Four years after its last close, Source Code Capital has raised another fund.

"Dual-currency, $600 million." By Zhiyan Chen

For the first time in a while, the market is hearing fresh news from Source Code Capital (hereafter "Source Code").

Today, Source Code announced the final close of its new growth fund — dual-currency, with total commitments of $600 million. To date, Source Code's assets under management stand at approximately $7 billion (RMB 50 billion).

According to official disclosures, the new fund will focus on "AI+" and "Global+," the two domains with the greatest long-term potential. Looking at recent investment activity, Source Code never really strayed from the core mandates of its dual-currency strategy. It has continued to double down on hot sectors like AI and embodied intelligence, with star companies such as Unitree, GalaxyBot, Booster Robotics, LiblibAI, Moonshot AI, Sand.ai, ESWIN Materials, and Biren Technology all on its portfolio roster.

More notable is how Source Code structured this "new product" with a "5-year investment period, 20-year exit period." This means China's primary market now has a growth fund with a 25-year lifespan.

Keep in mind that over the past two years, rumors about "Yi Cao's retirement" have circulated constantly. Last June, Yong Waves exclusively reported that Yungang Huang would independently operate the early-stage fund "Code Rhythm Capital", which many outsiders took as evidence that Cao was completing a "generational handover."

Yet this dual-currency fundraise directly shatters all such speculation. It doesn't just debunk the rumors — it shows Source Code is rapidly recalibrating its course: from the industry-standard pursuit of scale expansion toward greater focus and longer horizons; from the sector's former obsession with speed and breadth toward an exploration of patience and depth.

Far from preparing to "retire," Cao appears ready to fight for at least another 25 years.

Part01

Why still do "growth-stage investing"?

The primary investment targets of Source Code's growth fund are largely unsurprising. Specifically: under the "AI+" umbrella, Source Code will focus on AI-to-consumer/professional applications, the computing power supply chain, and supporting breakthroughs in "chokepoint" technologies while enabling large-scale commercialization of AI. On the "Global+" front, it will prioritize smart hardware and software applications, systematically mining opportunities for China's comprehensive capabilities to go global.

By contrast, Source Code's strategic emphasis on growth-stage investing carries a faint whiff of swimming against the tide.

One obvious reason may be that Code Rhythm Capital, independently operated by Yungang Huang, has clearly committed to going all-in on early-stage and returning to classic VC investing. Source Code's current fund, with its growth-stage focus, represents a clear stage-based division of labor.

But the more critical question is this: for the past two years, China's primary market has offered almost no fertile ground for growth-stage investing. Blocked exit channels led to severe valuation inversion for companies that should have entered growth phases, leaving institutions short on both ammunition and confidence. Why, then, would Source Code choose to raise a fund focused on growth-stage investing now?

The primary catalyst is undoubtedly the reopening of exit pathways. Since 2024, the Hong Kong market — a crucial exit route for Chinese tech companies — has warmed up at a visible pace.

According to the latest figures, as of end-September, Hong Kong Exchanges and Clearing's IPO fundraising totaled HK$182.9 billion, more than triple the same period in 2024, with nearly 300 listing applications being processed. Average daily turnover reached HK$256.4 billion, up 126% year-over-year. More important is the recovery in market sentiment: multiple companies this year have received oversubscriptions of 100x or even 1,000x, with significant "money-making effects" on listing day.

For growth investing, a predictable, healthy exit market is the foundation for a viable business model. When the bottleneck at the outlet begins to clear, the midstream channels naturally start flowing again.

The deeper reason, however, may lie in that number: "25 years."

According to people familiar with the matter, in designing this ultra-long-duration growth fund, Source Code also hopes to redefine how growth-stage investing is "played": "fewer but better" focus, returning to project quality and value-driven decision-making. Specifically, fewer but more precise bets, with more capital deployed per deal and held longer, accompanied by correspondingly heavier and deeper post-investment support.

Traditional growth-stage investing is fundamentally an IPO-centric business model, chasing relatively clear near-term exits. But when a fund's lifespan stretches to 25 years, investment decisions are decoupled from short-term IPO pressure. Teams no longer need to obsess over a company's financials or listing timeline for the next two years; they can return to the essence of value investing, judging its industrial competitiveness over the next ten or fifteen years.

