A Fund Moving Against the Tide, Riding the Pulse of the Era丨Entering the Game

By Zhiyan Chen

Overnight, one name kept coming up again and again: Chaoxi Capital. It was a star that had seemingly appeared out of nowhere in just the past year. People described it in whispers — "Chaoxi has a battery giant backing it," "the founder's background is no joke." Most of those saying these things didn't know, and had never met, founder Jie Liu. Many couldn't even pronounce the name correctly (it's Zhao Xi, not Chao Xi).

Like any rising-star VC of its generation, Chaoxi's fame rode on the companies it backed. There was Hithium, the biggest "dark horse" in new energy — from founding to a nearly 30 billion RMB valuation in just three years. Myrtilus Energy, now pushing toward an IPO, made the leap from zero to unicorn in four years. ASTRONERGY doubled its valuation in just six months and now stands at 13 billion RMB.

Investors were curious about Chaoxi, but the firm defied the stereotype of a big-name fund. Classic VCs love to talk portfolio strategy; Chaoxi excelled at deploying capital through specialized funds. In an industry built on relationships, its investors rarely appeared at industry gatherings, and its official website only recently went live. There was also a pragmatism that exceeded industry norms: "DPI results-oriented" was written plainly into its investment strategy.

In its eighth year, Chaoxi strode decisively into the spotlight of the primary market.

On November 6, Chaoxi Capital announced the oversubscription of its first marketized blind-pool fund — seven months in the making, exceeding 900 million RMB, focused on new energy and electronics/semiconductors, specifically solar, energy storage, hydrogen, automotive electronics, and new energy power electronics.

"Seven months, 900 million RMB" — this might have barely qualified as news back in 2015, when Chaoxi was founded. Today, it stands as rare good news brought by a first-time fund. At the same time, Chaoxi has busily launched fundraising for its second RMB fund and first USD fund.

The fund's major LPs include industrial groups such as Jingtaifu (controlling shareholder of JA Solar), Linglüe Investment, Maxwell, Lyric Robot, Tianqi Co., and Zhongshan Broad-Ocean Motor; multiple entrepreneurs; and marketized fund-of-funds and state-owned investment platforms including Suzhou Fund, C&D Emerging Investment, Shanghai Science and Technology Innovation Fund, Suzhou High-Tech Yangguang Huili Fund of Funds, Xinshang Capital, and Sichuan Puxin. Notably, all first-close capital came from industrial players, all of them existing Chaoxi LPs.

For Chaoxi, this marked a milestone in its push toward the investment mainstream.

To date, roughly two-thirds of the fund's deployed projects are early-to-mid-stage, with one-third mid-to-late-stage. Seven portfolio companies have initiated their next funding rounds; five have begun the IPO process. Over the past two years, Chaoxi has invested in Hithium, Myrtilus Energy, Jingkong Energy, Qidian Energy, ASTRONERGY, Laplace, Jinyuan Sheng, Shuangyuan Technology, Shanghai Lianfeng, and others. Among its 30-plus portfolio companies, four have reached 10-billion-RMB valuations, 13 have initiated IPOs. Chaoxi has already realized exits on some projects, with IRRs around 200% and average return multiples of 5-6x.

The name "Chaoxi Capital" has become an active new "sniper" in new energy and semiconductors, drawing increasing attention.

"We didn't dream up the blind-pool idea in isolation — LPs in the market came to us," Jie Liu, founding partner and chairman of Chaoxi Capital, told An Yong Waves in an exclusive interview. "Through conversations with them, we absorbed many new ideas. Taking the long view, launching a blind-pool fund is Chaoxi's answer to the question of institutional longevity."

Chaoxi may represent an emerging paradigm for investment firms: a path born outside the field of vision. The choices of era and individual revealed within help us better understand what possibilities remain for "investment" as an ancient industry. In the age of industrial investing, Chaoxi — and funds like it, however "heterodox" — will not remain isolated cases.

Against the Grain

Looking back at Chaoxi's development reveals an intriguing phenomenon: this "right place, right time" investment firm marched in the opposite direction from most of its peers.

