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Chinese venture capital giant Sequoia Capital announced a spin-off from Sequoia Capital this year as the company expands its global footprint as a slowing domestic economy pushes it overseas.
The group’s founding partner Shen Nanpeng is looking for business opportunities and investments globally to benefit Sequoia’s China portfolio companies, according to seven people familiar with the matter. Shen Nanpeng led Sequoia’s China business for 18 years until Sequoia was forced to spin off under political pressure in June. .
Global expansion could see him invest in foreign companies targeting the Chinese market or companies started by Chinese entrepreneurs overseas, according to three people who have spoken to Mr. Shen in recent weeks.
“They have $9 billion to deploy,” said one person who has met with Shen in recent weeks. “You can’t do that in China now. You can’t just rely on Southeast Asia. They have to look globally and consider Japan, Europe, etc.”
“Neil is really pushing for his company to expand into overseas markets,” said another person close to Shen. “Hongshan still calls itself a Chinese company, but now the story is about taking China to the world.”
The move comes as China’s economy slows, hurting the popularity of technology companies, and forms part of Hongshan’s ambitious new era as an independent group.
Shen contacted Hongshan’s limited partners to brief them on his plans ahead of a meeting with Hongshan’s main investors in Shanghai next month, according to three people familiar with the matter.
“Mr. Shen is quite open about his global plans,” said one Hongshan investor, adding: “The most obvious region is all of Asia. He has not tried to hide his ambition to do similar things in the United States and Europe… I wouldn’t be surprised if he opens an office in the Bay Area. I don’t know if there are plans to open an office, but he wants to invest here.”
“We have no plans to open offices in the United States or Europe,” Hongshan said.
However, Hongshan did open a Singapore office earlier this year, which already has two employees, according to three people with direct knowledge of the move. Hongshan has applied for a capital markets services license at the financial center but is still waiting for approval, they added.
A person close to Hongshan said the office was established “to meet Singapore’s legal requirements, which require us to register a company in order to operate legally in Singapore.”
Hongshan is looking for investment opportunities in European electric vehicle and battery markets that have synergies with its Chinese portfolio companies, according to multiple people familiar with the matter.
Shen led the Chinese EV founder on a European tour this summer, according to two people familiar with the matter. “We are willing to review and consider opportunities in the electric vehicle and clean energy markets, but most importantly, this must be combined with the globalization efforts of our portfolio companies,” said a person close to Hongshan.
Sequoia Capital has an office in London and focuses on European new venture investments.
Hongshan Capital, Sequoia Capital and Peak XV – the India and Southeast Asia funds that were also spun off from the Silicon Valley giant – do not have non-compete clauses barring competition between the post-split entities, according to a person familiar with the matter. Condition. The deadline for the split is March 2024.
Sequoia’s divorce was triggered by growing tensions between Washington and Beijing, which have made it increasingly difficult for the Silicon Valley-based company to invest in China’s semiconductors and artificial intelligence industries. The spinoff ends a profit-sharing agreement between the two companies.
The move is part of a wave of global funds divesting operations in China as Washington and Beijing step up regulatory scrutiny of cross-border investments and data flows. San Francisco-based GGV Capital also spun off its U.S. and Asia operations last month.
In August, the Biden administration further targeted the venture capital industry and announced a ban on some U.S. investments in China’s quantum computing, advanced chips, and artificial intelligence fields to prevent the Chinese military from obtaining U.S. technology and capital.
While many sovereign wealth funds, U.S. university endowments and pension funds have suspended Chinese investments, Shen has continued to court prominent U.S. limited partners. Sequoia’s investors include pension funds in California and Massachusetts, according to PitchBook data.
Two of Shen’s longtime U.S. backers said they did not foresee Biden’s restrictions on U.S. investment in Chinese technology deterring them from continuing to invest in Sequoia.
Hongshan Group will organize a trip to Shanghai next month for its limited partners – about half of the firm’s investments come from the United States – which for many will be the first time since the end of zero coronavirus restrictions last year, three people familiar with the matter said. This is my first trip to China since.
“We remain focused on working with Chinese founders and supporting their globalization journey,” Hongshan said.
Additional reporting by Kaye Wiggins in Hong Kong
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