Of course, Source Code's contrarian bet on growth-stage investing at this moment also benefits from its prior experience in mid-to-late-stage deals.

Whether with ESWIN Materials, a manufacturer of 12-inch silicon wafers, or Sunwoda EVB, a power battery company, Cao and his team appear to have found their posture and methodology for accompanying these capital-intensive, long-cycle "tough businesses." Coincidentally, ESWIN Materials (stock name: Xi'an Yicai) just rang the bell at the Shanghai Stock Exchange at the end of October, with its market cap surpassing RMB 100 billion on its first trading day.

As Cao put it, AI and globalization will transform and reshape business in ways that are massive and enduring, while geopolitics and capital markets carry significant uncertainty. "The extended exit period is Source Code's proactive experiment facing the future, and also a firm commitment to entrepreneurs, rooted in our tremendous confidence in the Chinese economy and the innovative growth of Chinese enterprises."

Part02

Is "de-scaling" the new narrative?

Turning back to the fundraise itself: this dual-currency fund's $600 million size represents a clear reduction from Source Code's April and October 2021 announcements of $1 billion and RMB 7 billion respectively. Cao didn't shy away from this in the firm's external fundraise announcement: "This growth fund is somewhat smaller than the previous one."

Behind the scale adjustment, on one hand, lies the objective environment of a broadly down market. On the other, it reflects an active strategic choice by Source Code.

In 2021, the global VC market was at the peak of liquidity abundance, with surging valuations and capital excess. For large institutions, mega-fundraises resembled an "arms race" — the core imperative was to acquire and deploy ammunition as quickly as possible. But the primary market's situation reversed sharply thereafter, with USD-denominated fundraising facing increasingly severe challenges.

After the "Great Leap Forward" fundraising wave, some top GPs reflected on the scale-driven, catch-all approach. They realized that balancing expanded AUM with ultimate returns (especially DPI) is extraordinarily difficult.

According to Yong Waves, the reduced size of this new fund is not a passive outcome but an active choice by Source Code. Breaking free from AUM competition to focus on building cycle-crossing capabilities — this is the mark of a comprehensive investment institution maturing.

Source Code's move sends LP's at least one clear signal: rather than pursuing scale and speed, it prioritizes quality and hit rate; going forward, it will no longer chase AUM expansion, but instead use a more nimble size, more focused direction, and more efficient methods to do deeper, longer-term work.

For USD LP's who have grown wary of China in recent years, this shift carries particular weight.

Geopolitical and macroeconomic uncertainty has indeed made some North American LP's more conservative. But for truly sophisticated global asset allocators, abandoning China entirely is not a rational option. Especially with structural opportunities in AI, robotics, and globalization that cannot be ignored, investing in China's top GP's remains the most efficient way to participate in global frontier innovation.

And Source Code's new fund happens to offer institutions a "new narrative": more focused investment directions, more restrained fund size, and a more earnest 25-year commitment. Source Code clearly hopes to reshape investment efficiency through focus, aspiring to become a sustainable long-term institution rather than a short-term winner of liquidity cycles.

From this perspective, the completion of Source Code's growth fund raise may mark the beginning of a new round of evolution for China's primary market institutions.

This July, Bloomberg cited sources saying that multiple firms including Source Code, Shunwei Capital, Black Ant Capital, Qiming Venture Partners, Lightspeed China Partners, INCE Capital, and Monolith were raising at least $2 billion in new capital — a rare wave of investment into Chinese startups in recent years.

Just two days ago, Xi Cao's Monolith announced the close of its dual-currency fundraise at $488 million. With subscription interest at roughly 160% of target, Monolith ultimately chose "restrained expansion." Today, Source Code submitted its own answer sheet with the keywords "focus" and "long-term."

Will China's primary market story thus open a new chapter? What can be said with certainty is this: if it truly arrives, the keywords of this chapter will no longer be the triumphant march of "Beta," but rather how — through discipline, focus, and patience — to find more certain value amid uncertainty, capturing precious "Alpha."

Image source | Unsplash

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