AngelList and its founder, Naval Ravikant, are having a very good Monday (Oct. 12) morning as they have just snapped up $400 million from China’s largest private equity firm to help disrupt early stage venture capital.
That investment represents the single largest pool of funds handed over to early stage startups in the U.S. or anywhere else and could shake out to be the largest investment by a Chinese private equity firm in a U.S.-based fund.
CSC Venture Capital, the U.S. arm of China Science & Merchants Investment Management Group, also known as CSC Group, is the power behind the big investment. CSC has about 80 billion yuan (~$12.7 billion) under management, says Veronica Wu, president of its U.S. arm. And, she says, the goal is to get bigger, lots bigger. In fact, according to Wu, CSC Founder Xiangshuang Shan’s end game here is to turn his private equity firm into the largest one in the world.
When the firm went public in March on the Chinese stock market, it raised almost $2 billion. CSC’s investment in AngelList is a start, Wu noted, and a big one — but still just a start. The big picture will see large swaths of capital flowing into every stage of the investment process, from seed to IPO.
The push comes as the central government in China is loosening up restrictions on Chinese nationals investing in overseas ventures — a move that is drawing wide investor interest as China’s stock market is prone to more drastic than normal booms and busts, leaving many looking for chances to diversify their holdings in the U.S. to hedge against homefront instability.
For this particular deal with AngelList, the $400 million in funds will roll out slowly to avoid messing with the market. In year one, the firm plans to disperse about $20 million and ramp up to $50 million per year later down the line.
“$400 million is just the tip of the spear,” says Ravikant. “Unlike a normal venture fund, we never stop.”
Ravikant further noted that while in China recently, two different limited partners each offered him $500 million, but “we’re limited in how much capital we can absorb,” he says.
Not everyone is thrilled with the incursion of Chinese investor groups in the marketplace, some calling it evidence of “dumb money” entering the system that could run the risk of overheating the early stage startup market, according to The Wall Street Journal.
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