560 million for its fourth US dollar vehicle. It is the largest fund raised by the GP to date, bringing its assets under management to around $1.5 billion. 

Almost all of the LPs in Fund III – which closed at $260 million in 2016 – re-upped for the new vehicle. New investors include a top global insurer and a handful of endowments and foundations.  

“I don’t feel there was any change in sentiment among our institutional LPs. It took us only three months from the end of September to December to close the fund, and the biggest challenge we faced was not raising money but turning down a lot of keen investors due to our need to be disciplined about fund size,” says James Mi, the firm’s founding partner. 

Lightspeed will continue to focus on early-stage technology investments, but the GP has fallen in with several of its peers by introducing a sidecar fund, which accounts for $200 million of the total raised. It was driven by a need for more capital for follow-on investments. 

Lightspeed has seen several portfolio companies become multi-billion-dollar businesses. They include online truck information content provider Full Truck Alliance, which completed a $1.9 billion funding round led by SoftBank Group at a valuation of more than $6 billion last year. 

The sidecar fund is set to become a permanent feature of the Lightspeed product offering. It will primarily target Series C rounds, writing checks of $15-20 million. Meanwhile, the core vehicle of $360 million will stay in its Series A and B sweet spot, committing $5-8 million per deal. Neither the core vehicle nor the sidecar has deployed any capital so far, but investment is expected to begin in the initial quarter of this year. 

The combination of deep technology – specifically, technological applications based on tangible engineering innovations or scientific advances that could have profound impacts on people’s daily lives once they are commercialized – and enterprise solutions is viewed as a potential bright spot for investors. 

“As the economy slows down, demand from enterprises to boost operational efficiency will only get larger, and this is where deep tech can play a role. In addition, due to the trade tensions between China and the US, China will need to have more of its own deep technology products to stay ahead, which is also pushing up the demand,” Mi says. 

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• Topics
• Greater China
• Fundraising
• Venture
• Technology
• China
• Lightspeed Venture Partners
• TMT