This shift in strategy comes after the prominent US venture capital firm, Sequoia Capital, announced its plans to separate its operations in China from those in the Indian and Southeast Asian markets. The firm intends to establish two independent companies to manage these regions.
Sequoia Capital will rebrand its Chinese arm as Hongshan, aligning it with the local market. Meanwhile, its businesses in India and Southeast Asia will operate under the name Peak XV Partners. The US and European units will retain the Sequoia Capital brand.
The company aims to complete this split by March 31, 2024, according to a statement provided by Sequoia's managing partner, Roelof Botha, along with Neil Shen, the head of China operations, and Shailendra Singh, the chief of Indian and Southeast Asian businesses.
In an interview with Forbes, the three executives acknowledged the conflicts between the startup portfolios of the various funds and the potential for brand confusion. They downplayed the impact of the strained geopolitical environment but recognized its existence.
Wang Peng, a researcher at the Beijing Academy of Social Sciences, noted that changing geopolitical dynamics, particularly between the world's two largest economies, have prompted leading global investment firms to reconsider their strategies in order to mitigate potential risks. Wang emphasized that this trend has gained momentum as some US politicians have expressed intentions to restrict capital flow into China, leveraging political power to suppress China's technological advancements and emerging industries.
For example, Paul Rosen, a senior US Treasury official, recently stated that outbound investment review would be more focused, particularly in sectors such as advanced semiconductors, artificial intelligence, and quantum computing.
An anonymous senior investor from a global investment firm revealed that their company reassessed its position in the Chinese market last year, resulting in some staff members being relocated to other markets earlier this year. Additionally, the firm is exploring opportunities with limited partners in regions beyond the US, such as the Middle East.
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| A view of Lujiazui area, the financial center in Shanghai |
According to Zero2IPO Research, only 28.6 percent of the number of foreign currency funds closed deals in China in the first quarter of this year compared to the same period last year, indicating a significant decline.
Wang added that the localization trend among global investment firms has been ongoing. Companies like Sequoia and IDG Capital have already implemented localized trading teams, investment strategies, and management practices. This trend is expected to become more prominent in the future.
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