In 2015, amid the "mass entrepreneurship and innovation" and "VC 2.0" wave, Chaoxi was born as a "buyout fund." In 2021, when the primary market's "one-nine effect" reached extremes, Chaoxi decided to enter minority equity investing. In 2023, while many investment firms were still using specialized funds to lever LPs, Chaoxi completed its first blind-pool flagship fund.

Compared to the mainstream path, Chaoxi seemed to approach from the opposite direction. The two converged in 2023 at the inflection point of the industrial investment era. For Chaoxi, the most important changes came in 2020.

On the evening of February 23, 2020, LONGi Green Energy announced that its wholly-owned subsidiary intended to acquire 100% of Ningbo Jiangbei Yize New Energy Technology Co. for cash.

Following the 2018 "531 New Policy" and the 2020 COVID-19 pandemic, during the photovoltaic industry's difficult period, "Ningbo Yize" — the entity through which Chaoxi Capital had acquired and operated Vietnam Solar — still received acquisition offers from multiple companies. On June 30, 2020, the parties formally signed the agreement, with LONGi taking 100% of this "highly sought-after photovoltaic industry asset."

For Chaoxi, selling "Vietnam Solar," which it had raised from infancy, was not an easy decision.

Liu had spent many years in investment banking, where he long focused on two tracks: new energy and electronics/semiconductors. In 2015, judging that "the day when new energy becomes mainstream energy is approaching," and bringing the industrial resources and perspective accumulated in banking, he founded Chaoxi Capital with the idea of "building industry through buyout investment."

Due to deep cooperation during his banking years, Chaoxi's birth owed partly to support from many photovoltaic and semiconductor industry leaders. In the founder's own words, Chaoxi was not a hardscrabble startup: "On day one, there were 500 million RMB sitting in the account."

"Chaoxi" means facing the morning sun and hope, with a nod to the team's deep roots in photovoltaics.

From 2016, the acquisition, management, and operation of Vietnam Solar was among Chaoxi's most important post-founding projects. Under Chaoxi's hands-on operation, by the time of LONGi's acquisition, Vietnam Solar had 1.8 GW of cell capacity and 5.3 GW of module capacity locally, with customers essentially being globally renowned PV companies such as JinkoSolar, Trina Solar, JA Solar, LONGi, Risen Energy, GCL, Yingli, and Suntech. In the first three quarters of 2019, it achieved revenue of 2.056 billion RMB and net profit of 248 million RMB, making it the largest photovoltaic cell and module producer in Vietnam and even Southeast Asia.

Originally, Liu had hoped to take Ningbo Yize public domestically. But 2020 arrived, and the sudden COVID-19 pandemic叠加 international developments forced him to sell this four-year operation "at the last minute."

A more critical question followed: should they continue as a buyout fund?

Chaoxi's team judged at the time that, on one hand, IPO timelines for companies were accelerating from the second half of 2020; on the other, the policies and services needed for domestic buyout funds remained in early stages. Combined with the increased difficulty of cross-border M&A due to the pandemic, they concluded that "systemic buyout opportunities were shrinking sharply." Soon, in 2021, Chaoxi decided to transform into an institution focused on minority equity investment with industrial depth.

At that time, USD funds were staging their final capital carnival in consumer, B2B, and healthcare. Hard tech investing was increasingly discussed, mainly around chip manufacturing-related import substitution. Liu and his team made a series of precise and important industrial investment moves that would prove prescient:

Strategic investment in Hithium's Series A, becoming its only institutional shareholder at the time (now among the most dazzling star companies, breaking into the industry top ten in three years since founding); investment in Swiek New Materials (whose parent company Shenzhen Gas now plans to spin it off for a ChiNext listing); as the second-largest institutional investor in Jingkong Energy, matching it with suitable partners (the company just announced a 300-million-plus Series D at a valuation exceeding 3.3 billion RMB); and Shuangyuan Technology, an online automated measurement and control systems developer that listed on STAR Market this June.

The changing era posed questions to Liu, and he answered through Chaoxi's transformation.

