Amino Capital to raise $100m fund for US-China cross-border deals

Amino Capital to raise $100m fund for US-China cross-border deals

Managing team of Palo Alto, California-based early-stage venture firm Amino Capital

Palo Alto, California-based early-stage venture firm Amino Capital is raising $100 million for a USD-denominated fund to finance data-driven startups primarily located in the United States and China.

The new fund, which started raising capital earlier this year, is expected to close in the second quarter of 2020 with capital commitments from Amino Capital’s general partners, as well as family offices, public companies and individual investors, Sue Xu, managing partner of Amino Capital, told DealStreetAsia in an interview on Wednesday.

Amino Capital has about 10-20 active limited partners who also serve as its venture partners to provide professional knowledge and industry know-how, including Wu Zining, the former CTO of global semiconductor major Marvell who founded InnoGrit Corporation in October 2016.

David Wei Xiaoliang, Facebook’s vice president of engineering, has also put money into the new cross-border fund, Xu revealed, adding that commitments from these venture partners accounted for about 20 per cent of the new fund.

Amino Capital has so far secured over 30 per cent of its target corpus, said Xu. The $100-million fund will mainly back startups at seed to Series B stages of financing. It has already invested in over 10 startups, writing cheques ranging from $500,000 to $5 million.

Amino Capital plans to allocate over 50 per cent of the fund to investments in the United States with China accounting for 30-40 per cent. The remaining capital will be deployed in other markets, including Thailand, India and Africa.

The US-based investment company established an office in China about half a year ago with a dedicated team on the ground, sourcing deals in data-driven companies in the healthcare, fintech and professional consumer industries.

Investing against headwinds

The company is upping the ante in the Chinese market despite economic headwinds, an ongoing trade war between China and the United States, and growing concerns about startup valuations that have eaten into deal flow in China and worldwide.

Venture deals in China continued to plummet in the third quarter of 2019. The value of investments in the country tumbled 48.7 per cent to 30.39 billion yuan ($4.33 billion) in the third quarter from a year earlier, while the number of deals decreased 38.7 per cent to 753, according to Chinese research platform Zero2IPO Group.

“Many investment companies have become reluctant to invest in the Chinese market because of what is happening right now,” said Xu, who considers it “a great opportunity” to invest in top-notch entrepreneurs in the country.

“Amino Capital tends to make investments in talented entrepreneurs, data-driven ventures, and sectors that are not in a blaze of hype,” said Xu. “Previously, we might not be unable to participate in some investments in top-notch companies while they were raising capital, simply because of the fierce competition [among investment firms]. But now, it is quite easy for us to write cheques for them.”

“Because of the clouded economic condition and slumped confidence level, we are able to invest in these companies that we have been watching for quite a long time,” she added.

A humble beginning

About 30 per cent of its portfolio companies, which translates to around 45 firms, are based in China. The investment firm favours Chinese entrepreneurs with “a humble beginning” who are “capable of defining the future products,” said Xu, referring to the founders of its portfolio companies CoWrite and Mobike.

Amino Capital was the earliest backer of CoWrite, a Chinese business similar to Google Docs that mainly serves co-workers for project collaboration. The business was started in 2014 by Peking alumnus Cai Jian, who was then a Google engineer.

CoWrite was bought out by Chinese video-sharing app Kuaishou, generating a 7x investment return for Amino Capital.

The VC firm backed Chinese bike-sharing giant Mobike, thanks to personal connections between Mobike’s co-founder Davis Wang and Amino Capital’s partner Jun Wu who became close friends while working together at Google China and Tencent.

Mobike was acquired by Meituan-Dianping, the largest online on-demand service in China, for $2.7 billion in April 2018.

“We believe the next Google or Facebook will also start with a humble beginning,” said Xu.

Industry know-how

Amino Capital, formerly known as zPark Venture, was founded in 2012 to back companies specialising in artificial intelligence (AI), big data and domain expertise. The company has so far backed 150 companies, about 25 of which have been acquired by technology giants such as Facebook, Amazon and Tencent while over 21 are valued at more than $100 million.

“Our portfolio companies in the healthcare and fintech industries have generated the best investment returns in the past years,” said Xu. Two of the company’s six unicorns are in the healthcare sector, while the other four are in fintech.

The company introduced its maiden fund in 2012 to focus on seed and pre-Series A rounds of investments. In September 2016, Amino Capital announced the final close of the $50-million second fund to cover investments from seed to Series B rounds.

Some of the most prominent exits enjoyed by its debut fund include Orbeus, a computer vision algorithm maker (acquired by Amazon in 2015), and Assemblage, which provides tools and infrastructure to enable browser collaboration (bought by Nasdaq-listed technology conglomerate Cisco in 2014).

Another portfolio firm, Contastic, which offers natural language-based predictive sales tools, was acquired by California-based software company SugarCRM in 2016.

Xu, who leads investments in data-driven solutions and Web 3.0, has been involved in more than 150 investments since 2012, including Assemblage and Orbeus, American cancer-testing startup Grail, as well as conversational AI startup Ozlo and AI-enabled visual shopping app GrokStyle, which were both acquired by Facebook.

Xu spoke to DealStreetAsia about the investment strategy of Amino Capital, the investment performance of its previous two funds, as well as the firm’s growing focus on the Chinese market. Below are the edited excerpts:

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief
Subscribe to Newsletter