Vertex Ventures China, the China branch of Singapore’s Temasek Holdings-backed Vertex Ventures, has reportedly closed its fifth flagship fund with $390 million in commitments at a size slightly below its initial target of $400 million.
Vertex China, which runs offices in Singapore and Chinese cities including Beijing, Shanghai, and Shenzhen, closed the new fund with commitments from a mix of new and existing limited partners (LPs) including asset managers, sovereign wealth funds, endowments, insurance companies, funds-of-funds (FOFs), and family offices, AVCJ reported on Wednesday.
DealStreetAsia has reached out to Vertex China for comments.
The update came almost nine months after Reuters reported that Vertex Ventures was set to raise a new China-focused fund with an initial target of $400 million to invest in efforts around elevating the country’s domestic tech development.
Tay Choon Chong, the founder and managing partner of Vertex China, put the fund’s estimated final close size at over $400 million, while shooting for nearly $500 million, compared to the predecessor vehicle that raised $275 million, he told the news agency.
The latest fund comes amid a slowdown in US dollar fundraising and dealmaking among China-focused investment firms following pandemic-induced travel controls and Beijing’s regulatory crackdown on domestic tech giants. At the same time, the ongoing China-US trade tensions, which have spilled over into the tech sector, continue to dampen US investors’ appetite for China strategies.
It is unsure if the continued geopolitical uncertainties will influence Tay’s original plan of investing about 90% of the new capital in Chinese startups, especially in areas like chips and computing, where he saw opportunities as “China is pivoting from relying on imported technologies to its own tech know-how.”
The stake is high for a US dollar fund to bet on China’s deep tech, after Washington is said to be mulling new regulations that would limit US capital and information flows into sensitive technologies in China, such as chips, artificial intelligence (AI), and quantum computing – areas where Vertex China has backed companies including chip developer Horizon Robotics and automotive chip maker SemiDrive Technology.
Vertex China’s filing with the US Securities and Exchange Commission (SEC) in January revealed a total commitment of $375 million at that point to its fifth China-focused fund, dubbed “Vertex Ventures China V LP,” from US investors.
Founded in 2008, Vertex China mainly invests in Chinese startups in the technology and healthcare industries, particularly across segments such as deep tech, semiconductors, artificial intelligence (AI), carbon neutrality, new materials, biopharmaceutical, medical devices, and consumer tech.
The firm invests in both US dollars and Chinese yuan with over 15 billion yuan (nearly $2.1 billion) in assets under management (AUM), according to its website. The firm closed its latest RMB fund at 3 billion yuan ($413.9 million) in September 2020.
Last year, Vertex China reaped three initial public offerings (IPOs) from its portfolio. SES, a Vertex China-backed lithium-metal battery startup that also counts carmakers Honda, Hyundai, and GM as shareholders, went public on the New York Stock Exchange in February 2022 after completing a merger with the special purpose acquisition company (SPAC) Ivanhoe Capital Acquisition at a valuation of $3.4 billion. Vertex China is SES’s first institutional investor who backed its Series A round in 2013.
Additionally, Vertex China saw the public listing of Jiangsu Recbio Technology on the Hong Kong Stock Exchange in March last year, through which the Chinese vaccine developer raised HK$765 million ($97.9 million).
Its portfolio firm PlayNitride, a supplier of chip carriers for micro-LED products, also floated an IPO of over 662 million New Taiwan dollars ($21.2 million) on the Taiwan Stock Exchange’s Taiwan Innovation Board in August 2022.
It was also an investor in Mobike, a bike-sharing firm acquired by Chinese food delivery giant Meituan in 2018. Vertex China claims to have generated a cash return of more than 10 times on its initial investment from the Mobike exit.