The VC rainmakers

24 Pages·2014·2.18 MB·English

Asia’s Private Equity News Source avcj.com June 03 2014 Volume 27 Number 20
EDITOR’S VIEWPOINT
The PE spotlight turns
back to China
Page 3
NEWS
3i, Accel, Apax, Carlyle,
Clearwater, Hony,
HQ Capital, KKR,
PEP, Piramal Capital,
Providence, Sequoia, SIG
Page 5
INDUSTRY Q&A
Magic Stone Alternative
Investments’ Jenny Zeng
Page 15
ANALYSIS
Renminbi managers
grapple with an
institutional challenge
The VC rainmakers Page 20
GRAPHICAL ANALYSIS
China buyouts: Control or
not control?
How entrepreneur ecosystems are changing China’s venture market Page 9 Page 23
FOCUS FOCUS
Untapped market A scale conundrum
Insurers consider offshore fund options PE reconsiders China education exposure
Page 12 Page 17
PRE-CONFERENCE ISSUE AVCJ PRIVATE EQUITY AND VENTURE CAPITAL FORUM CHINA 2014
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EDITOR’S VIEWPOINT
[email protected]
Red heat Managing Editor
Tim Burroughs (852) 3411 4909
Staff Writers
Andrew Woodman (852) 3411 4852
Winnie Liu (852) 3411 4907
Creative Director
Dicky Tang
Designers
Catherine Chau, Edith Leung,
Mansfield Hor, Tony Chow
Senior Research Manager
Helen Lee
Research Associates
Herbert Yum, Isas Chu,
INVESTORS HAVE NOT BEEN CHASING AS $55 billion raised, new capital for China-focused Jason Chong, Kaho Mak
hard as they used to on opportunities in Chinese vehicles has been slowly declining with last Circulation Manager
private equity these past few years. It’s not hard year’s total dropping below the $20 billion mark. Sally Yip
to understand why: the combination of slowing However, preliminary year-to-date data indicate Circulation Administrator
Prudence Lau
economic conditions, frequently unrealistic that the situation is stabilizing with close to $9.7
Subscription Sales Executive
valuations, the temporary closure of the IPO billion raised by 34 funds – pushing the total Jade Chan
market, a government in transition have made amount of China-focused private equity capital
Manager, Delegate Sales
opportunities elsewhere seem more attractive in to more than $205 billion. Pauline Chen
the short term. The return of the IPO market is not the only
Director, Business Development
There are, however, plenty of reasons for reason to take another hard look at China. There
Darryl Mag
remaining bullish no China, not least because are a number of encouraging developments such
Manager, Business Development
several of the factors listed above have to some as domestic companies’ increasing propensity
Anil Nathani, Samuel Lau
extent abated. to use M&A, instead of R&D, as an instrument of
Sales Coordinator
Since the reopening of the domestic growth. These same companies are also gradually
Debbie Koo
IPO market last December, foreign investors opening up to investing in, collaborating with,
Conference Managers
have rushed into China, with overseas capital and selling to private equity firms.
Jonathon Cohen, Sarah Doyle,
accounting for 68% of the $440 million raised Developments are not restricted to the
Conference Administrator
in the first quarter of 2014. We’ve also observed private sector. The government is also playing a Amelie Poon
a rise in the number of completed deals and role in making the private equity industry more Conference Coordinator
Fiona Keung, Jovial Chung
successful exits in the past six months as PE and attractive with the easing of regulations, broader
VC firms regain their momentum. financial reforms and the launch of free trade Publishing Director
The recent $1.7 billion listing of JD.com – “the zones. Allen Lee
Amazon.com of China” – has resulted in great, There can be little doubt that the Chinese Managing Director
though still mostly paper, profits for its backers. private industry is in the process of recapturing Jonathon Whiteley
The company is still trading at a 30% premium not so much its former glories, as a more rational
to its IPO price, which may be a prelude what and value-oriented equilibrium.
happens when Alibaba Group goes public this
summer. Will this public market euphoria boil Incisive Media
Unit 1401 Devon House, Taikoo Place
over to the private equity scene? That remains to 979 King’s Road, Quarry Bay,
be seen but early signs look promising. Allen Lee Hong Kong
T. (852) 3411-4900
Statistics from our research team reflect this Publishing Director F. (852) 3411-4999
E. [email protected]
change. Since peaking in 2011 with a staggering Asian Venture Capital Journal
URL. avcj.com
Beijing Representative Office
No.1-2-(2)-B-A554, 1st Building,
Fundraising in China
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50,000 300 F. (86) 10 5869 6205
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250
n 40,000
millio 30,000 200 nds
US$ 20,000 115000 Fu The Puibnl ipsahretr irse pseerrvmesit ateldl roignhlyts w hietrhe itnh.e R weprirtotednu cctoinosne nint wofh ole or
AVCJ Group Limited.
