Venture capital firm Vertex Ventures, backed by Singapore state investor Temasek, is expected to raise almost $500 million for a new fund that will invest in some efforts to step up China’s domestic technology development, according to a senior executive.
The new fund’s size will surpass an initial target of $400 million, compared with an earlier, similar fund that raised $275 million, as highlighted by Tay Choon Chong, a managing partner at Vertex Ventures China.
Nearly 90% of the new capital will get invested in Chinese start-ups. Tay commented:
“China is pivoting from relying on imported technologies to its tech know-how. It lacks the most underlying technologies, such as those for chips and computing, and it’s the right moment for China to play catch-up, which will bring us big opportunities.”
President Xi Jinping launched China’s 20th Communist Party Congress on October 16 insisting on the importance of self-reliance in technology and the need to enhance the nation’s capacity for independent innovation.
Some analysts stated that President Xi’s call for China to “win the battle” in core technologies might indicate an overhaul in Beijing’s approach to advancing its technology sector, with much state-led spending and intervention to counter United States pressures.
The latest Vertex fund comes amid a slowdown this year in US dollar-denominated fundraising by China-focused venture capital and private equity companies. Regulatory crackdowns, coronavirus controls, and increased China-US tensions have compelled some investors to rethink their strategies toward the Chinese projects.
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While seeking investment opportunities involving firms developing advanced technologies, Vertex will also seek firms with the potential of reducing Beijing’s reliance on foreign suppliers, as stated by Tay. He added:
“We will invest in some underlying technologies that may not seem to be high-end but risk import restrictions.”
He also said that he saw emerging investment value in companies working on chips for electric vehicles. Vertex’s previous China investments consist of Beijing-based chip manufacturer Horizon Robotics, electric vehicle battery maker SES, and Mobike, a bike-sharing company purchased by China’s Meituan in 2018.
