Lightspeed China raises $560 million, eyes enterprise and deep tech opportunities

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Early-stage venture firm Lightspeed China Partners (LCP) announced on January 3 the closure of its fourth and largest-ever fund for China, with a combined committed capital of $560 million. The funding brings the firm’s total capital under management to $1.5 billion.

Lightspeed China’s current funding comes as China’s venture capital party begins to quiet after an exuberant 2018. Around 70 China-focused venture funds raised just over $15 billion in first 11 months of 2018, according to a study released by data provider Preqin and Insead business school, a significant drop as compared with $40 billion raised by 330 funds in all of 2016.

James Mi, founding partner of Lightspeed China, said he didn’t consider the cooling capital markets as bad news for investors and entrepreneurs. With less of a “bubble,” Mi said the chances for startups with good products and strong teams to succeed were higher.

“It will be more difficult for “me-too” companies to raise funds, and thus promotes healthier development of the industry,” Mi told TechNode. “This would divert the companies from an unhealthy growth path that’s heavily reliant on cash-burning wars.”

Of the proceeds, $360 million will be directed to early-stage startups at Series A and Series B, while the remaining $200 million will be focused on follow-on investment for top portfolio companies in the early stage fund and other high growth companies, according to LCP.

The current round more than doubles the firm’s previous $260 million funding it received in 2016. It was raised in three months with institution investor demand reaching close to $1 billion, according to the company.

In the past 18 months, five of Lightspeed China’s portfolio companies the firm invested in from their early stages have completed successful IPOs. These include super lifestyle app Meituan Dianping, social-e-commerce platform Pinduoduo, fintech firms PPDai and Rong360, and high-speed optical transceiver supplier InnoLight.

The company’s investment portfolio also includes proptech site Fangdd, trucking service Full Truck Alliance, Airbnb-like Tujia and electric vehicle maker XPeng Auto.

As an early-stage investment institution, Lightspeed China has focused on China’s consumer internet, Internet+, as well as enterprise and deep tech sectors.

In addition, the company is betting on new emerging areas. “China’s enterprise service and deep tech innovation are in the early innings of development,” said Lightspeed China’s Mi.

“Given China’s vast market, deep talent pool, and increasing demand for home-grown deep technologies across various industries, we are seeing accelerated growth and significant investment opportunities,” he added.