Chinese language enterprise capital big HongShan, which introduced its cut up from Sequoia Capital this 12 months, is establishing a world footprint as a slowdown within the home financial system pushes it abroad.
Neil Shen, the group’s founding accomplice, who led Sequoia’s China enterprise for 18 years till it was pressured to separate underneath political stress in June, is searching for enterprise alternatives and investments worldwide to profit HongShan’s Chinese language portfolio firms, in line with seven individuals conversant in his plans.
The transfer comes amid a slowdown in China’s financial system that has damped sentiment for tech firms, whereas additionally forming a part of an bold new period for HongShan as an impartial group.
“They’ve $9bn to deploy,” stated an individual who has held conferences with Shen in latest weeks. “You can’t try this in China proper now. And you can’t simply depend on south-east Asia. They must be considering globally, about Japan, Europe, and so on.”
In keeping with three individuals who have spoken to Shen in latest weeks, the worldwide enlargement might see him put money into overseas firms concentrating on the Chinese language market or these based by abroad Chinese language entrepreneurs.
Shen reached out to HongShan’s restricted companions to transient them on his plans forward of a gathering subsequent month with its key buyers in Shanghai, in line with three individuals with information of the discussions.
HongShan stated: “We stay targeted on partnering with Chinese language founders and in assist of their globalisation journeys.”
One HongShan investor stated, “Shen has been fairly open” about his international plans, including: “the obvious space is throughout Asia. He’s made no try to cover the ball on his ambition to do one thing related within the US and Europe . . . I wouldn’t be stunned if he opens an workplace within the Bay Space. I don’t know if there are plans to open an workplace, however he desires to take a position right here.”
HongShan stated: “We now have no plan to open an workplace within the US or in Europe.”
Nonetheless, HongShan did open a Singapore office earlier this year which already has two workers, in line with three individuals with direct information of the transfer. HongShan has utilized for a capital markets providers licence within the monetary hub, however it’s nonetheless pending approval, they added.
An individual near HongShan stated the workplace was “set as much as fulfil Singapore’s authorized requirement that want us to register an organization in order to function legitimately in Singapore”.
HongShan is scouting out funding alternatives in Europe’s electrical automobile and battery market the place there are synergies with its Chinese language portfolio firms, in line with a number of individuals briefed on the plans.
Shen led a visit of Chinese language EV founders round Europe this summer season, in line with two individuals with information of the transfer. “We’re open to evaluation and contemplate alternatives within the EV and clear power market, however at the beginning, this needs to be tied in with the globalisation effort of our portfolio firms,” stated one particular person near HongShan.
Its former mother or father firm, Sequoia Capital, has an workplace in London targeted on European start-up investments.
HongShan, Sequoia Capital and Peak XV — the India and south-east Asia fund which additionally cut up from the Silicon Valley big — should not have non-compete provisions that might prohibit competitors between the entities following the separation, in line with an individual with information of the scenario. The deadline for the cut up is March 2024.
Sequoia Capital’s divorce was triggered by rising tensions between Washington and Beijing, which had made it more and more troublesome for the Silicon Valley-headquartered agency to put money into industries equivalent to semiconductors and synthetic intelligence in China. The cut up ended revenue sharing agreements between the 2 companies.
The transfer is a part of a wave of world funds hiving off their China companies as Washington and Beijing step up regulatory scrutiny of cross-border funding and information flows. San Francisco-based GGV Capital additionally cut up its US and Asia companies final month.
In August, the Biden administration further targeted the enterprise capital trade by asserting a ban on some US funding in China’s quantum computing, superior chips and synthetic intelligence sectors, in an effort to cease the Chinese language navy from accessing American expertise and capital.
Whereas many sovereign wealth funds, American college endowments, and pension funds have paused Chinese language investments, Shen has courted distinguished US restricted companions. In keeping with PitchBook information, HongShan counts the California and Massachusetts pension funds amongst its buyers.
Two longstanding US backers of Shen stated they didn’t foresee that Biden’s restrictions on US funding into Chinese language expertise would stop them from persevering with to put money into HongShan.
HongShan is organising a visit for its restricted companions subsequent month to Shanghai — about half of its funding comes from the US — which for a lot of would be the first journey to China because it ended zero-Covid restrictions final 12 months, in line with three individuals with information of the transfer.
“Neil is actually pushing his firms to broaden into abroad markets,” stated one particular person near Shen. “HongShan continues to be calling itself a Chinese language agency, however the story now’s about taking China globally.”
Extra reporting by Kaye Wiggins in Hong Kong