IDG Capital Partners scored one of China’s quickest fundraisings seen in a long time, managing to raise $586 million for its fourth venture capital fund in little over two months. At the same time, it beat its target of $550 million as limited partners choose to back some of China’s more seasoned fund managers.

IDG’s investment hits include popular Chinese technology companies: Internet giants Baidu Inc., Tencent Holdings and online travel company C-trip Ltd. IDG Founding Partner Hugo Shong said the Beijing-based firm will stick to doing what it does best, with plans to invest the lions-share of the new fund into Chinese startups in the technology, media and telecommunications sectors.

Global investors are turning to the safety of managers like IDG, which have a longer investment and distribution track record, following a recent wave of slower returns from other China-focused firms. Last year, some venture firms struggled to achieve returns amid lackluster deal-flow and exits as initial public offerings slowed.

While IPOs of Chinese companies have since picked up at home and abroad, limited partners continue to be cautious as they seek out more recognized venture names. Chinese managers GGV Capital and Qiming Ventures are two of China’s longstanding venture firms that have both recently found success in raising successive new funds.

Investors in IDG China Venture Capital Fund IV include institutions, fund of funds managers and pension funds, from geographies including the U.S., Europe, Australia and Asia. Fund IV also attracted three to four strategic investors, said Mr. Shong, who declined to provide any names.

Raising IDG China Venture Capital Fund IV marks the first time IDG Capital has raised a dollar-denominated vehicle without the help of partner Accel Partners. IDG and Accel previously joined to raise five funds to invest in China.

Those earlier funds include three venture funds and two private equity vehicles, which will continue to be managed by both firms. IDG-Accel China Growth Fund III was raised in 2011 and totaled $550 million, while on the private equity side, IDG-Accel China Capital Fund II closed at $750 million in 2011.

IDG-Accel China Growth Fund III is now fully invested. IDG also manages a local currency yuan-denominated fund totaling around 3.6 billion yuan, investments from that vehicle include an undisclosed amount into a tourism company known as Beijing Miyun Gubei Water Town (Simatai) International Tourism Resort.

For IDG China Venture Capital Fund IV, a smaller portion of capital will be allocated into clean technology and health-care deals, Mr. Shong said. At a minimum, the Beijing-based firm can invest $2 million into a deal, while on the upper-end, potentially up to $117 million in tranches, or 20% of the total new fund.

Author: Sonja Cheung Publisher: WSJ URL: