ZWC Partners’ first USD fund has a quarter left to deploy,eyes four IPO exits next year
October 28, 2019

ZWC Partners (ZWC), a Hong Kong and Shanghai-headquartered investment firm, has deployed around three quarters of its first USD fund and is eyeing four IPO exits next year, said Patrick Cheung, founder and managing partner.

It closed the USD fund in 2016 and has used around three quarters of its dry powder in more than 30 investments in China and Southeast Asia, Cheung said.

The first USD fund had assets under management of close to USD 700m. It also manages a CNY fund, which is a small fund set up for early-stage investments in China, according to Cheung.

Cheung expects the IPOs on China’s STAR market, Hong Kong and the US. The firm also expects one to two M&A exits next year, said Cheung without disclosing the potential exit candidates.

ZWC focuses on early- to- mid- stage investments in the TMT and consumer sectors in China and Southeast Asia.

For early stage investments, it focuses on angel rounds to Series B rounds and the average investment size ranges from USD 2m to USD 10m. For mid-stage investments, it focuses on Series C to Series D rounds and the average investment size is around USD 25m, according to Cheung.

ZWC had two exits via M&A when Beijing-based bike sharing startup Mobike was acquired by Beijing-based on-demand services provider Meituan Dianping in April 2018 and when Beijing-based online dating app Tantan was acquired by its peer Momo in February 2018, said Cheung. The deal sizes were not disclosed.

Exiting via M&A is sometimes a better option as returns from an IPO could be undermined by various factors such as market liquidity and lock-up period, said Cheung. But as a minority investor, ZWC does not have a preference on the exit channel, said Cheung, adding ZWC respects founders’ exit decisions and advises them on the different exit scenarios.

LPs of its first USD fund include fund of funds and family offices from Europe, the US and Asia as well as Chinese corporates and high-profile entrepreneurs such as Jason Jiang, founder of Shenzhenlisted advertising company Focus Media Information Technology [SHE:002027].

Fundraising for a second USD fund

ZWC is planning to raise a second USD fund of between USD 400m and USD 500m next year, said Cheung.

The second USD fund aims to make no more than 40 investments, according to Cheung.

The investment focus will remain the same for the second USD fund but it will add a partner as advisor to improve its value-added services, said Cheung. The undisclosed new partner has rich academic and practical experience in entrepreneurship and will help portfolio companies with their organizational structure, Cheung added.

It welcomes global limited partners, but hopes to bring in institutional investors, conglomerates and family offices from Southeast Asia to provide more strategic resources to its Chinese and Southeast Asian portfolio companies that are planning an expansion in the region , said Cheung.

It aims to reach a first close by the end of next June and is receptive to engaging a private placement agent to assist with its fundraise, according to Cheung.

Fund background

ZWC has a team of around 30 people, with 20 of them investment professionals, said Cheung. It has offices in Beijing, Shanghai, Hong Kong, Singapore and Jakarta, Cheung added.

ZWC focuses on technology investments in the B2C and B2B markets, said Cheung. Its consumer related portfolio companies include Tantan, Mobike and Beijing-based online used car trading platform Souche. Its B2B portfolio companies include Beijing-based AI technology provider 4Paradigm, Beijing-based industrial cloud platform Rootcloud and Hangzhou-based primary medical service platform Yunhu Network Technology, which provides medical logistics and cloud services for local clinics.

ZWC has allocated USD 150m from the first fund to invest in Southeast Asia. Its investments in Southeast Asia include Indonesia-based logistic startup Ritase and Singapore-based online tuition startup Tenopy, according to Cheung.

Cheung explained that the fund’s presence in Southeast Asia helps to bridge startups in China and Southeast Asia as it can help companies from both sides to better connect to capital, talents and strategic resources to provide more value-added services.

(source: ZWC Partners, Mergermarket)