MindWorks plans to tap US LPs as interest in Asia's emerging fund managers remains high: David Chang

MindWorks plans to tap US LPs as interest in Asia's emerging fund managers remains high: David Chang

David Chang, co-founder and managing partner of MindWorks Capital. Source: MindWorks Capital

Hong Kong-based MindWorks Capital – an investor in HK-based logistics firm Lalamove and Taiwan-based travel e-commerce platform KKday – is seeking to tap commitments from limited partners (LPs) in the US for the first time through the launch of its Fund IV in H1 2021.

MindWorks Capital is targeting to raise $150 million for Fund IV with a hard cap of $200 million for investment opportunities in Greater China and the pan-Asia region.

“People are always looking for emerging fund managers, although a lot of LPs are unable to conduct site visits this year due to travel restrictions and thus opt to re-up commitments to their existing GPs,” said David Chang, co-founder and managing partner of MindWorks Capital, in an interview with DealStreetAsia.

“Interest in our Fund IV has been high,” he said. “I have not seen any slowdown of US-based LPs investing in the venture capital asset class in Asia.”

By far, the total market value of MindWorks’ shares across all portfolio companies has amounted to $714 million.

Going global

Chang co-founded MindWorks Capital in 2013 with Joe Chan after they returned from Silicon Valley to a domestic environment in which Chang says there was only “a small trickle” of Chinese tech firms going global – a trend that has grown to become a major theme for Chinese tech startups nowadays.

After seven years in, MindWorks Capital has made itself ready to take on US-based pension funds, university endowments and other LPs, after the past seven years of raising capital from an LP base of largely family offices, funds of funds (FOFs), and asset managers in Europe and Asia.

Its existing LPs include Hong Kong’s Innovation and Technology Venture Fund (ITVF), a HK$2-billion fund created by the Hong Kong government in 2017 to co-invest with VC funds in local innovation and tech startups. ITVF committed $50 million to Fund IV.

“Being situated in Hong Kong with a pan-Asia strategy, MindWorks’ China-Southeast Asia investment layout really resonates with a lot of US LPs’ preference of not allocating all their capital to the Chinese market,” said Chang, adding that the firm invests about 70 per cent of capital in Greater China while deploying the rest 30 per cent to Southeast Asia.

Chang said that most of the greatest tech companies nowadays are international companies with operations “across borderlines.” Hong Kong, thanks to its proximity to mainland China and Southeast Asia, is “a natural stepping stone” for the next multi-billion tech startup to go international.

Through Fund IV, MindWorks Capital plans to invest in 15 to 20 companies, with a total investment size of about $10 million into each startup including capital being reserved for their follow-on rounds. It has closed nine deals so far this year, including six into existing portfolio companies.

“Emerging VCs can offer better co-investment rights and investment exposure compared to managers of billion-dollar funds,” said Chang. He continued that mega-funds could easily miss out on opportunities at Series A and Series B stage, which is when investors can really build “invaluable, close relationship” with founders.

Edited excerpts of the interview with David Chang:

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