10,000 50 ISSN 1817-1648 Copyright © 2014
0 0
2009 2010 2011 2012 2013 2014 YTD
No. of funds Amount (US$m)
Source: AVCJ Research
3
Number 20 | Volume 27 | June 03 2014 | avcj.com

NEWS
ASIA PACIFIC Carlyle acquires Japanese Chinese warehousing developer and operator
noodle snack maker e-Shang. APG and e-Shang - which was
founded in 2011 by two local entrepreneurs
David Pierce appointed The Carlyle Group has acquired a controlling in conjunction with Warburg Pincus - will also
Asia head of HQ Capital stake in Oyatsu Company, the Japanese establish a joint venture to build modern logistics
manufacturer of Baby-Star ramen snacks. real estate assets across China.
David Pierce, previously a partner at FLAG Financial details were not disclosed but sources
Squadron Asia, has been appointed managing put the value of the deal at more than JPY20 China’s Alibaba to buy 10%
director and head of Asia at Harald Quandt (HQ) billion yen ($194 million) for a 51% stake. stake in Singapore Post
Capital. The firm, a private investment group Set up in 1948, the company is based in
owned by the Harald Quandt family of Germany, Tsu in western Japan’s Mie prefecture and Alibaba Group has agreed to buy a 10.35%
has approximately $12 billion in assets under has a workforce of around 370. Its flagship stake in Singapore Post (SingPost) for S$312.5
management. product, Baby-Star ramen snacks, has been sold million ($249 million), becoming the second-
domestically since 1959. Made from the by- largest shareholder in the national postal service
AUSTRALASIA product of noodle manufacturing, the snack is provider. In addition to selling 30 million ordinary
also available in China, Hong Kong, South Korea shares, the listed company is issuing 190.096
million new shares to Alibaba Investment at
PEP exits Australia’s Peters S$1.42 apiece.
Ice Cream to UK’s R&R
Mobile app analytics firm
Pacific Equity Partners (PEP) has exited Australia’s App Annie raises $17m
Peters Ice Cream to PE-backed UK ice cream
company R&R. Local reports value the deal at Mobile app analytics platform App Annie has
around A$450 million ($416 million). Peters’ most raised $17 million in new funding from existing
popular brands include Drumstick, Connoisseur, investors IDG Capital Partners, Greycroft Partners
Peters Original and Maxibon. PEP acquired Peters and Sequoia Capital.The company has now raised
from Swiss food and beverage giant Nestlé for $39 million in total.
around $304 million in 2012.
Hony completes $569m sell
PEP to list Australian paper and Vietnam. Oyatsu currently has three facilities down of CSPC Pharma
maker Asaleo for $642m in Mie and is currently planning to establish its
first overseas manufacturing base in Asia. The Hony Capital has made a partial exit from Chinese
Pacific Equity Partners-owned paper maker company - which will continue to be headed by generic drugs maker CSPC Pharmaceutical
Asaleo Care, formerly known as SCA Hygiene President Yoshiaki Matsuda - generated sales of Group, generating HK$4.41 billion ($569 million).
