GoTo-backer ZWC Partners hits first close of new vehicle amid rise in RMB fundraising

Michael Yao, a partner at ZWC Partners

ZWC Partners, a dual-currency venture capital (VC) firm that invests in both China and Southeast Asia, has held the first close of a new RMB-denominated fund at 1 billion yuan (about $150 million).

ZWC Partners has drawn capital commitments from China’s state-backed funds of funds (FOFs), global institutional investors, and regional family offices for the RMB vehicle. The fund counts Chinese out-of-home advertising company Focus Media and publicly listed supplement provider Xiamen Kingdomway Group as strategic limited partners (LPs), according to a statement.

With this, the firm joins a slew of investment companies raising dry powder in local currency at a time when startups in Greater China are more prone to a public listing closer to home. Startups, which are re-routing to an initial public offering (IPO) in mainland China, prefer venture money in local currency for the convenience of building a business structure ready to go public on a domestic stock exchange.

According to data cited by Chinese media outlet TMTPost, the first quarter of 2022 saw the setting up of 1,354 RMB funds in China, which is about 67.7 times the number of newly launched USD funds. These RMB funds raised about 377.8 billion yuan ($56.4 billion), up 11.6% from the same period in 2021; while the combined fundraising size of the new USD funds dived by 62.6% from Q1 last year.

Other Greater China-focused players who have launched or raised RMB vehicles recently include GF Xinde Investment, Cathay Capital, Vivo Capital, Yingke PE, Huaxing Growth Capital, Cedarlake Capital, and BlueRun Ventures China.

Having raised 1 billion yuan for its new fund, ZWC Partners targets 1.5 billion yuan ($223.3 million) for the final closing in the second or third quarter of this year.

Founded in 2015, ZWC Partners manages both RMB- and USD-denominated funds with a team of professionals operating across Beijing, Shanghai, Shenzhen, Hong Kong, and Singapore. In its latest fundraising success, the firm secured an equivalent of over 5 billion yuan ($785.3 million) in capital commitments in June 2021.

As an investor of Indonesian tech giant GoTo, ZWC Partners aims to invest most of its capital raised in the Greater China market. Its China portfolio includes AI technology startup 4Paradigm, dating app Tantan, medical test services platform Yunhu Technology, and job recruitment website Boss Zhipin, just to name a few.

Edited excerpts from an interview with Michael Yao:

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