China Creation Ventures (CCV), a three-year-old venture capital firm focused on the TMT sector, is in the market raising two new funds – one RMB-denominated and one US dollar – which by far have brought its total assets under management (AUM) to over $700 million.
The investment team behind Chinese e-commerce giant JD.com and fintech conglomerate CreditEase is reloading ammunition to invest in early-stage startups with a focus on corporate services, innovative technologies, and new consumption models.
“The fundraising process is running smoothly despite the impact of the pandemic. The ultimate size of the U.S. dollar fund is expected to be relatively larger than our previous ones,” said CCV partner Nick Nie in an interview with DealStreetAsia on Thursday.
While CCV’s second yuan fund already had its first close, CCV and Nie declined to disclose the expected time for their final closings or the sizes that they are targeting for the two new vehicles.
The fundraising update comes two years after CCV announced the completion of its debut U.S. dollar fund at nearly $200 million with capital injections from institutional investors and family offices worldwide. In the first half of 2017, the company closed its first over-1.5-billion-yuan ($214 million) yuan fund, which has a total investment duration of 10 years.
CCV said that it currently manages over $700 million across two yuan funds and two U.S. dollar funds, including capital commitments already secured by the new vehicles. Setting aside the combined $414-million capital pool across the first two funds, this indicates that Beijing-based CCV might have garnered at least $286 million for its second USD fund and RMB fund.
Founded in 2017 by former KPCB China managing partner Zhou Wei together with his years-long TMT investment team, CCV primarily bets on the fundraising stage between Series pre-A and Series B round.
Apart from some 90 per cent of its deals in the early stage, Nie said that CCV also backs a few “high-potential” angel and seed-round projects, and “reasonably-valued” companies at Series C round that it tends to invest through its yuan fund.
This new U.S. dollar fund represents the venture capital firm’s latest attempt to up its stake in the domestic market, which ushered in at least two colossal deals worth $1 billion and over in the past six months, against the headwinds of the deadly virus and trust crisis among international investors ignited by accounting scandals of US-listed Chinese issuers like Luckin Coffee.
Economists in a recent Bloomberg survey upgraded their forecasts for China’s full-year growth projection to 1.8 per cent from 1.7 per cent as they are expected to see the country on track for a gradual recovery. This could give more fuel to the deal-making activity in the world’s second-largest economy.
For the second half of 2020, Nie plans to continue one of CCV’s major investment strategies in his specialized area of consumer-focused mobile Internet, which is to source deals “based on the consumption demand of various groups of people.”
“[For the new dollar fund,] we are looking to identify opportunities behind the social characteristics, consumption behaviours, and spiritual pursuits presented in different demographics,” he said. “For our investment in the second half of this year and beyond, we will continue to search for and identify particular groups of population with the potential to become the next high-value market generating massive consumer demand.”
As examples of the approach, CCV is closely tracking the development of startups tapping China’s burgeoning markets composed of the middle-aged and elderly group, as well as the young generation born after 2020.
The company also made an investment into META, a mobile-based online entertainment platform that serves the country’s third and lower-tier cities where people are increasingly showing “more willingness to purchase services online,” especially amid travel restrictions during the pandemic hit.
CCV, which typically pours $5 million to $10 million into each transaction, mainly finances companies in the Greater China region as well as a small fraction of overseas TMT businesses led by Chinese teams.
It previously invested in companies including Rong360, a Chinese customized financing and loan services provider listed in New York; Chinese podcasts platform Himalaya FM; Shenzhen-listed network security firm VenusTech; and Tan Tan, China’s top dating app acquired by domestic social networking app Momo in 2018 for a combination of share consideration and $600.9 million in cash.
In December 2018, CCV saw the initial public offering (IPO) of its portfolio firm Wanka Online on the Hong Kong Stock Exchange (HKEX) – within 18 months after CCV invested in its Series B round.
The mainland provider of Android-based content distribution services raised HK$272 million ($35 million) from the listing. But its share price has dropped 80.59 per cent to HK$1.06 ($0.14) at the closing price of July 9 from the peak of HK$5.46 ($0.70) in May 2019.
Editor’s Note: A previous version of this article referred to CCV as a direct investor behind JD.com and NetEase, but in fact, CCV’s investment team made the investment in JD.com when they were still operating under KPCB China. This article has been amended to reflect the change.