Australasia, is looking to raise A$690 million ($642 JPY18.2 billion for the year ended July 2013. Hony-owned Joyful Horizon sold 600 million
million) in what would be the biggest Australian This is the first deal from Carlyle Japan shares in CSPC to third parties and 105.88 million
IPO this year. Asaleo, formerly is jointly owned Partners III, a vehicle launched in May last year shares to an entity owned by Dongchen Cai,
by PEP and Swedish paper products company with a target of around $1 billion. Carlyle’s last the company’s chairman, at HK$6.25 apiece,
Svenska Cellulosa Aktiebolaget (SCA) significant buyout in the country was in 2012, according to a regulatory filing.
when it bought cleaning services provider
GREATER CHINA Diversey for about JPY30 billion. SIG commits $20m to China
discount site 51Fanli
3i exits auto parts firm to of investment led by Sequoia Capital. Chinese SIG China has committed $20 million in a Series
Chinese buyer microblogging website Sina Weibo also B round of funding to 51Fanli, a Shanghai-based
participated in the round. online discount aggregation site. The site has
3i has sold Hilite International, a German suppler previously obtained $10 million from Qiming
of auto engine and transmission parts, to China’s Apax to invest $15m in Venture Partners and Steamboat Ventures in
AVIC Electromechanical Systems for EUR473 Zhaopin alongside IPO 2011, AVCJ Research’s records show.
million ($643.8 million), generating a 2.1x return.
Hilite makes products intended to improve car Zhaopin, a Chinese recruitment website which Charm Communications
fuel efficiency and reduce emissions. 3i acquired has previously raised capital from several VC accepts CMC buyout offer
the company in 2011 for EUR190 million in an firms, will receive $15 million from Apax Partners
all-equity transaction. alongside a US IPO. Chinese advertising agency Charm
Communications has accepted a take-private
Sequoia leads $100m APG invests $650m in PE- offer from a consortium backed by China
round for China news app backed e-Shang Media Capital (CMC) that values the NASDAQ-
listed company at around $180 million. The
Toutiao, a Chinese mobile news app operator, Dutch pension fund APG Asset Management consortium, led by He Dang, Charm’s chairman
has received $100 million in a Series C round will invest up to $650 million for a 20% stake in and founder, will acquire all outstanding
5
Number 20 | Volume 27 | June 03 2014 | avcj.com
NEWS
American Depository Shares that it doesn’t Sequoia raises $530m for $12.5 million payable after two years.
already own for $4.70 apiece. India fund
PE-backed Café Coffee Day
NORTH ASIA Sequoia Capital has raised $530 million for eyes $1b India IPO
its fourth India-focused fund, which has an
expanded remit to take in opportunities in Café Coffee Day - the Indian café chain backed
Sequoia leads $100m Southeast Asia as well. by KKR, Standard Chartered Private Equity (SCPE)
round for e-commerce firm The fund will primarily invest in the and New Silk Route Advisors (NSR) - is said to be
technology, consumer and healthcare sectors. considering an IPO next year.The company may
South Korean e-commerce platform Coupang The team is particularly interested in mobile, seek a valuation of about $1 billion and plans to
has raised a $100 million round of funding led by online payment, big data, software-as-a-service, file a draft prospectus with the Securities and
Sequoia Capital that is said to value the company cloud computing, enterprise software and Exchange Board of India (SEBI) later this year.
at more than $1 billion. A number of existing medical and lifestyle-related opportunities. Check
investors also participated in the round. sizes will range from a few hundred thousand Piramal Capital merges PE
dollars to $50 million. and lending arms
AIP Japan to launch $300m
healthcare focused fund Piramal Capital has merged its real estate private
equity fund management business - Indiareit -
Asia Investment Partners (AIP) Japan is launching and its real estate-focused non-banking financial
its sixth healthcare-focused fund, which will company (NBFC). The combined entity is known
specifically target the elderly care home as Piramal Fund Management (PFM). Piramal
segment. The fund is looking to raise JPY30 Capital is the finance arm of Piramal Enterprises,
billion ($295 million). the flagship company of Piramal Group.
Japan Industrial Solutions SOUTHEAST ASIA
invests $98m in Unitika
Turnaround specialist Japan Industrial Solutions KKR agrees $1.1b deal for
(JIS) has agreed to acquire a stake in listed textiles Sequoia has been active in India for eight Singapore’s Goodpack
manufacturer Unitika for JPY10 billion ($98 years, making seed, venture and growth
million). JIS Fund 1 will purchase 10,000 new class investments. It has backed around 75 companies, KKR has agreed to buy Goodpack, the world’s
C preferred shares. including search engine Just Dial, which went largest manufacturer of intermediate bulk
public in May 2013, raising $174 million, and containers (IBCs), for S$1.4 billion ($1.1 billion). It
SOUTH ASIA outsourcing firm GlobalLogic, which was sold to plans to delist the company from the Singapore
Apax Partners last October. exchange. The private equity firm will pay
The new fund takes the total committed S$2.50 per share for all outstanding shares in the
Clearwater in partial exit capital to the firm’s India funds to around $2 company through a scheme of arrangement.
