China’s Innoangel Fund, which focuses on early-stage investments in technological innovations, has reached the second close for its new RMB-denominated fund at over 1 billion yuan (almost $140 million).
Innoangel Fund, which operates from mainland China, Hong Kong, and Silicon Valley, updated its fundraising development with several Chinese media outlets on Thursday. DealStreetAsia has reached out to the firm for comments.
As the second of the firm’s Tech Innovation Fund series, the new vehicle received support from a few domestic fund-of-funds (FOFs), including the 40-billion-yuan ($5.6 billion) state-level government guidance fund CICC Genesis.
The fund’s limited partners (LPs) include industry investors, such as mainland-listed mobile medical solutions provider Andon Health and China-Singapore Suzhou Industrial Park Development Group, which was established in 1994 by the governments of China and Singapore for industrial park construction and operations in eastern China’s Suzhou City.
HongShan, previously known as Sequoia Capital China, and growth equity investment firm Oceanpine Capital also made LP commitments to the fund, according to a Jazzyear interview with Li Zhu, founding partner of Innoangel Fund.
Investors’ interest in early-stage investments remains high, as macroeconomic challenges and a tepid exit landscape continue to weigh on their appetite for investing in typically larger-sized deals at the growth stage.
Across Greater China, 1,359 private market deals were completed at Series A and earlier funding stages last year, accounting for over half of 2023’s deal count, according to DealStreetAsia’s report Greater China Deal Review: Q4 2023.
“This is probably the most challenging, but also the best day and time,” said Li. “The macro market environment has reached a historical low, underscored by the dearth of liquidity and a tightening exit window. There is no more low-hanging fruit in the market.”
“But technological innovations have become a consensus in national development. As China moves into an era where domestic tech is going global, the many investment opportunities and industrial disruptions brought by AI will make the next few years the best time for early-stage investors to search for innovations,” he said.
The new vehicle is about three times the size of its predecessor fund, said Li. It will double down on new-generation IT, including artificial intelligence (AI) and semiconductors, as well as new energy, new materials, life science, and advanced manufacturing, which covers robotics and aerospace tech.
Entrepreneur-turned-investor Li launched Innoangel Fund in April 2013, over a decade after he began angel investments and wrote cheques for companies like Meituan.
The firm now manages a few billion Chinese yuan, with a portfolio of more than 500 companies and a global team operating from cities like Beijing, Shanghai, Guangzhou, Shenzhen, Hong Kong, and Silicon Valley. It historically focused on startups at angel and Series pre-A funding stages.
Some of Innoangel Fund’s portfolio companies include AI medical tech company Infervision; autonomous driving firm WeRide Technology; green energy startup MS Energy; and MegaRobo Technologies, which applies AI and robotics in life science research.
Its second Tech Innovation Fund will back up to 40 startups, with the average cheque size estimated at 15 million yuan ($2.1 million) to 30 million yuan ($4.2 million), said Li.
The new fund has made 13 investments so far. About 60% of its invested capital went into AI and new-generation IT startups. The capital invested in new energy & new materials accounted for 20%; so does the money invested in life science.
The second close comes roughly a year after Innoangel Fund announced the 600-million-yuan ($83.4 million) first close during an investor meeting in China’s Sanya City in February 2023.
With an initial fund target of 1 billion yuan, the firm intends to invest about 70% of the new fund in early-to-mid-stage startups, and the remaining in growth-stage companies.