Caixin
Feb 26, 2020 07:54 PM
FINANCE

Private Equity Giant Hillhouse Sets Up 10 Billion Yuan Venture Fund

Hillhouse Capital is one of the biggest investment firms in Asia, currently managing over $65 billion.
Hillhouse Capital is one of the biggest investment firms in Asia, currently managing over $65 billion.

Private equity heavyweight Hillhouse Capital will spin off its venture capital (VC) unit into an independent fund with 10 billion yuan ($1.42 billion) in initial capital to invest in emerging startups.

The new fund, called GL Ventures, will invest in both U.S. dollars and yuan in chunks ranging from 3 million yuan to $30 million, according to an announcement by Hillhouse on Monday. GL Ventures will focus on four areas: biomedicine and medical devices, software services and initiatives in tech innovations, consumer internet and technology, and emerging consumer brands and services.

The team of more than 20 people at GL Ventures is made up entirely of staff from the original Hillhouse VC unit, a source familiar with Hillhouse told Caixin. The new fund will operate independently under the new brand, though it will remain part of the private equity firm.

The spinoff aims to help Hillhouse focus its venture capital business, the source said. Its private equity investment unit might also end up merged into GL Ventures, according to the source.

Started in 2005 with funding from Yale University’s endowment by Chinese alumnus Zhang Lei, the Hong Kong-based private equity firm is one of the biggest investment firms in Asia, currently managing over $65 billion. It’s known for backing promising startups early. Airbnb Inc. and internet giants Tencent Holdings Ltd. and JD.com Inc. were among the first companies backed by Hillhouse.

Hillhouse has raised 10 billion yuan in new funding for GL Ventures, said the source.

GL Ventures will make its investment decisions independently, but will share resources with Hillhouse, including the latter’s staff and technology, the source said.

Zhang will chair GL Ventures’ investment committee. Yi Nuoqing, Hillhouse’s co-chief investment officer, will take charge of the new VC fund’s biotech team. Three other partners, Huang Liming, Wang Bei and Cao Wei will each take charge of another team — one focused on software, one on the consumer internet, and one on emerging consumer brands.

The rapidly growing biotech sector has been a focus for Hillhouse in recent years. In a document submitted to the U.S. securities regulator last week, Hillhouse said that 25 of the 54 companies that it had invested in by the end of last year were in biotech, including drugmaker WuXi AppTec Co. Ltd. and Hangzhou Tigermed Consulting Co. Ltd.

The ongoing coronavirus outbreak and the existing struggles in the venture capital market have posed severe challenges for many firms in the industry. According to a report by industry researcher Zero2IPO, more than 120 Chinese funds reported the amount of money they had raised in January was down 60% on average from the same month last year, falling to 47.5 billion yuan. That same figure was down 75% from December.

Hillhouse said its latest move also aims to send a positive message to startup entrepreneurs in the midst of the ongoing chill in the VC market.

Yang Ge contributed to this report.

Contact reporter Isabelle Li (liyi@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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