Chinese venture capital firms have mostly shied away from high-value deals this year amid waning confidence in the country’s economy. Total deal value is on track to plunge by 30 percent year-on-year, a recent report from PitchBook suggests.
One firm bucking this trend is ZhenFund, a Beijing-based angel investor which has helped several big names in the high-tech space get their start. Notable companies which have received funding from ZhenFund include autonomous aerial vehicle manufacturer EHang, LiDAR sensor developer Hesai Technology, and artificial intelligence companies DeepGlint, Intellifusion, and YITU.
ZhenFund, which has about $1 billion in assets under management, emerged following the initial success of education technology giant New Oriental Education & Technology Group Inc., a pioneer among Chinese education companies. The fund provides seed capital for up-and-coming innovators across a variety of industries, and has most recently been in the news after backing the company behind Los Angeles-based AI video platform, HeyGen.
At The Wire, we periodically showcase prominent firms investing in China. In the past, we’ve looked at IDG Capital, Shunwei Capital, Primavera Capital, and Qualcomm Ventures. This week we’re focusing on ZhenFund.
ZHENFUND’S MANAGEMENT TEAM
ZhenFund was founded in 2011 by Bob Xu and Victor Wang, two former teachers who were involved in the founding of New Oriental, one of the first private Chinese companies to go public in the U.S. with a listing on the New York Stock Exchange in 2006.
With the goal of helping other start-ups in China’s burgeoning private sector achieve such success, and boosted by the credibility that New Oriental’s initial public offering had brought them, Xu and Wang set about expanding the ZhenFund team. They soon brought on Stanford graduate and former investment banker at J.P. Morgan, Anna Fang.
Fang was only 29 when she launched her angel investing career with ZhenFund, and now at 41, she is the oldest and most senior ZhenFund employee besides Xu and Wang. The rest of the ZhenFund team’s youthfulness helps to fuel its early stage investment focus, analysts say.
ZHENFUND’S LIMITED PARTNERS
ZhenFund has had 31 limited partners across China, with the majority based in Shanghai and Beijing, according to data from PitchBook. Some major names include Tencent, Kunlun Technology, and Sequoia Capital’s newly rebranded China branch, HongShan; plus, a number of economic development agencies such as Chang Development and Chengdu High-tech Investment.
Below are some of ZhenFund’s largest limited partners:
MAJOR INVESTMENTS
ZhenFund is actively invested in 571 companies, according to Pitchbook. One prominent company in its portfolio which has gone public this year is Hesai Technology.
The leading Light Detection and Ranging (LiDAR) provider successfully listed on the NASDAQ in February, but has recently faced backlash after the House of Representatives’ Select Committee on the Chinese Communist Party released a letter calling for an investigation of Chinese LiDAR companies, and referenced Hesai in particular.
In a press release from Hesai, chief executive and co-founder David Li commented that “it is disappointing that the Select Committee has made these false allegations about our company.”
The sensitivities around Hesai point to broader issues facing ZhenFund. At its outset, the firm was able to exit from some of its investments with a healthy gain by taking advantage of a still-favorable environment for Chinese tech firms going public on U.S. exchanges. With that route to market now attracting more scrutiny from U.S. lawmakers — and IPOs becoming more challenging inside China also — ZhenFund’s options for crystallizing its investment gains could narrow.
Below you’ll find a selection of other deals ZhenFund has participated in since its founding:
ONE INVESTMENT: DEEPGLINT
DeepGlint is an artificial intelligence company founded by former Google research scientist Yong Zhao. Specializing in facial recognition technology, its main competitors include SenseTime and CloudWalk.
In 2013, the company received startup funding from Microsoft Ventures, a fund run by Microsoft. ZhenFund, along with Ceyuan Ventures, provided millions of yuan in seed funding in August that year, and a further undisclosed amount in July 2017. According to a Chinese language interview with Anna Fang, published in collaboration with the Beijing Private Equity Association, some members of the ZhenFund investing team met Zhao whilst he was still working at Google in San Francisco. Fang and Xu then sent him money for a plane ticket back to China, encouraging him to take the plunge and launch his own business.
DeepGlint’s unique recognition algorithm, designed to discern certain facial features shared by relatives, has been crucial to cracking several missing persons cases across China, the most recent of which was celebrated on the company’s official Weibo page last month. But DeepGlint’s surveillance activities within the Xinjiang Uygur Autonomous Region have attracted scrutiny from the U.S. government, which placed the company on the entity list in July 2021 — just one month after DeepGlint had announced plans to go public in China.
The company did list on the Shanghai Stock Exchange on March 17, 2022, raising approximately $272 million and valuing the company at around $1.2 billion. ZhenFund retained a 6 percent stake in the company after the IPO, but has since reduced its shareholding to 4.3 percent as of the time of publication.
Ella Apostoaie is an editorial associate at The Wire. She is a 2021 graduate of Wellesley College, where she majored in East Asian Studies, with a primary focus on Chinese history and politics. Ella grew up in Norwich, England and is now based in the Boston area.
