Beijing-based investment firm Buhuo Ventures has completed a yuan-to-dollar fund restructuring to raise its maiden US dollar venture capital (VC) fund at over $100 million.
As part of the process to create the US dollar fund, Buhuo transferred partial stakes in four assets from its initial yuan fund Buhuo Ventures RMB Fund I, a 500-million-yuan, 2017-vintage vehicle, and an associated special purpose vehicle (SPV) into Buhuo Venture USD Fund I, the firm announced in a WeChat post on April 29.
The assets include Chinese engineering equipment rental platform Zhongneng United; Guoquan, a supermarket chain that offers hotpot and barbecue ingredients; and New Carzone, a business-to-business-to-consumer (B2B2C) auto aftermarket platform backed by e-commerce giant Alibaba, among others.
Under a six-year term, Buhuo’s maiden US dollar fund already booked a 1.5x multiple on invested capital (MOIC) at the final close.
Three of the new vehicle’s portfolio firms are expected to file for an initial public offering (IPO) within one year, said the firm. Chinese fund placement business AlphaLoop advised the transaction that took around four months in total.
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Buhuo’s cross-currency fund restructuring followed the footprints of its domestic counterpart Kinzon Capital, which in 2019 transferred seven assets out of an RMB-denominated fund into a US dollar fund to open itself to foreign investors.
Beijing-based IDG Capital also carried out a yuan-to-dollar restructuring in an over $600-million deal led by HarbourVest Partners, with participation from LGT Capital Partners, according to sources cited in a September 2020 report from Secondaries Investor.
In an interview with Private Equity International (PEI) last week, Buhuo’s founding partner Jay Li said the transaction, which was worth over $100 million, consisted of about two thirds of net asset value, as well as one third of follow-on capital for new investments.
The transaction was backed by funds of funds (FOFs) in the US and Asia, and Asian family offices, said the firm, without naming these limited partners (LPs).
“Buhuo’s goal is to become a dual-currency management firm as USD LPs are more stable, and more financially-driven investors,” Li was quoted as saying. “Also, most of our deals are JV structures, which enables them to raise money from both RMB and USD funds, so that’s an advantage.”
According to the PEI report, the USD Fund I used some of the follow-on capital to purchase new shares in Guoquan, which the firm had invested about 350 million yuan through its RMB Fund II, an 800-million-yuan, 2019-vintage vehicle, and SPVs. The startup’s valuation reportedly rose to nearly $2 billion from just 300 million yuan ($46.3 million) in about 18 months.
As Guoquan’s earliest investor, Buhuo first injected 45 million yuan into the firm’s Series A round in August 2019. Founded in early 2017, the startup recorded a total of 5,000 supermarkets across China, serving about 130 million consumers by the end of 2020.
Buhuo was established in September 2017 by Li, a former partner at Chinese angel investment firm ZhenFund, alongside Ray Yi, previously an investment team founder at CICC Alpha, a direct investment platform of investment bank China International Capital Corporation (CICC).
With over 2 billion yuan ($308.9 million) in assets under management (AUM), the firm invests in startups from Series Pre-A round to the growth stage with a focus on China’s supply chain industry.
It has built a portfolio of startups, such as Internet of Things (IoT) startup EasyLinkin; health food brand Sharkfit; new retail solutions provider iBOXCHAIN; smart home furnishing service Transblock; and Master Bao, a startup that offers maintenance and online transactions of luxury products.