from Diamond Power Infra billion. The first entity, Sequoia Capital India
Growth Fund I, raised $400 million in 2006. GGV leads $15m round for
Asia special situations investor Clearwater According to AVCJ Research, two funds followed taxi-booking app
Capital Partners has part-exited India’s Diamond in 2007 - a second growth fund of $725 million
Power Infrastructure by selling a 5.5% stake for and an early-stage vehicle of $300 million. GGV Capital has led a Series B round of funding
INR271 million ($4.57 million) via an open market worth more than $15 million for GrabTaxi, a
transaction. Southeast Asia-focused taxi-booking mobile
media company Bertelsmann have teamed up phone app. Qunar, a NASDAQ-listed Chinese
Providence to buy stake in to invest in Pepperfry.com, an Indian online travel platform that is majority-owned by Baidu,
India shopping JV marketplace specializing in furniture and home also participated alongside existing investor
accessories. The size of the investment was not Vertex Ventures.
Providence Equity Partners has acquired a 50% disclosed, but local media put it at around $15
interest in home-shopping channel Star CJ million. Clearwater sells jack-up rig
Network India from Star Group. The business is a to Middle East buyer
joint venture with Korea-based CJ O Shopping. VC-backed medical
The size of the transaction is said to be in excess advisory bought by Ebix Asia special situations investor Clearwater Capital
of $50 million. CJ O Shopping will retain its Partners has sold a jack-up rig built in a Singapore
interest in the venture. Healthcare Magic, an India-based medical shipyard to a drilling services partnership
advisory service that won early backing from between the Saudi Arabian government and
Bertelsmann, NVP back Accel Partners, has been acquired by NASDAQ- Schlumberger. The Keppel FELS B Class jack-up
furniture marketplace listed on-demand software and e-commerce rig is the first of two Clearwater placed in late
services provider Ebix. Ebix has paid $6 million in 2013. Keppel FELS is a network of offshore yards
Norwest Venture Partners (NVP) and international cash for the business plus an earn-out of up to owned by Singapore’s Keppel Offshore & Marine.
6
avcj.com | June 03 2014 | Volume 27 | Number 20
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创新无极限
Innovation
without
limits
Cooley’s Global Private Investment Funds group is highly 科律的全球私募投资基金业务组致力于为位于中国
specialized in serving private equity, growth equity and 以及面向中国投资的私募基金、成长型基金和创投
venture capital clients. We have extensive experience 基金提供高度专业化的服务并拥有丰富的全球及中
assisting funds located or investing in China. 国经验。
We have been involved in the China investment funds 自1989年起科律就一直参与中国私募投资基金市
market since 1989—longer than any other global law firm. 场的法律服务，起步早于任何其他全球性律师事务
We form more dollar-denominated China venture capital 所。科律协助成立的专注投资中国的创投美元基金
and growth equity funds than any law firm worldwide. In 和成长型美元基金在数量上远超过任何其他律师事
2014 year-to-date, we have organized in excess of USD 务所。自2014年至今，我们协助成立的中国创投
基金和私募基金规模已超过16亿美元。
$1.6 billion in China venture capital and private equity funds.
科律律师事务所
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© 2014 Cooley LLP, IFC - Tower 2, Level 35, Unit 3510, 8 Century Avenue, Pudong New Area, Shanghai, 200120, China, [phone]
中国上海浦东新区世纪大道8号国金中心二期35楼3510室, 200120 电话: [phone]
COVER STORY
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The virtuous circle
创新无极限
China’s VC market is evolving as funds started by or raised from founders of first-generation internet firms.
