Qiming Venture Partners quickly closed on a sizable second China fund at the end of May, and it has already made two investments from the $320 million vehicle, according to firm co-founder and Managing Director Gary Rieschel.
The Shanghai-based firm, whose name is pronounced “chee-ming,” has been on a tear since it raised its first fund ($200 million) in 2006. To date, it has invested $115 million in 24 startups, Rieschel said in an email interview with VCJ.
“Clearly with the rapid growth of money coming into China, there are sectors that are considered ‘hot’ or overheated,” he said. “Models that are easily understood by overseas VCs are the ones that get the highest valuations, so we tend to stay away from mid stage deals in those companies.”
Qiming’s focus won’t change with the new fund. It principally invests in products and services targeted at the domestic Chinese market, with about 40% of its money going into both online and offline consumer-related deals. Another one-third will go to health care and the remainder to traditional information technology and cleantech.
The firm also has no plans on changing its early stage focus. About 75% of the investments from its inaugural fund were Series A deals, and that isn’t expected to change. The first two investments from the second fund were both Series A deals. Qiming invested an undisclosed amount in Oriental Cambridge, a private education provider, and an undisclosed amount in EHi, a leading limousine and self-drive company in China.
Qiming has backed at least three other companies this year: Shanghai-based advertising service Touch Media, which raised $14 million in January, Seoul-based social networking and game company Nurien Soft, which raised $15 million in March, and Santa Clara, Calif.-based biomedical outsourcing company Crown Bioscience, which raised $16.3 million in March. Although Nurien and Crown aren’t based in China, “their success is tied closely to their operations in China,” Rieschel noted.
One of the things we are staying away from now in China are the ‘just good enough’ companies, of which there are thousands. That is everyone’s greatest competitor.
“One of the things we are staying away from now in China are the ‘just good enough’ companies, of which there are thousands,” he said. “That is everyone’s greatest competitor. We will really only pursue deals that can be the leader in their particular sector.”
On the subject of liquidity events, Rieschel said Qiming hasn’t had any exits yet and doesn’t expect any IPOs until next year. “Just like the U.S., we expect most of our exits will be M&A transactions, hence a strong focus on early stage projects,” he added.
Qiming began as a joint venture between Rieschel and two partners from Ignition Partners: John Zagula and Richard Tong. Tong and Zagula continue to be partners at Bellevue, Wash.-based Ignition and managing directors with Qiming.
With a substantially bigger second fund, Qiming felt it needed more manpower, so it added two partners: Robert Headley, a partner at Ignition who will continue in that role like Zagula and Tong and Hans Tung, a former vice president at Bessemer Venture Partners. The firm also added a venture partner: Richard Chen, former CEO of Yifei Investment Holding Ltd., a media and consumer investment group based in Shanghai.
Overall, Qiming has 14 professionals on staff.
PRINCO, which manages the Princeton University endowment, was the lead investor in Qiming’s first fund and continued in that role in the second. The firm didn’t disclose the names of its other limited partners, except to say that most of its money came from endowments and foundations. —Lawrence Aragon