Chinese investment firm LongCapital has held the first close of its third deeptech fund, as it targets to hit the final close of 1 billion yuan ($140.6 million) this year, according to a company announcement on Monday.
The first close roped in state-affiliated industry investment platform Orinno Capital as well as a fund-of-funds (FoF) set up by a prominent local university, among others, the statement stated without further divulging investor details.
The new fund will continue to invest in opportunities across semiconductors, mobile artificial intelligence (that includes smartphones, automotive, and robotics), as well as carbon neutrality, per the release.
With 70% of the fund allocated to early- and growth-stage startups, the deeptech fund has so far invested in two firms, it added without disclosing details.
Founded in 2014, LongCapital counts Shenzhen Capital Group, the venture investment vehicle of the Shenzhen government; Guangdong Yueke Financial Group, a wholly state-owned enterprise of the Guangdong Provincial Government; and state-owned Dongguan Financial Holdings Group among some of its institutional backers.
The Shanghai-based firm’s debut deeptech fund has generated a DPI of 1.65X within three-and-a-half years since its launch. Yet, in light of the current challenging market conditions, the firm expects its “payback period” will be extended to around four years for its second fund.
Last year, China’s PE/VC funds raised a combined 1.8 trillion yuan ($253.1 billion) in funding, down 15.5% from 2022, according to market researcher Zero2IPO Group. Meanwhile, the Greater China market saw only 77 non-RMB-denominated funds complete a new fundraising round in 2023, down 32.5% from 2022. The overall fundraising value of non-RMB-denominated funds also dropped 56.4% in 2023 compared to the year before.
While heightened China-US geopolitical tensions and macro uncertainties have deterred US dollar LPs from investing in USD funds, state-affiliated or state-owned investors have stepped up to fill the void.
As proof, state-owned investors or state-affiliated LPs contributed 77.7% of the total proceeds raised by RMB funds in 2023, up 4.6% from 2022, per Zero2IPO Group.