ZWC Partners eyes new $400m China and SEA-focused fund in 2020
11 Oct 2019

Patrick Cheung, Founding & Managing Partner, ZWC Partners, speaks at Asia PE-VC Summit 2019 in Singapore.

Chinese venture capital firm ZWC Partners is targeting to launch its new fund, a $400-million vehicle that will focus on both China and Southeast Asia, in 2020.

ZWC’s $150-million first SEA and China fund had attracted investments from corporates, fund of funds, family offices, and high net worth individuals in mainland China and Hong Kong.

“The new fund stresses on our China Plus investment strategies, where we believe in the synergistic impact of China’s talent, business model know-hows and leading tech companies could have with markets in the region,” said ZWC Partners founding and managing partner Patrick Cheung. 

“The new fund stresses on our China Plus investment strategies, where we believe in the synergistic impact of China’s talent, business model know-hows and leading tech companies could have with markets in the region,” said ZWC Partners founding and managing partner Patrick Cheung. 

China will continue to take up the bulk of the second fund but ZWC expects to tap more early-stage deals in Southeast Asia, especially in consumer internet, artificial intelligence, and technology sectors, with the new vehicle.

Its investments in Southeast Asia so far include Tenopy, a Singapore-based online tuition startup; Target Media Indonesia, a Jakarta-based media company; and Ritase, an Indonesian logistics first-mile provider.

Cheung spoke to DealStreetAsia about ZWC’s latest and planned China-SEA focused funds and the firm’s interest in Southeast Asia. Edited excerpts below:

What made ZWC Partners raise a fund targeted at Southeast Asia and China?

ZWC is a cross-border fund with coverage spanning China and Southeast Asia. The idea behind the cross-border initiative is to leverage upon business model know-how in China and to apply such learnings to Southeast Asia. Other value-adds include coaching for Southeast Asia startups, introductions to relevant corporates and partners in China, and talent sharing between the regions.

What was the response of your limited partners, who are largely based in Mainland China and Hong Kong, to a fund that also targeted Southeast Asia?

The LPs are entrusting into ZWC to leverage the China edge in investing in the Southeast Asia market. There are many transferable skillsets that have been accumulated from China that could provide value-adds to the entrepreneurs in Southeast Asia.

What is the investment allocation split between Southeast Asia and China?

Both China and SEA shall be focal points though China might command a bulkier portion. Other than teams that are from solely China or SEA, we shall back teams that are hybrid of China and SEA entrepreneurs. In terms of the investment stage, we cover full stack from seed to growth stage. For early-stage, the cheque size ranges from $500k to $5 million, whereas for the later stage, we write cheques around $30 million.

For SEA, we are adopting a China Plus strategy through venture builder Zynergy, through which we are betting on good entrepreneurs and business models, and supporting these teams with relatively larger seed ticket to jumpstart their initiatives.

Do you see any impact from the ongoing US-China trade tensions on your deployment pace? 

The ongoing tension could bring to surface more opportunities; one needs to stick to fundamental principles on what makes companies great and focus on those attributes taking into account macro-political factors. 

What sectors are particularly attractive in Southeast Asia? Which ones look attractive in China?

Onshore deep tech and supply chain reconfigurations, for example, would be areas that could flourish in China due to tensions among certain nations. Whereas for SEA, manufacturing enablement could be a theme that could prosper due to current market conditions.

In general, SEA is enjoying widespread growth with favourable GDP growth and demographics. We are leveraging our experience and know-how in the consumer and media space to actively scout for companies in these sectors, as well as others such as e-commerce enablement, AI, and logistics.

In Southeast Asia, is ZWC Partners seeing more opportunities in certain markets than others?

While we remain optimistic about the growth of the entire region, we are paying particular attention to Indonesia where the demographic is favourable and timing is ripe for both early-stage and growth-stage opportunities.

What funding gaps in Southeast Asia do you see that ZWC can bridge? 

We cover full-stack. We have our own venture builder that covers the seed stage.  For early-stage, our focus would be Pre-A/A, and could follow on subsequently with our growth stage platform. The Series B crunch could be addressed through our growth stage platform.

How many Southeast Asian companies have you backed so far? 

We have backed 5 companies in less than two years after our first deployment in the region. Among the portfolio, there’s a prominent regional company in the e-commerce space, the name of which we cannot disclose due to NDA. We also backed Target Media, a OOH media prov