China Renaissance K2 Ventures breaks ties with spin-off outfit Next Capital

Teng Yue Partners
Photo: Bloomberg

Chinese early-stage investor China Renaissance K2 Ventures (K2VC) has said that it has completely cut off all ties with its spin-off outfit Next Capital citing a case of intellectual property theft by the latter, according to its public announcement published on Tuesday.

Next Capital, an early stage investment firm, was started by Li Li in 2017. Li, a former media professional, joined K2VC in 2011 and became the firm’s managing director in 2015. She later quit the firm to set up Next Capital, which has even made several investments alongside K2VC.

In 2018, she roped in two executives from K2VC to join her at Next Capital. K2VC is also an LP in Next Capital.

Last December, it came to light that Li, along with her two former colleagues from K2VC, have been paying existing K2VC IT system administrator to infringe K2VC’s confidential information, including trade secrets and intellectual property rights of K2VC’s project management system.

“When Li left in early 2017, in addition to disbursing the carried interest to her based on the investments that she has made on behalf of the firm, K2VC has also accelerated the disbursement of her investment income from three other major projects; we have gifted her some shares of BufanBiz (an entrepreneurship classroom startup, incubated by K2VC and founded by Li); and to show our support, we committed into Next Capital as an LP. We are extremely shocked and hurt to find out our former colleagues have carried out such unspeakable deeds. Despite all these, we have given Li and her two colleagues an opportunity to issue a public apology and will not take any legal actions for now,” said K2VC.

Next Capital has issued a public apology on December 22, 2018, admitting to all the wrongdoings.

As a result, K2VC has declared that it will cease all collaborations with Next Capital and will withdraw its status as LP. It also forbids Next Capital from publicly associating itself with K2VC in any way, especially when it comes to fundraising.

K2VC added that it will retract the carried interest that have been issued to Li, and will donate the capital to charities. Internally, the firm said, it has taken “serious measures” against the IT system administrator and has strengthened its internal security systems and company ethics.

According to an earlier report by 36kr, Next Capital was launched with 400 million yuan ($59 million) debut RMB fund in 2017. The fund’s cornerstone investor is state-linked private equity firm CITIC Capital.

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