IDG mulls new China fund

IDG Capital Partners is considering setting up a $586 million fund (or 4 billion yuan), a top executive told Reuters last month.

Suyang Zhang, a general partner with IDG, said China’s national pension fund, the National Social Security Fund (NSSF), is a potential investor in the possible new IDG fund.

“We are thinking of setting one up,” Zhang told Reuters in an interview. He added that it will likely be within a year.

“We have spoken with the NSSF, and we hope to help manage their funds,” Zhang said.

Zhang said IDG is currently awaiting government approval and the NSSF mandate for the fund, but provided no further details.

Last August, Reuters reported that CITIC Capital, an investment arm of China’s largest financial conglomerate, was in talks with NSSF to launch a yuan-denominated private equity fund. Beijing has pledged to develop yuan funds run by Chinese managers to help reduce companies’ dependence on bank financing.

IDG, which has about $2.5 billion under management, invests in early and growth stage companies with a focus on Internet, telecommunications, wireless communications and digital media.

What About Accel?

It is unclear if Accel Partners will join IDG in raising the new fund. Last year, Accel and IDG partnered to raise $600 million for their third co-managed fund, called IDG-Accel China Capital. At the time the fund was raised, IDG said it was the largest fund under its management. It is unclear how much the two firms have invested from the most recent co-managed fund.

Accel General Partner Jim Breyer—who is listed on the IDG website as an advisor—did not return a request for comment.

The IDG-Accel team has had some notable portfolio investments. The investors were early backers in Chinese Internet portal company Sohu (Nasdaq: SOHU), which raised almost $60 million in a May 2000 IPO; travel site Ctrip.com (Nasdaq: CTRP), which raised more than $75 million in a September 2003 IPO; financial information company China Finance Online (Nasdaq: JRJC), which raised $80.6 million in an October 2004 IPO; and Chinese search engine Baidu Inc. (Nasdaq: BIDU), which raised $109.1 million in an August 2005 IPO.

We are also planning to invest between $80 million and $100 million into 12 to 15 companies in the second half of the year.

Suyang Zhang

Zero2IPO, a data service provider to the venture industry, reported that domestic and foreign venture capital yuan funds raised the equivalent of $402 million in the second quarter, or 29.4% of total funds raised during the period.

IDG, which recently invested an undisclosed amount in China Biologic Product, a maker of blood products, is looking to exit three to four investments this year. One or two of its possible future exits will be through IPOs in overseas markets, and portfolio companies could hold a public debut on the Shenzhen Stock Exchange, Zhang said.

Zhang said the companies close to exit are in the health care and consumer sectors.

“We are also planning to invest between $80 million and $100 million into 12 to 15 companies in the second half of the year,” Zhang said, adding that two of the investments will be $30 million each. —Reuters and VCJ staffDEALWATCH: Five recent investments by IDG Capital Partners

3G Portal (dba Wap.3g.net.cn)_Chinese WAP portal.

Aigou Network Technology Co. Ltd._Online portal for dog owners.

Analogix Semiconductor Inc._Mixed-signal semiconductors.

Beijing Shenzhoufu Technology Co. Ltd._Online payment services.

Rubicon Project, The_Internet advertising platform.

Note: Investments made from January to August 2009. Source: Thomson Reuters