If we view investment and industry as two ends of a road, before 2021 Liu wanted Chaoxi standing closer to the industry end, "experiencing iteration and progress firsthand," and thus hidden in a corner of the primary market. After 2021, synthesizing its capabilities with the broader environment, Chaoxi moved to the middle of this road. And from 2023 onward, on the matter of industry plus investment, Chaoxi clearly hopes to become one of the most important players.

"Originally, we wanted to build industry through control-oriented investment, but that became unrealistic, so we moved to a balanced position doing minority equity investment," Liu told An Yong Waves. "But we don't want to be the kind of investor watching from shore. Chaoxi still wants to make investments that influence industry."

The Algorithm of Industrial Investment

In March 2021, when Chaoxi prepared to invest in Hithium, it brought three industrial controlling shareholders to Xiamen for due diligence. One made an immediate decision after the trip, becoming an LP in Chaoxi's Hithium specialized fund. He told Chaoxi Capital managing partner Hengyu Hui, "This investment is a once-in-a-millennium opportunity — we must seize it."

One foundation for this industrial player's rapid decision was that Chaoxi had already conducted five years of detailed research on the energy storage track, ahead of most peers, followed by rigorous and thorough due diligence on Hithium itself.

Tesla launched its home battery Powerwall in May 2015. From that point, Liu led the Chaoxi team to start thinking about energy storage: why would North American households accept this product? What were the needs, and what lay behind them?

Initially, the Chaoxi team thought Powerwall was about electrical safety. Through research and reflection, they gradually realized this was about how new energy's core logic differs from traditional energy.

Liu shared with An Yong Waves the key insight his team developed at the time: when primary energy (the generation side) gradually increases its share of new energy, it affects the entire energy structure because, unlike traditional coal or natural gas, it is completely random and unpredictable. In this situation, secondary energy development is needed to complement it.

"Simply increasing new energy's share in total energy use on the primary side, without secondary energy development, will encounter more and more bottlenecks down the road."

After confirming the judgment that energy storage would see major development, the Chaoxi team tracked the evolution of similar overseas scenarios. Upon detecting signals of domestic energy storage demand, they "lit up" the energy storage track internally in 2020.

"Lighting up" is Chaoxi's internal term for the starting point of systematic investment in an industrial sector. Liu said that based on the industrial ecosystem, Chaoxi starts from the demand side, disassembles the industry chain bottom-up, combines this with inflection points in new technology iteration to lock in tracks ahead of time, then after advance positioning and long-term tracking, selects the timing to begin investing based on certain change moments.

To summarize the algorithmic logic of Chaoxi's investment process: within its two focused vertical tracks, it excavates segmented opportunities in the industry chain, screens for companies with the best chance of achieving dual growth in performance and valuation, then invests at the inflection point before growth arrives.

Suzhou Fund, one of this fund's investors, discovered Chaoxi proactively through exchanges among upstream and downstream players in the new energy industry.

Its responsible person told An Yong Waves: Through exchanges with Chaoxi, we fully sensed its accumulation in the new energy industry. As an industrial investment institution, Chaoxi has unique and profound insights into industry trend and inflection point judgment, early-stage project value identification, and industrial ecosystem resource integration. Suzhou Fund thus became Chaoxi's first marketized fund-of-funds LP.

Take Myrtilus Energy. Chaoxi believed upstream capacity release would further open downstream application scenarios, and based on understanding the strong consensus on "carbon reduction" in Europe and other overseas markets, early on predicted that overseas markets would be among the most marketized and demand-elastic application scenarios for energy storage. After multiple rounds of validation from industrial sources including Jingkong Energy, Chaoxi locked onto Myrtilus Energy, which was then at an industry inflection point.

It was a company providing overseas users with household energy storage and other new energy solutions. "After due diligence, we found Myrtilus Energy's product design philosophy was ahead of its time, its understanding of overseas household user needs was on point, and more importantly it had stable supply capacity and channel resources." Chaoxi participated in Myrtilus Energy's Series A in 2022, and led its 1-billion-plus RMB Pre-IPO round this year.

Returning to the Hithium case. Following industry chain disassembly, energy storage investment can proceed along the "cell-BMS-PCS-system" thread. Standing around 2020, Chaoxi judged that the cell segment held the greatest value in this chain. Thus came the story of Chaoxi firmly investing when Hithium had just been founded for two years, when the company could barely make payroll.

