China's Dreame sets up CVC arm, targets $1.54b for debut funds

China's Dreame sets up CVC arm, targets $1.54b for debut funds

Yu Gao, founder and CEO of Dreame Technology. Photo from Dreame Technology

Dreame Technology, a Chinese maker of smart cleaning appliances, has set up its corporate venture capital (CVC) arm, starting with two venture funds to invest up to 11 billion yuan ($1.54 billion) in the artificial intelligence (AI) and robotics space.

The CVC firm, known as Empyrean Venture, is in the market raising capital for its debut funds, including one growth strategic fund and one early- to mid-stage incubation fund. Their fundraising targets total 11 billion yuan, said the firm in a WeChat post.

Founded in 2023, Empyrean said that it recently held the first close of its early-to-mid-stage incubation fund, which is eyeing a final close of 1 billion yuan ($140.1 million).

In just three months, the smaller fund secured commitments from external limited partners (LPs) such as China’s local governments, state-owned enterprises (SOEs), industrial groups, and family offices. Dreame also invested in this fund.

The CVC did not share much detail on the other fund in the post, except that Dreame is the anchor investor.

Ming Lei, a partner of Empyrean, told 36Kr that the growth strategic fund, which the CVC jointly launched with a local government in China, has closed the “bulk” of its targeted dry powder of 10 billion yuan ($1.4 billion).

With a focus on AI and robotics, Empyrean plans to invest in opportunities in what it calls “the pan-robotics industry,” covering upstream hardware, robotics software, industrial robots, and services robots.

“Nowadays, more Chinese companies are taking on the R&D role,” said Empyrean in the post. “This is what we call, ‘the integration of global resources with Chinese R&D and manufacturing strengths to create products for sales worldwide.’ Many of them are born global… We see plenty of investment opportunities.”

The creation of Empyrean makes Dreame the latest Chinese firm to build its CVC practice. The Suzhou-based firm has joined the country’s booming CVC space, where tech giants like Huawei Technologies (via Habo Investment), Tencent Holdings (via Tencent Investment), and Meituan (via Dragon Ball Capital) have introduced their venture investment arms over the years to leverage strategic investments for the growth of their ecosystems.

Hard tech, new energy, and advanced manufacturing are the three most favoured industries by CVCs in China, according to a March 2024 report by market intelligence firm FOFWEEKLY.

These CVCs typically write somewhere between 100-500 million yuan ($14-70 million) per cheque for primary fund investments and direct/co-investments, with an agenda to add value to the parent group by investing in smaller players in the industry chain, the report shows.

Dreame, established in 2017, sells its cordless vacuums, hairdryers, robotic lawnmowers, and other products to some 120 countries and regions including China, Southeast Asia, the US, Germany, Japan, and South Korea.

It is led by founder and CEO Yu Hao, who initially started the business as a school project when he was studying computational fluid mechanics at Tsinghua University.

In its biggest fundraising to date, Dreame closed 3.6 billion yuan ($504.1 million) in a Series C round in October 2021. Huaxing Growth Capital and CITIC Private Equity (CPE) co-led the deal, with participation from several new and existing investors including Alibaba co-founder Jack Ma-backed Yunfeng Capital, Country Garden Venture Capital, Xiaomi Corporation, Shunwei Capital, and IDG Capital.

Edited by: Pramod Mathew

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