Innovation
Concerns about conflicts of interest must be addressed, but the influence of their ecosystems will grow
without
JUST OVER TWO YEARS AGO, ANDREW Venture capital fundraising in China for the first Vision Knight’s Wei reports a similar
Teoh passed up a role on Chinese e-commerce five months of 2014 reached $5.2 billion, beating experience between his two funds. Institutional
giant Alibaba Group’s mega IPO for a career the totals for the previous two years in full. players account for 70% of the Fund II corpus but
limits helping companies get started on the journey There is a cyclical element to this. Nearly half it was a very different story the first time around.
that might end in a public listing. The world will the capital raised went to Legend Capital, GGV “With Fund I it is very difficult to win the
soon find out whether Alibaba Group can live Capital, Matrix Partners, Qiming Venture Partners trust from institutions because you have no
up to the hype. Teoh, meanwhile, is preoccupied and DCM. They all raised their previous vehicles track record and your strategy needs time to be
with Ameba Capital, the VC firm he founded with between 2010 and 2012 so were expected proved,” Wei says. “We went for high net worth
the former CFO of Kingsoft Holdings. to return to market in 2013-2014. This almost entrepreneurs. We wanted them not just to put in
“A lot of people asked me why I was leaving synchronized activity is in part responsible for the money but also be part of our network. In Fund I
a potentially $200 billion company, but I went China VC fundraising spikes in 2011 and 2008. we had four institutional investors and they were
to Alibaba to really learn how companies work, But this old guard is increasingly all introduced by entrepreneurs’ family offices.”
having previously been only on the advisory side,” complemented by the new. Yunfeng Capital, a Even though space in Vision Knight Capital
Teoh explains. “I always wanted to start my own tech-focused private equity firm, recently closed Fund II was limited, the number of entrepreneurs
business and every step in my career has been its second fund at $1.1 billion. The firm was set participating has actually doubled to 36. Wei
geared towards that goal.” up by David Yu and Jack Ma, founders of Target likens them to buying an insurance premium:
Previously a banker in the tech, media and Media and Alibaba, respectively. “You don’t need them immediately but maybe
telecom (TMT) space, Teoh joined Alibaba in Vision Knight Capital, founded by ex-Alibaba. you will need them in the future.” Half the deals in
2005 to focus on corporate development. This com CEO David Wei raised $550 million for its Fund I came through entrepreneur introductions,
included participating in Yahoo’s investment in
2005 and the IPO of B2B division Alibaba.com. “We went for high net worth entrepreneurs. We
Cooley’s Global Private Investment Funds group is highly 科律的全球私募投资基金业务组致力于为位于中国
He moved on to corporate finance where his last
major project was the $1.6 billion deal that likes wanted them not just to put in money but also
specialized in serving private equity, growth equity and 以及面向中国投资的私募基金、成长型基金和创投
of Silver Lake and Temasek Holdings get equity in
be part of our network”
venture capital clients. We have extensive experience 基金提供高度专业化的服务并拥有丰富的全球及中 the company. – David Wei
Teoh’s present existence is far removed in
assisting funds located or investing in China. 国经验。 pure dollar terms. Ameba raised $25 million
for its debut fund, principally from successful second fund. Vision Knight targets the consumer- but there is no guarantee of the same happening
We have been involved in the China investment funds 自1989年起科律就一直参与中国私募投资基金市 entrepreneurs and tech sector investors. It technology space and, given the partners’ in Fund II. Value-add could come through day-to-
has backed 22 start-ups, has three exits in the operating backgrounds, classifies itself as a PE day consulting on portfolio companies.
market since 1989—longer than any other global law firm. 场的法律服务，起步早于任何其他全球性律师事务 pipeline, and is now preparing to launch a firm. Shunwei Capital Partners, founded by super GGV Capital is one of a number of established
successor fund with a bigger target. angel, Kingsoft veteran and Xiaomi CEO Lei Jun, players that carves out an entrepreneur sidecar
We form more dollar-denominated China venture capital 所。科律协助成立的专注投资中国的创投美元基金 closed its second fund at $525 million. vehicle alongside its main fund in order to create
A rising tide Other angel investors have also launched an alignment of interest with potentially useful
and growth equity funds than any law firm worldwide. In 和成长型美元基金在数量上远超过任何其他律师事
Ameba is just one member of a new vanguard vehicles, notably ZhenFund, created by Bob players in the technology space. Hans Tung,
2014 year-to-date, we have organized in excess of USD 务所。自2014年至今，我们协助成立的中国创投 of Chinese PE and VC firms that is able to raise Xue and Victor Wang, founders of US-listed New managing partner at GGV, explains that while
money by dipping into the growing ecosystem Oriental Education, in conjunction with Sequoia the firm’s ties to the likes of Baidu, Alibaba and
$1.6 billion in China venture capital and private equity funds. 基金和私募基金规模已超过16亿美元。 of domestic entrepreneurs. Either started by Capital, and C.C. Zhuang, co-founder of travel site Tencent Holdings (the BATs) are well established,
or raised from founders of successful first- Qunar, who started Crystal Stream Capital. it wants to maintain relationships with executives
generation internet businesses, these funds have There is one fully-fledged VC spin-out. The from businesses in the tiers below.
