Sequoia China to raise $6b new fund with state-owned VC, JD.com

Neil Shen, managing partner of Sequoia Capital China. Photographer: Jason Alden/Bloomberg

Sequoia Capital China is teaming up with a state-owned venture capital (VC) fund and e-commerce powerhouse JD.com to raise up to 40 billion yuan ($5.81 billion) for a new investment firm to focus on late-stage tech investments, sources said.

The yuan-denominated fund of Starquest Capital, or Xingjie Capital, underlines growing efforts by Chinese venture capitalists to fatten their wallets as valuations and financing needs rise with firms spending more time remaining private.

Startups in China are up to 40 percent more expensive than their U.S. counterparts and, in some cases, even valued at twice the price, according to recent investor estimates.

Starquest has so far raised about 10 billion yuan from domestic sources such as banks, said one of the sources.

It is in talks with prospective investors to secure the rest, the sources with knowledge of the matter told Reuters on condition of anonymity as the fundraising plans were private.

Sequoia China said it is a shareholder in Starquest but does not participate in the fund’s management. Starquest, the state-owned VC fund – China State-Owned Capital Venture Investment Fund, and JD.com declined to comment.

The VC fund’s controlling shareholder – China Reform Holdings – did not respond to a request for comment.

According to the sources, Starquest will primarily seek private-equity, late-stage investment opportunities in technology, particularly in sectors Beijing considers to be strategically significant such as artificial intelligence.

FOCUS AREAS

China has been pushing for growth in sectors like robotics, semiconductors and autonomous vehicles, while in artificial intelligence, it aims to be a global leader by 2030.

A mounting trade war with the United States, with tensions running high over market access, intellectual property and technology transfer, has infused a new sense of urgency into Chinese efforts to ramp up development.

Beijing in 2016 launched the 200 billion yuan China State-Owned Capital Venture Investment Fund and tasked China Reform with investing “in strategic emerging industries related to national security and the lifeblood of the national economy”.

The fund, also financed by Postal Savings Bank of China, China Construction Bank and Shenzhen Investment Holding, was the sole investor in Canyon Bridge Capital Partners, a California-based buyout fund.

Canyon Bridge in 2016 planned to buy Lattice Semiconductor for $1.3 billion, but the deal was blocked by U.S. President Donald Trump over national security concerns.

Among the other backers of Starquest, JD.com, China’s No.2 e-commerce firm, has been investing in tech companies, including online fashion retailer Vipshop Holdings and Indonesian ride-hailing startup Go-Jek.

Sequoia China, founded in 2005 by Neil Shen, one of the best-known venture capitalists, has been diversifying its focus to include pre-IPO funding, while retaining its traditional focus on early-stage investments.

It is close to raising 15 billion yuan in its fifth yuan-denominated China-focused fund, the largest of its kind, while parent Sequoia Capital is raising an $8 billion global fund in its largest-ever fundraising.

Shen serves as chairman of Starquest, the sources said.

Sequoia China, however, said Shen was not involved in the day-to-day management or investments at Starquest.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.