private equity giant Hillhouse Capital Group recently announced the launch of its seed funding project, with plans to invest in some 100 projects over the next three years.
This latest strategic move comes after the company established the independent venture fund GL Ventures in 2020.
The seed funding arm, Aseed+, will work separately, focusing on industries such as manufacturing, new energy, new materials, biotechnology and carbon neutralization. Aseed+ aims to be a co-creator of new companies, providing support in the form of incubation, acceleration and market validation, in addition to investment.
Attitudes towards early stage financing in 2022
Venture capital appears to be concentrated on seed funding this year. According to statistics from JingDatain the first and second quarters of 2022, the number of seed angel investment rounds accounted for 30.6% of the primary market.
The changing macro environment is a contributing factor. Since it is generally common for mid- and late-stage projects to encounter growth problems, venture capitalists prefer to invest in early-stage projects.
Another factor is the changing face of technology. Most tech startups these days deal with artificial intelligence, new energy, and other relatively recent technological developments, so it makes sense that most of these companies are in the early stages.
Finally, also due to the nature of tech startups, there is a greater influx of founders who are already well established in their respective fields.
This sentiment is shared by venture capital firm Source Code Capital. “More zero-to-one tech innovation companies are starting to emerge,” the firm said in a statement as it launched its Yisu seed fund division.
With these factors, initial investment is definitely an area to watch in China’s top market this year.
The general management of Aseed+
One of the most common topics of discussion in investing is whether financing is more effective in early-stage or late-stage companies. While there is no clear answer, Hillhouse has been gradually moving toward early-stage investing.
Some of the projects under his wing are BeiGene, horizon robotics, agile robots, Neumora Therapeutics and Little Freddie. While many of these companies have become unicorns in their respective industries, they ran into difficulties when they started.
One example is Horizon Robotics, which specializes in AI. When founder Yu Kai started the business, many investors couldn’t understand the technicalities and felt their goals were unattainable. However, Hillhouse turned things around when he came on board as one of Horizon’s early investors, even though at the time he had been more focused on mid- to late-stage investments.
In the future, the Aseed+ arm will focus more on science and technology startups. According to data provided by Hillhouse, the company has provided seed investment for 20 companies so far in 2022, of which 83.6% are technology companies.
It is worth noting that the science and technology umbrella also includes industries that appear traditional but are highly technical. One such case is the Chinese manufacturing company. New Kingwill Materials, established by founder Chen Boyi in 2021. The unique fast spinning materials developed and produced by Kingwills are widely used in medical packaging, industrial protection, and building materials. Hillhouse invested in the company in its first round of external financing.
For now, Aseed+ is focused on investing in startups as long as their founders have a specialized niche and the ability to implement strategies.
“We want to find early-stage entrepreneurs who have a deep understanding and understanding of their segments,” said Hillhouse founding partner Li Liang. “They should have experience in their industry and want to set new benchmarks in technology and engineering.”
He cited Tian Ruijun, a professor at the Southern University of Science and Technology, as an example. Tian meets the above requirement of having in-depth knowledge of the industry, having accumulated years of research in proteomics. He wanted to focus on the clinical application of research to help solve patient problems. With Hillhouse’s help in 2022, Tian founded BayOmics, a cutting-edge biotech startup. Since then, the company has managed to see considerable growth in various areas, such as recruitment, integration of industrial resources, and strategic cooperation with well-known domestic and foreign pharmaceutical companies.
Hillhouse and its support measures for Aseed+
The Aseed+ arm intends to better support the early-stage companies it invests in. “We hope to use this funding arm to provide professional and systematic services to early-stage entrepreneurs,” said Zhang Lei, founder of Hillhouse.
Aseed+ listed five areas of support:
- Innovation platforms: Aseed+ will work with its partners to establish pilot testing platforms, experimental spaces and facilities, innovation centers and seed concept verification platforms in Beijing, Shanghai, Suzhou and the Guangdong-Hong Kong-Macao Greater Bay Area.
- Pre-investment support: Aseed+ aims to help early-stage companies gain access to research resources and facilities from the creative incubation stage, without investment as a prerequisite.
- Industry consultants: Aseed+ will collaborate with research and industry partners to establish advisory committees, which will provide strategic guidance and consultation to startups at the seed funding stage.
- Industrial resources: Aseed+ will help link early-stage companies with resources in the industry.
- Financing services: Aseed+ will offer business financing services, from the improvement of the design of basic points to the construction of investment and financing promotion platforms to the communication and negotiation with investment institutions.
Additionally, Hillhouse has established a specialized talent service team to assist companies with organizational diagnostics, equity incentive training, and executive training and provide college recruiting, executive recruiting, and other services as needed.
Aseed+ is led by Li, who joined Hillhouse in 2005. Li has extensive experience investing in science and technology projects, as well as manufacturing, dual carbon (carbon neutralization and peak carbon), and other industries.
In creating the Aseed+ team, Hillhouse selected established members who have scientific research backgrounds or hands-on industry experience. The team aims to add value by providing much-needed information for startups.
With such extensive support, Aseed+ is well positioned to give the startup ecosystem a boost.
This article was adapted based on a feature Originally written by Xu Muxin at 36Kr. KrASIA is authorized to translate, adapt and publish its contents.