Sequoia Capital’s former China unit has raised an Rmb18bn ($2.5bn) fund, defying a fundraising freeze that has hit rivals and constructing its battle chest to spend money on expertise start-ups within the nation.
HongShan, the Beijing-based group that cut up off final 12 months from one of many world’s largest enterprise capital companies over geopolitical points, efficiently closed the renminbi fund in March, in accordance with two individuals with data of the matter.
It’s the largest fundraising by a privately owned VC agency in China previously 12 months, marking the continuing affect commanded by its founder Neil Shen, extensively thought-about the nation’s strongest tech investor.
The brand new fund is backed by the Hangzhou metropolis authorities and a lot of non-public and state-owned insurance coverage corporations, the individuals mentioned. Nonetheless, it’s smaller than HongShan’s $9bn US greenback fund raised in 2022, which it has to date struggled to deploy.
Begin-ups in China have been hit by an financial and property disaster, in addition to the lasting results of a regulatory crackdown on tech teams that despatched valuations tumbling and crushed plans of inventory market listings.
Final 12 months, Silicon Valley-based Sequoia separated from its China unit amid strain from Washington and Beijing over overseas funding flows.
In June, President Joe Biden proposed guidelines that might cease US funding in Chinese language expertise with army makes use of, similar to synthetic intelligence, quantum computing and semiconductors.
A number of world monetary establishments that had beforehand backed Sequoia China stay buyers in HongShan’s US greenback fund. These embody the California state pension fund Calpers and the Canada Pension Plan.
Shen has been behind a few of the most profitable Chinese language tech investments, together with TikTok mother or father ByteDance, drone maker DJI and ecommerce teams Meituan, Alibaba and Pinduoduo.
This 12 months, HongShan has invested in Zhipu and Moonshot, two of the main home start-ups racing to turn out to be China’s reply to OpenAI.
An individual with data of the fund’s operations mentioned the brand new renminbi fund may current a problem for HongShan’s US restricted companions, the monetary establishments that spend money on VC teams.
HongShan’s greenback and renminbi funds are managed by overlapping groups, however the renminbi one can extra simply spend money on delicate applied sciences.
“The RMB fund and USD fund are very totally different animals beneath the identical management, with extra constraints on the US restricted companions than earlier than,” the particular person mentioned. “By nature the USD fund might be tapped into fewer offers and extra cautious about investing in delicate industries. The query is: the place does HongShan focus its power and efforts?”
HongShan’s seventh renminbi fund is smaller than a newer Rmb28bn one raised in 2021 through the peak of investor urge for food for Chinese language tech corporations. However it leaves HongShan in a powerful place to barter preferential phrases from cash-strapped founders, mentioned one rival VC agency.
“Everyone seems to be struggling to lift capital,” they mentioned. “There aren’t many gamers within the area writing large cheques.”
HongShan declined to remark.
This story has been up to date to take away an inaccuracy about HongShan’s AI investments
