Middle East backers help Chinese tech giant Sequoia raise $9bn

Creative Commons

• Investor hope China is easing regulatory crackdown on the tech sector
• Latest fundraising by Sequoia China was 50% oversubscribed
• Investors were from US, Europe, the Middle East and Asia
• Included pension funds, sovereign wealth funds

Sequoia Capital China has raised a total of nearly $9 billion for four new funds amid investor hopes that the authorities are easing a regulatory crackdown on the tech sector, said a person with direct knowledge of the matter.

The latest fundraising by Sequoia China, which according to the person originally targeted at least $8 billion and was 50 percent oversubscribed, underscores how global investors are counting on leading investment managers to cut deals in China’s new economy industries following the unprecedented crackdown.

Sequoia China, widely viewed as a bellwether for Chinese tech investment, launched the fundraising early this year and has attracted commitments from investors in the United States, Europe, the Middle East and Asia, including pension funds, sovereign wealth funds and university endowments.

Sequoia China declined to comment. The person with direct knowledge of the matter declined to be identified as the information is not public. News of the fundraising was first reported by news website The Information.

The four funds will primarily invest in Chinese start-ups at different stages of their life cycle, with a focus on the technology, healthcare and consumer sectors, said the person.

Authorities in late 2020 started to rein in the homegrown technology sector with a campaign that spread to other industries, which wiped billions off market capitalisations and stalled start-ups’ overseas listings.

The crackdown also forced global investors to pull back or put commitments to China-focused investment managers on hold, leaving many struggling to raise new funds.

China-focused venture capital and private equity firms raised only $4.3 billion in US dollar-denominated funds in the first half of 2022, a far cry from the $26 billion in the same period last year, according to data provider Preqin.

But the authorities have in recent months changed their tone and tack towards the regulatory crackdown campaigns, as they seek to boost an economy hurt by COVID-19 lockdowns.

The shift in messaging has raised hopes for companies and investors that the worst is over, though jitters remain.

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

As an early investor in top Chinese tech firms such as Alibaba, Sequoia China has more than 900 portfolio investments including TikTok owner ByteDance, ride-hailing major Didi Global and food delivery giant Meituan.