Shunwei goes local with RMB fund

"A few of them already received funding from renminbi funds and they are planning IPOs in the domestic markets. It is difficult for us to convince them to buy-back all shares from existing investors and shift to overseas listings," says Tuck Lye Koh, co-founder and CEO of Shunwei. "Another issue is by the nature of the business. Some businesses are sensitive to government regulation." 

Shunwei - which was set up in September 2011 by Lei Jun, founder of Chinese mobile phone maker Xiaomi, and Koh, formerly of GIC Private and C.V. Starr Investment Advisors - confronted the dilemma by raising its own renminbi fund, which closed at RMB1 billion ($160 million) two weeks ago. It comes about eight months after the firm closed its second US dollar fund at $525 million.

The renminbi fund, which had an initial target of RMB500 million, was oversubscribed. LPs are mostly from private sector and include domestic fund-of-funds and Chinese technology companies and entrepreneurs. Institutional investors account for a substantial majority of the corpus.

Shunwei has invested over 60 tech and internet companies since inception across intelligent hardware, online education, e-commerce, internet finance, real estate services, online automotive services, healthcare, new media, social networking and online gaming.

In China, most internet companies raise capital in US dollars and so this area will feature less prominently in renminbi fund. However, in areas such as online payment, which have become difficult for foreign investors, renminbi managers can claim an advantage. The crux of the dollar-renminbi debate is really whether a company's business model is more appropriate for an onshore or an offshore listing.

"We have never managed a renminbi fund before and we need to learn along the way and work out what is the best model," says Koh. "Decisions to list on Chinese exchanges are driven by our portfolio companies, not by us, but they still account for a small group of companies within the internet industry."

In the renminbi and US dollar spaces alike, the last 12 months have seen a substantial ramp up in VC valuations. However, Koh claims to have seen more discipline over valuations in recent months, while the M&A market has become more active, facilitating exit opportunities for GPs.

"Hopefully there will be more because a larger number of M&A transactions makes for a more vibrant venture market. But M&A is something that's hard for us to plan," Koh says. "Primarily we will choose IPOs. If the business model works well and the team executes correctly, then an IPO is easier to plan for."

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• Topics
• Fundraising
• Greater China
• Venture
• Fundraising
• China
• Venture
• Shunwei Capital Partners