The Real Thing, Real Returns

Despite his long immersion in industry, Liu still comes out with colorful expressions. Discussing Chaoxi's investment methodology, he says "invest at the inflection point the night before the unicorn explodes," "invest in the beauty of 'imperfection.'" Behind these expressions lies the same deeper meaning — putting out money is only the beginning of an investment.

Due to the buyout fund DNA, for key portfolio companies where it holds substantial stakes, the Chaoxi team still applies the "engagement model" from when they "were major shareholders."

For example, in Chaoxi's ecosystem sits Canadian Solar, a leading photovoltaic and energy storage company. When Canadian Solar aggressively developed its energy storage business, it lacked good cell matching — the Chaoxi team introduced Hithium to Canadian Solar. The two quickly reached cooperation.

Another example: after Hithium, a core factor in Chaoxi's investment in Jingkong Energy was "having room to provide more support to help it transform." In pre-investment communications, Chaoxi investors and Jingkong Energy reached consensus: as an automotive BMS company, it must strengthen its energy storage business. Afterwards, Chaoxi provided Jingkong Energy with a series of reference approaches and resource introductions.

"For companies taking Chaoxi's investment for the first time, what they want most, and what's most valuable, are our resources and knowledge." Liu defines Chaoxi as "an integrator of industrial resources."

Often, funds' self-proclaimed "beyond-the-money" value seems like a black box. What exactly can an industrial institution, claiming to be more advanced than financial funds, bring to a company?

Though Liu said in the interview that specific details he could reveal were limited, his statements indicated that Chaoxi's understanding of resources includes but is not limited to: in-depth strategic discussions with companies, matchmaking between innovative enterprises and seasoned industrial players, assisting in supply chain construction, and directly or indirectly driving orders and cooperation between upstream and downstream industry chain players.

"From Chaoxi Capital's industrial M&A period, we established very close cooperation with their team, which has continued to this day," JA Solar, which has collaborated with Chaoxi multiple times, told An Yong Waves. "The Chaoxi team has personally experienced industry cycles and managed companies hands-on, so it's easier to establish resonant understanding on many industrial challenges."

"Resources" was the most frequently mentioned keyword in conversations with Chaoxi, and this is also widely considered the decisive key in the industrial investment era.

To some extent, in the investment industry, building relationships with various parties, developing them, and leveraging them is basic investor craft. As resource-emphasizing industrial investment gains increasing weight in the primary market, how large is Chaoxi's resource advantage, really? How sustainable?

"Chaoxi established trusting beginnings with many industrial groups early on through capital cooperation, M&A investment, and multiple other methods. To this day, we maintain long-term and high-frequency cooperation through various channels," said Hui. Chaoxi's industrial network reaches directly into many industrial groups, and within each group it can directly access everyone from controlling shareholders to core executives to department heads.

"Both breadth and depth. Their understanding of industry is more comprehensive and three-dimensional, many lessons are more deeply learned, and they're willing to tell us the truth." In Chaoxi's LP roadshow materials, "top-tier industrial circle access" also sits in a prominent position among displayed advantages.

The greatest value of "resources" clearly extends beyond merely enhancing competitive positioning when facing companies as an investment institution — it has longer-term strategic significance. One example: in battery technology route selection, there are TOPCon, HJT, BC, perovskite, and others. Investment institutions in this track must all make choices. Hui found that relying on traditional investment methods — simple industry mapping to expert interviews, executive interviews — yields different results from Chaoxi-style industrial communication.

Resource advantages lead to cognitive differences, and this may be the true meaning of resources, as well as the key factor in whether an investment institution can stand tall over time, now and in the future.

With its first blind-pool flagship fund fundraising complete, Chaoxi expects to fully deploy this fund by year-end.

Liu told An Yong Waves that Chaoxi remains in a stage of "accelerating institutionalization." "But scale isn't what I'm passionate about. We want to earn real carry, and see industry truly develop."

Image source | Visual China

Layout | Xuemei Guo