Fund focus: InnoSpring builds cross-border bridges

Silicon-Valley based technology incubator InnoSpring stepped in with a seed investment out of its first China-US fund and desperately-needed China expertise. Now, with a fresh $5 million for its second fund in the bank, InnoSpring plans to help more start-ups both in the US and in China secure those all-important cross-border ties.

"When we started there had been a lot of exchange of talent, capital and partnerships between the US and China, but there wasn't a professionally-run platform that went a step further, bridging two markets that are very different culturally and very different in terms of a running business," says Xiao Wang, CEO of the InnoSpring Seed Fund.

InnoSpring's funds are primarily raised from venture capital backers. The first fund was supported by KPCB, Northern Light Venture Capital, GSR Ventures, China Broadband Capital, and the TEEC Angel Fund. Northern Light also features in the second, alongside IDG Capital Partners, Legend Capital, Legend Star, SoftBank, the Chinese Software Development Network, and executives from Tencent Holdings.

Investees not only receive seed capital of around $30,000 per company, but also access to other InnoSpring start-ups and companies in the portfolios of these VC firms. This base of experience and knowledge can help newcomers trying to break into an unfamiliar market, whether in China or the US.

Part of InnoSpring's role is to convince investees, most of which are based in the US, that China is relevant to them. This can be challenging, because awareness is still quite low among most US start-ups.

"Even though Alibaba Group has gone public, most of my friends who are really tech-savvy don't know Alibaba's business model," says Wang. "I've been giving talks at Stanford a lot, and most of the people sitting in the audience have no clue as to how Baidu, Alibaba or Tencent generate their revenue."

Companies that take Innospring's advice on board have seen success. Artisan State, which now produces photo books and frames in China, is projected to post $25 million in revenue this year, while consumer-focused mobile security company Trustgo was acquired by Baidu eight months after Innospring's 2013 investment.

InnoSpring is now looking to expand its China presence, having recently set up a renminbi-denominated fund, which will support Chinese and US companies. "We need capital to support these companies that are on the ground in China. We can't just leave them alone," Wang says. "We're going to set up a bigger China fund, and that will be our complete pipeline to provide continuous support."

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• Topics
• Fundraising
• Greater China
• North America
• Early-stage
• Venture
• seed
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• Fundraising