Exclusive | NIO Capital Raises Over 3 Billion Yuan in New Fund

By Qian Ren

Edited by Lili Yu

AnYong Waves has learned exclusively that NIO Capital recently completed the fundraising for its second RMB fund, with total commitments exceeding 3 billion yuan. The newly raised second fund will continue to focus on investments in the new energy vehicle industrial ecosystem, energy technology and energy transition, and advanced technology manufacturing.

The LPs in NIO Capital's second RMB fund include local government guidance funds with extensive portfolios in new energy vehicles and components, national-level funds, family offices, and listed companies. When NIO Capital was founded in 2016, it locked its investment focus on new energy and intelligent vehicles — areas that had not yet gained broad consensus in the venture capital circle. Within two years, it swiftly invested in several well-known companies including CATL, Ronbay Technology, Momenta, and Pony.ai. Among the 20 portfolio companies in its first RMB fund, five have already listed or are near listing. AnYong Waves understands that NIO Capital has consistently raised capital independently from external sources — seven funds over seven years (three USD funds and two RMB funds), with total assets under management reaching 15 billion yuan. The scale has expanded with restraint: for example, the second USD fund closed in 2022 at approximately $400 million, nearly double the size of the first USD fund.

A Persistent Question: NIO's Voice

For years, NIO Capital has been unable to escape one persistent question: what exactly is your relationship with NIO?

In 2016, when the managing partners of NIO Capital founded the firm, they too considered this question. The answer the core management team arrived at: "Our goal is to be open, to use the fund to discover excellent technologies and projects in the market."

For example, if NIO Capital invests in a components company, it "won't require [the company] to supply only NIO" — instead, it hopes the company can serve more enterprises. "Rooted in major industries, creating major projects" was NIO Capital's original DNA.

In a sense, this may have been the direct reason the founding team was willing to co-found NIO Capital together — "this philosophy was somewhat different."

In fact, a more common interpretation holds that "NIO established this fund in order to bring products and technologies into NIO's own supply chain." This understanding largely stems from NIO's industry influence, and from the fact that in the era of surging industrial investment, the original motivation for dominant enterprises in their respective fields — such as CATL, BYD, SMIC, and Huawei — to establish funds was often to safeguard supply chain security, with strategic attributes taking precedence above all.

NIO Capital is clearly different. It is an industry-focused, independent, and professional investment fund that employs market-based decision-making mechanisms.

The fund's founding team comprises veterans of the intelligent electric vehicle industry, as well as among China's earliest investors in the electric vehicle space. Over the years, the core management's focus has continually shifted. In the first two years, they were more like "entrepreneurs" responsible for fundraising roadshows, team building, and system construction. From 2018 to 2021, they functioned more like CIOs, responsible for and managing investment strategy within the organization. From 2021 to the present, as the organizational system has gradually clarified, the management team has begun using its prior experience to adjust strategy and steadily expand fund scale.

In the past two years, NIO Capital has reorganized its investment sectors — smart mobility, new energy, and advanced technology manufacturing — and has cultivated a senior investor to lead investment activities in each sector.

Navigating Both Sides: Using Industry Thinking to Do Financial Investment Well

As a fund born from industry yet raising capital through market channels, NIO Capital has gained flexibility to maneuver between the positions of corporate venture capital and pure financial investment institutions.

On one hand, it has no strategic mandates, can make independent decisions, and takes performance as its ultimate orientation (which to some degree avoids conflicts of interest with NIO's core business). On the other hand, it can leverage industry advantages to improve investment success rates.

One illustration is Ronbay Technology. This was NIO Capital's fastest deal — from due diligence, through investment committee approval, to completing the investment, in less than a month.

"When doing industry research we had already locked in on Ronbay Technology. When the company opened a financing window, we invested without hesitation," the investor leading the project told AnYong Waves. From the perspective of 2017, the valuation was not cheap, but he judged that Ronbay Technology's performance had not yet truly materialized and was on the eve of explosive growth.

As it turned out, electric vehicles' demand for lithium batteries surged dramatically in the years that followed. NIO Capital's returns on this deal were considerable.

The latter type of case is represented by Momenta. 2017 was a peak fundraising period for Momenta; the project was highly sought-after at the time. NIO Capital ultimately secured lead investor status by drawing on its own industry resources.

After completing the investment, the investor discussed business models with the management team from an industry perspective. When he saw core team members grow from technical talent into business leaders, "I felt genuinely gratified," the investor leading the project recalled.

This industry advantage can also help NIO Capital trial products before investing in a company, refining due diligence from an industry perspective.

For example, after judging in 2017 that autonomous driving was a key technology trend in automobiles, NIO Capital looked at more than 20 companies in the L2 and L3 domains, then contacted nearly 20 companies in the lidar space, and had these companies send samples to NIO for validation.

Most technology innovation companies hope their products can be rapidly applied in industry and have deep cooperation with automakers — NIO provided channels for testing and exchange. "Making judgments and selecting technologies from the customer's perspective, then making the investment, can improve the success rate of investments."

"Using industry thinking to do financial investment well may be the most correct thing NIO Capital has done in the past seven years," a managing partner told AnYong Waves.

Two Kinds of Victory: A Circle of Friends Called "NIO Founders Club"

NIO Capital has consistently held "selective investment strategy" as its guiding principle. Its consistent investment logic is: starting from industry, daring to make concentrated bets, pursuing top-tier companies ranked first or second in their subsectors; and adhering to endgame thinking — when investing, it looks from the endgame at how the industry will evolve in the future, then works backward to determine what industries and technologies are needed at this moment.

What is rarer is that after investing, it can help companies find customers and rapidly achieve mass production.

Hiway, a NIO Capital portfolio company, is an ecosystem partner for NIO's center console screens, instrument panels, rear passenger screens, and NOMI — from the NT1.0 first-generation platform to the NT2.0 second-generation platform. Over the years, as NIO has grown, Hiway has also begun providing in-vehicle displays for other automakers.

Seyond (formerly Innovusion) is an image-grade lidar sensor system developer for the autonomous driving vehicle market. Shortly after NIO Capital's investment, NIO began adopting Seyond's lidar across its second-generation platform, rapidly achieving industrial deployment of the technology. In 2021, Seyond completed three consecutive funding rounds.

Moreover, NIO Capital assists portfolio companies with matters such as site establishment and fundraising.

ClearMotion is an automotive technology company whose founding team comes from Boston. Its main product is high-performance active air suspension. After investing, NIO Capital not only assisted the company with factory site selection and investment negotiations with local governments, introduced investors for its next funding round, but also — when US-China interest rate differentials inverted in 2022 — helped the company secure relatively low-interest loans.

In fact, NIO Capital is acting as the initiator in building an industrial platform that tightly connects automakers, ecosystem partners, and service providers.

NIO Capital has a powerful circle of friends called the "NIO Founders Club" (牛总会). This community club brings together founders from more than 80 of NIO Capital's portfolio companies.

The "NIO Founders Club" regularly organizes sharing and exchange sessions among entrepreneurs. This community is an important industrial partner that NIO Capital can rely on, and can also help NIO Capital make "judgments about technology and industry trends."

In fact, building a circle of friends or ecosystem that allows partners and service providers to deeply participate can also let "scale effects" play their role in the vehicle development process.

Regarding the future, whether in energy or automobiles, the market is far from reaching saturation. "It's like a marathon — we've only just finished the first quarter of the race," a managing partner said.

Image source: IC photo

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