The WSJ reports,"four Chinese venture capital firms that invest in Chinese technology start-ups secured $2.23 billion in total new funding in the last two weeks, more than double the $1.07 billion raised in the entire first quarter.
The $2.23 billion worth of capital secured by Shunwei Capital, IDG Capital Partners, Legend Capital and GGV Capital since May 22, in fact, surpasses all previous quarters going back to the fourth quarter of 2011, when Chinese venture firms at that time had raised $3.48 billion, fundraising data from Dow Jones VentureSource show.
For some time, limited partners have treaded cautiously when allocating to Chinese venture capital, as returns from general partners slowed amid fewer initial public offerings and lackluster dealflow.
But Chinese e-commerce giant Alibaba Group Holdings’ forthcoming IPO in the U.S., which analysts say could be the biggest listing for a technology company in history, and online retailer JD.com’s recent $1.8 billion offering on Nasdaq is reviving interest in China’s technology businesses.
With Shunwei, IDG, Legend and GGV’s core investment strategies focusing on the Chinese telecommunications, media and technology industry, it’s unsurprising investor demand for their funds has been high. Shunwei, a firm set up by Chinese entrepreneur Lei Jun, IDG and GGV all surpassed their funds’ targets.
Shunwei closed a $525 million second fund, relative to a $500 million target; IDG raised $586 million versus a $550 million goal; and GGV secured $622 million, surpassing a $500 million target. Meanwhile, Legend Capital raised $500 million on May 22.
There are many technology fund managers in China, but what defines these four particular firms is their streak of investment hits and their reputation, which sits well with investors seeking out the safety of managers that can make returns.
For example, GGV was one of the early investors in Alibaba, while IDG can count Baidu Inc., China’s equivalent to Google Inc., as an investment.
Legend Capital, meanwhile, is part of Chinese conglomerate Legend Holdings, which is a controlling shareholder in computer maker Lenovo Group Ltd.
The latest manager to close a fund, Shunwei, is part of a new breed of venture firms that have been set up by well known Chinese entrepreneurs, in this case, Mr. Lei, the founder of local smartphone maker Xiaomi Inc. which is rapidly encroaching on Apple Inc.’s market share in China.
These entrepreneur-founded funds are garnering increasing investor interest, as they often have better access to deals given the founding partner is tapped into the same entrepreneurial network as potential portfolio companies, while the founding partner’s first-hand experience of how to operate a technology enterprise is also deemed attractive.
Alibaba Executive Chairman Jack Ma is also a founder of private equity firm Yunfeng Capital, which recently raised just over $1 billion".
