Sequoia Capital China raising $2.2 billion in new yuan fund, say sources

Investor Sequoia Capital China is raising at least 15 billion yuan ($2.2 billion) in a new yuan-denominated fund, people with knowledge of the matter said, building a war chest as the world's second-largest economy recovers from a virus-induced slump.

The fund, Sequoia China's sixth, is likely to be the largest of its kind for the company and is expected to focus on sectors ranging from industrial technology, healthcare and consumer to media, said one of the people.

The early investor in top Chinese technology firms such as Alibaba Group Holding reached the first close of the fundraising late last year, according to another person.

The Chinese investment arm of Silicon Valley venture capital firm Sequoia Capital looks to fully close the fundraising in the coming weeks and the final fund size would be about 18 billion yuan, said a third person.

The people declined to be named as the details of the fundraising plans are not public yet.

Sequoia China declined to comment.

The firm's yuan-denominated fundraising comes amid ongoing U.S.-China tensions over technology that have put global funds and companies in the cross-fire, and triggered concerns about the Chinese firms' ability to access private capital overseas.

One of Sequoia China's most prominent portfolios - Chinese tech major Bytedance - is in the final negotiations with the U.S. government over the fate of its global short-video streaming application TikTok.

The fundraising also comes as Shanghai's Nasdaq-style STAR Market has become increasingly attractive to China's tech founders as they prepare to leverage higher valuations and take their companies public, offering domestic investors an attractive exit option.

Sequoia China was founded in 2005 by former investment banker and entrepreneur Neil Shen, now one of China's best-known venture capitalists.

It has invested in over 500 firms in China, including e-tailer major JD.com, food delivery giant Meituan Dianping and ride-hailing company Didi Chuxing, according to the firm.

China-focused investment managers raised only $12 billion in July-August this year in funds denominated in U.S. dollars and yuan, compared with $68 billion and $59 billion over the same period in 2019 and 2018, according to data provider Preqin.

Venture capital and private equity fundraising are, however, picking up as a number of big names, with track records of landing big-ticket merger-and-acquisition deals and steady returns, come to the market.

Private equity firm Hillhouse Capital Group is raising a fund targeting over 20 billion yuan ($3 billion), its largest-yuan fund, Reuters reported last week.

By Kane Wu and Julie Zhu