a pedigree that is rooted extensive deal-sourcing TMT investment team from IDG Capital Partners “You have first-generation entrepreneurs
networks and proven operational ability. departed last year to form Banyan Capital and and VCs. They know each other, they started
“A lot of people have made money in the they closed their debut vehicle at $206 million businesses together, and now they are putting
tech sector and some of them are coming into in January. The LPs are predominantly CEOs money into businesses started by second-
the buy side, self-funding or raising capital from of companies they backed while at IDG. This generation entrepreneurs,” says Lye Thiam Koh,
within their circle,” Teoh adds. “You are going to compares to Yunfeng raising its first fund almost principal at Northgate Capital. “Experience and
see more and more of that. Not only people like exclusively from a set of leading founding partner capital is being recycled into the system and
科律律师事务所
myself, but also guys leaving the big VC firms entrepreneurs. However, the firm managed making it more robust.”
to form their own funds and raise money from to diversify its LP base for Fund II, picking up This phenomenon is by no means
people they know.” allocations from several institutional players. unprecedented. The virtuous circle is well-
www.cooley.com
© 2014 Cooley LLP, IFC - Tower 2, Level 35, Unit 3510, 8 Century Avenue, Pudong New Area, Shanghai, 200120, China, [phone]
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中国上海浦东新区世纪大道8号国金中心二期35楼3510室, 200120 电话: [phone] Number 20 | Volume 27 | June 03 2014 | avcj.com
COVER STORY
[email protected]
established in Silicon Valley and perhaps best “But there is also a big difference between talking become an aggressive M&A player and is said
exemplified by the “PayPal mafia,” named for the about investing money and being a custodian to have backed several VC funds. Now online
start-up money-transfer service sold to eBay in of money. If you have a background in finance retailer JD.com have gone public it is expected
2002. PayPal alumni have since set up, joined, the compliance side becomes instinctive. Some to embark on a series of acquisitions and online
merged or invested in a vast array of VC firms and entrepreneurs will struggle if they don’t have the video provider Youku Tudou may do the same.
start-ups, including the likes of YouTube, Yelp, patience to deal with the administrative side, It begs the question when ecosystems
LinkedIn and Tesla Motors. The mafia epithet has and that’s not only being a fiduciary but also become a vice rather than a virtue. There are
since been attached to networks emanating from managing a team.” certainly risk factors involved, not least that a
Facebook and Twitter. The implication is that not everyone is cut out fund perceived to be aligned with a particular
to manage money once their LP base stretches company could essentially become an extension
Then and now beyond friends and family and into institutional of its M&A efforts.
That China is now following suit is a sign of the territory. It is worth noting that Vision Knight’s Alibaba has invested alongside Yunfeng on
deepening investor and entrepreneur pool. Wei and Ameba’s Teoh both forged careers several occasions and then Yunfeng participated
The contrast with the environment less than 10 in finance before moving into operations. At in the 2011 investment in Alibaba that featured
years ago couldn’t be starker. In 2005, having Shunwei, Lei Jun teamed up with Tuck Lye Koh, Silver Lake and Temasek.
co-founded online travel agency Ctrip and taken previously of GIC Private and C.V. Starr. Alibaba committed $100 million to Yunfeng’s
it public, Neil Shen formerly entered the VC As such, Teoh considers himself to be part second fund and the company said in its IPO
space as managing partner of Sequoia Capital’s of the Alibaba ecosystem but not typical of it. filing that the alliance is beneficial to its business.
