Source: AVCJ,https://www.avcj.com/avcj/official-record/3022460/oceanpine-opens-to-external-capital
Technology and healthcare-focused Oceanpine Capital sees the large GP commitment to its fund and the network of its founder as key differentiators in a competitive Chinese market
Larissa Ku
15 January 2021
Oceanpine Capital looks to differentiate itself from the numerous other Chinese GPs targeting technology and healthcare deals in several ways. Perhaps most noticeably in a private equity context, the firm’s latest fund of $400 million features a 30% GP commitment.
“With a 30% commitment, our interest as the GP is closely aligned with that of the LPs. Thi is attractive for investors in US dollar-denominated funds,” says Dave Chenn, founder and CEO of Oceanpine. “We have promised to put 30% into all successor vehicles.”
A commitment of this size is feasible in part because of Chenn’s background as an entrepreneur. He established China Century Group in 2005 and set up Oceanpine 11 years later. Fund I also had a corpus of $400 million but all of it came from internal sources. Fund II, which launched in December 2019, was the first time the firm had reached out to external investors.
Chenn’s network is another differentiator. He has founded a string of other businesses, among them Yuantel Technology, an intelligent car services platform that is a long-term supplier to Chinese top auto manufacturers. Through this connection, Oceanpine introduced two local autonomous driving technology developers, Horizon Robotics and Black Sesame Technologies, to FAW Group, SAIC Motor, and Geely Automobile Holdings.
“We are perhaps the only investor with exposure to Horizon Robotics and Black Sesame. They are competitors, but they like getting access to potential business contracts through Oceanpine’s value add service and our founder Dave’s deep roots in tech industries,” says Michelle Chen, executive director of Oceanpine Capital.
Cybersecurity start-up Zshield has also benefited from the Oceanpine network as an introduction to State Grid Corporation of China resulted in an order of $100 million. Meanwhile, semiconductor equipment supplier Best has been put in touch with Semiconductor Manufacturing International Corp, ChangXin Memory Technologies, and Yangtze Memory Technologies as part of efforts to lift the domestic share of its sales above 30%.
To extend its industry antenna, Oceanpine has established an assortment of collaboration funds with Chinese companies. These are managed by independent GPs, with Oceanpine participating as an LP and typically contributes 30%-50% of the corpus. The rest comes from the corporate partner and a local government. Oceanpine’s contributions do not come from its main funds.
Fund I is now fully invested and has secured two full exits and five IPOs, with distributions to paid-in (DPI) of 50%. At least five more companies will file to list this year.
Fund II has already deployed around $200 million across 10 investments. Portfolio companies include artificial intelligence (AI) computing-power specialist Enflame Technology – which Oceanpine first backed through Fund I – and Best. The post-money valuation for Enflame’s Series B was twice that of Oceanpine's entry price, while Best’s valuation has risen sixfold in six months.
The sweet spot is equity checks of $30 million for Series B and C rounds raised by companies with applied disruptive technologies and proven innovative business models that address mass-market demand.
Oceanpine will launch a third US dollar fund later this year, but it is currently focused on raising a RMB2 billion ($309 million) renminbi vehicle. “We decided to raise a renminbi fun because of the travel restrictions. In addition, some Chinese start-ups targeting Star Marke listings prefer renminbi,” Chenn says. “But in our DNA we are a US dollar fund manager.”
