Sequoia Capital China is close to raising nearly $9bn to put into Chinese start-ups, defying global investor apprehension about Beijing’s zero-Covid policies, a crackdown on technology groups and heightened geopolitical risk.
The fundraising haul, which two people familiar with the matter put at between $8bn and $9bn for four separate funds, will allow China’s premier venture capital group to plough new money into start-ups desperate for cash.
Global investors have largely pulled back from China funds in the past year over regulatory concerns, after an extended regulatory crackdown by Beijing torched the valuations of listed tech groups and halted many initial public offerings in Hong Kong and New York.
Sequoia China plans to close the round this week, one of the people said, adding that it was 50 per cent oversubscribed.
One Beijing-based investor said that while many sovereign wealth funds, American university endowments and pension funds had paused China investments this year, the largest and broadest investment funds such as Sequoia China and Hillhouse were still raising money.
“Only Sequoia and Hillhouse can raise money from international investors right now, they see it as lower risk, like making an index fund investment,” the person said.
At the top of the range, the funds brought in by Sequoia China would amount to nearly 170 per cent of the total raised in the first half of this year by all China-focused private equity and venture capital groups, according to data from industry information provider Preqin.
There is heightened risk in China. Putting money into venture funds such as Sequoia China requires investors to lock up their capital for five to 10 years or longer in an increasingly uncertain geopolitical environment.
Russia’s invasion of Ukraine has stoked concerns that investments in Chinese start-ups could be hit by the fallout from close ties between Moscow and Beijing.
As a result, China-focused funds have struggled to convince global investors to buy in this year, raising just $4.8bn in the first six months of 2022, according to preliminary figures from Preqin. That total was down about 94 per cent from the same period a year ago and marked the lowest half-year haul since 2009 during the global financial crisis.
Led by former entrepreneur and banker Neil Shen, Sequoia China is an affiliate of Silicon Valley-based Sequoia Capital, and has backed many of the country’s largest tech companies, including TikTok owner ByteDance, ecommerce juggernaut Pinduoduo and delivery group Meituan.
The four new Sequoia funds will invest in Chinese start-ups at different stages of their life cycle. News of the fundraising was first reported by The Information.