China franchise. While he may well The LP tie-up “formalized an
have been able to raise a fund institutional relationship” with the
Recently closed China VC and tech-focused PE funds
independently, Shen opted to align GP. “We expect that, through its
with the brand, knowledge base expertise, knowledge base and
Amount Predecessor Predecessor
and fundraising expertise of a US Fund Date closed (US$m) closed size (US$m) extensive network of contacts in
firm. private equity in China, Yunfeng
Yunfeng Fund II May-14 1,100.0 Jun-10 307
Sally Shan, head of China at Capital will assist us in developing
LC Fund VI May-14 500.0 May-11 515
HarbourVest Partners, describes a range of relevant strategic
then and now as China PE 1.0 GGV Capital V* May-14 622.0 Aug-12 509 investment opportunities,” it said.
versus China PE 2.0. In 1.0, GPs Matrix Partners China III Apr-14 350.0 Apr-11 350 Teoh is upfront about the
would leverage whatever affiliations perceived conflicts that might
Vision Knight Capital Fund II Apr-14 550.0 Mar-13 250
they could to get started, whether arise if Tencent were to emerge
Qiming Venture Partners IV Mar-14 500.0 May-11 450
it was a US VC firm or a Chinese as a strong partner for a portfolio
corporation like Legend Holdings or DCM Ventures China Fund Mar-14 330.0 Jun-10 400 company in an Ameba fund with
(DCM VII)*
CITIC Group. LPs including current and former
Banyan Partners Fund I Jan-14 206.0 - -
“The supply of capital was members of Alibaba and Kingsoft.
limited and trust and credibility * Also invests in US “We have also invested alongside
Source: AVCJ Research
were hard to gain among the LPs Baidu, non-BAT strategic corporates
without a track record,” she says. and typical VC funds, so it’s pretty
“Under China PE 2.0, there are Chinese individuals He expects more spin-outs but with a view to neutral across the fund,” he says. “At the end of
and organizations participating as LPs. The deal starting pure operating businesses, not funds. the day the portfolio company is number one
sourcing opportunities and ways to create value The other obstacle is simply time. Many and we want to be objective.”
and secure exits are deeper..” entrepreneurs remain fully occupied by the He stresses that marketing efforts for
Derek Sulger, now a partner at consumer- businesses through which they made their Fund II will be based on exits – as evidence
focused buyout firm Lunar Capital, was in a fortunes and not in a position to make angel of a systematic business model – not Alibaba
similar position to Shen nearly a decade ago. investments, let alone set up institutional funds. connections. Vision Knight’s portfolio also has
He had founded wireless value-added services “It takes a lot of work to raise a professional fund minimal Alibaba crossover and Wei expresses a
provider Linktone and taken it to NASDAQ and I don’t think many entrepreneurs will do it,” similar view on fundraising. “It helps to open the
the year after Ctrip. Sulger was approached by says GGV’s Tung. “They would put money into door, but it doesn’t mean too much when you
several US VC firms looking to set up China-based sidecar vehicles instead.” raise money. It doesn’t prove you are a good fund
affiliates but ultimately chose to go it alone in PE. manager.”
Sulger identifies two qualities that made Shen Risk factors The general consensus is it best to remain
stand out. First, he was an entrepreneur with While the Alibaba ecosystem may have made independent as long as possible and only bring
experience of running a business and this had the most visible contribution to Chinese private in a strategic partner if there is a particular need
inculcated a belief in the value proposition of equity – with Vision Knight, Ameba and Yunfeng – and then make a selection based on what best
making investments in platform-like companies – the full scale of funds, start-ups, M&A events serves the portfolio company. As one industry
and using them to find other synergistic and LP commitments that can in some way be participant observes, Alibaba brings money and
opportunities. Second, he previously worked as a traced back to alumni of the BATs is virtually credibility but is hands-off in its approach, leaving
banker and then as a CFO. impossible to fathom. And it doesn’t stop there. the entrepreneur to address issues. Baidu and
“The guys who have raised funds have Another ecosystem has arguably sprung up Tencent, meanwhile, are known for using their
something they deeply believed in and the around the Lei Jun-Kingsoft-Xiaomi axis; Qihoo clout to bring user traffic to start-ups.
stubbornness of an entrepreneur,” Sulger says. 360, a US-listed antivirus software developer has The relatively small size of China’s start-up
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avcj.com | June 03 2014 | Volume 27 | Number 20