Lightspeed’s New China Fund Breaks New Ground, HAX Looks To India

The new fund raised by Lightspeed China Partners breaks some new ground with the addition of a new limited partner, San Francisco City Retirement System, and its first RMB-denominated fund designed to back Chinese startups that aim to capture higher valuations at home on local stock exchanges. Managing director James Mi notes the oversubscribed Lightspeed China Fund III of $260 million was raised in a short three months, good timing as valuations in Chinese Internet startups have fallen.
Lightspeed China, a backer of Chinese tech startups, has been a venture force behind such successes as online vacation rental service Tujia and Chinese restaurant review site Dianping (now the merged Meituan-Dianping).
In a slight change in management structure, fund III will be managed by Herry Han and former Google exec Mi. Previous partner Ron Cao is not participating in future Lightspeed China funds and plans to launch his own VC firm focused on technology startups, Yunjiu Capital. The China-focused venture fund Lightspeed broke off from Silicon Valley-anchored Lightspeed Venture Partners to do China deals exclusively a few years ago and has prospered.

Sequoia Capital China has led a $70 million, Series C investment in Yungtongxun, a cloud communication service in Beijing for corporations. The cloud technology developer has raised nearly $90 million since its start in 2013, backed initially by Sequoia and in later rounds joined by TBP Capital. The cloud service provider claims to work with leading Chinese tech companies Alibaba, Tencent, JD and Baidu.

Not wasting much time after raising a debut fund of $200 million, Joy Capital, the Chinese venture founded by former Legend Capital head Liu Erhai, has backed two Chinese companies in the automotive space and one in lodging. The fund joined in a $500 million financing of Chinese electric vehicle maker NextEV and joined a C round for auto after-sales e-commerce platform Tuhu. Joy also led a $60 million, third round of financing for an AirBNB-type service, XiaoZhu.com.

Moving toward a domestic IPO in China after dismantling its VIE structure early in 201 Qufenqi, a BlueRun Ventures portfolio company in Beijing that is also backed by Alibaba affiliate ANT Financial, has raised a reported $449 million pre-IPO investment from two A-share listed Chinese companies. The specialist e-commerce firm focused on installment payments is repositioning more broadly as a Chinese electronic retailer named Qudian. Less than a year ago, in August 2015, Qufenqi raised $200 million in fifth round of investment for the startup that first raised capital in April 2014. Sequoia-affiliated Source Code Capital also has financed the e-commerce player.

Financial holdings company China Everbright Ltd., investing from its RMB-denominated mezzanine fund, has invested in and become a key shareholder in Hope Education, a leading private education institution in the Mainland with several vocational, technical, training, business schools and colleges mostly in western China. Hope Education, founded in 2007 in Sichuan, is aiming to raise additional capital and go for a public listing.

Shanghai-based video lifestyle series producer Yitiao, which has recently pivoted to include e-commerce, has raised a $15 million Series B investment from private equity firm China Media Capital, the same group that last year formed a joint venture with Warner Bros. Entertainment to develop and produce Chinese-language films.

INDIA
Leave it to Asian tech expert Benjamin Joffe to spot new opportunities in the region. Having joined China-focused hardware accelerator HAX nearly three years ago, he’s now adding to India to the geographical mix for HAX. Speaking at an IoT event in Bangalore, Joffe noted that India is far behind China in the manufacturing-oriented IoT sector. But he added that HAX will help India make some strides forward by investing up to $100,000 in hardware venture it identifies in India.

Three Indian startups have made into Silicon Valley’s elite Y Combinator accelerator, a recognition that India is fertile ground for promising startup. The three that got the greenlights are co-working space Innov8, car rental app JustRide and messaging app for sellers Meesho. Look for these startups to jump ahead as the accelerator invests $120,000 for a 7% equity stake across two batches of startups each year.

In spite of growing recognition of India’s startup prowess, venture capital investments declined 34 percent in the latest three months ending June 2016 from the same period a year ago. VC firms made 94 investment worth $324 million in Indian startups compared with 112 investments at $491 million in the comparable 2015 quarter, according to Venture Intelligence. The biggest deal of the recent period was the $20 million by Sequoia Capital India in fashion e-tailer Voonik. Sequoia was also behind a $16 million investment in playschool business KLAY Schools, healthcare product e-tailer 1MG and online tax filing company Cleartax. Overall, the report noted that information technology deals drew the most capital.

EMERGING MARKETS
Institutional investment firm Farallon Capital Management, uniquely geared for private market transactions in Singapore, Tokyo and Sao Paulo, has raised $1.12 billion for two funds aimed at investments in Asia and Latin America. This is the third fund closing for the San Francisco-based firm, founded in 1986 and with $20 billion in capital under management. Farallon works with entrepreneurs, key families and business groups on acquisitions, recapitalizations and restructurings, with a nexus on these emerging markets.

[Silicon Dragon News digest, week of July 5, 2016]