Chinese venture capital firm Unity Ventures is preparing ammunition for its first $100-million US dollar fund as it foresees heightened investment into early-stage technology startups following Beijing’s listing reforms that will make exits easier for their investors.
Beijing-based Unity Ventures, which primarily bets on startups at the angel and pre-Series A stages, already reached the first close for the debut dollar fund at tens of millions of US dollars before the Lunar New Year. Limited partners (LPs) include China’s Wu Capital, a family office that manages money for real-estate tycoon Wu Yajun.
The new vehicle kicked off fundraising in late 2019 and is expected to close in the second half of 2020 at $100 million.
China’s Nasdaq-style STAR Market and Beijing’s proposed reform of the ChiNext board will make it “substantially easier for investors to exit from their high-tech portfolios,” said Shaw Wang, founding partner of Unity Ventures in a phone interview with DealStreetAsia.
Investment interest in Chinese technology startups at Series A round and after will increase with the formation of exit alternatives. This will contribute to “a less difficult development path for high-tech companies that rely heavily on massive capital and talent investment to grow in the early stage,” he said.
The venture capitalist, formerly a founding member of Nasdaq-listed Chinese search engine giant Baidu, created Unity Ventures in September 2011 and anchored four RMB-denominated funds with nearly 2 billion yuan ($281 million) in assets under management (AUM).
After deploying about 1 billion yuan ($141 million), the company has formed a portfolio of over 200 startups predominantly at angel round and Series pre-A round, as well as a fraction at Series A round.
Unity Ventures posted a track record of over 40 per cent in average internal rate of return (IRR) in its previous three yuan funds, in what Wang referred to as a symbol of maturity for his investment team to manage a dollar fund with a larger capital pool.
“USD-denominated funds are of crucial importance since about 60 per cent of subsequent investments in our portfolio companies are from dollar funds,” said Wang. “We are able to get a hold of their preferences, which makes it logical for us to run a U.S. dollar fund of our own.”
Shaw Wang shared with DealStreetAsia the fundraising updates of Unity Ventures’s first dollar fund and investment strategies, as well as his insights into a transition of consumer behaviours amid the COVID-19 outbreak, and how Beijing’s IPO reforms are shaping up exit potential for investors behind Chinese technology companies. The interview was conducted in Chinese. Below are the translated and edited excerpts: