The Most RMB-Denominated Singapore-Based Fund Raises Over 3.5 Billion Yuan丨Making Its Move

"Entering the Game" is a recurring column by Waves. It grew out of our observation that once-reliable operating models are facing new challenges, and industry rules inherited from West to East have been shattered. People are urgently seeking a new map and new order for innovation and capital. "Entering the game" is the most precious posture one can take. "Entering the Game" was born amid transformation. To summarize the column's subject in one sentence: we hope to find new players and new strategies better adapted to a changing environment. This is the column's eighth installment. By Qian Ren

Edited by Zhiyan Chen

Vertex Holdings' Beijing office sits in a Guomao office tower crowded with investment firms. The reception area displays models of Mobike, a Unitree quadruped robot, and an AgileX Robotics robot, while internal meeting rooms are named after China's Four Great Inventions: papermaking, the compass, gunpowder, and printing.

This offers a glimpse into what makes this investment firm distinctive: founded in 1988 and part of Singapore's Temasek Group, Vertex is among Asia's earliest venture capital practitioners. Despite its "pure dollar pedigree," its team has actively pursued a more localized, more "RMB" approach to investing since arriving in China in 2008.

For instance, though it witnessed every wave of China's tech evolution since the mobile internet era, it never fixated on landing "megadeals" or chasing outsized returns. A decade ago, Vertex pivoted from internet to early-stage hard tech, backing then-obscure companies like SES and SmartMicro that would later generate excess returns.

Then there's the fact that Vertex has two managing partners who "exude tech cred." Tuck Lye Kong holds a master's in electrical engineering from Stanford and was once a fighter jet engineer. Zhijin Xia earned both his bachelor's and master's in electronic engineering from Tsinghua University, and at Vertex has backed Horizon Robotics, Geek+, Eswin, Eigencomm, ZKRobotics, Xiaoduo Tech, DeepVision, and others.

It's hard to say whether Vertex's localization push was active choice or passive necessity. At least judged by results, as most foreign PE/VC firms retreat in disappointment, the strategy Vertex has consistently pursued has paid off.

On August 26, Vertex Holdings completed fundraising for its second RMB fund, raising over 3.5 billion yuan — a 60% increase over its first RMB fund raised in 2020. The second fund's investors include not only substantial re-ups from first-fund LPs (such as the Xiamen government guidance fund), but also a new major insurance company.

In today's fundraising climate, this is a rarely seen scale for an early-stage fund still focused exclusively on hard tech. Vertex says the second fund will continue targeting innovative technologies, including chips and semiconductors, robotics and intelligent solutions, large model-related applications, new energy, new materials, and medtech, with investment rounds concentrated in Series A to B.

Recently, Waves spoke with Zhijin Xia about the fundraising experience, Vertex China's gains and losses over 16 years, and his understanding of localization and the new AI cycle. He revealed how a Singaporean fund became "the most RMB" of its kind.

A Different Kind of Victory

In 2013, while numerous investment firms were immersed in the capital game of "burning cash to buy traffic, boosting DAU, winner takes all," Vertex invested in SES, a developer and manufacturer of hybrid lithium-metal batteries. The contrarian bet stemmed from Vertex research finding that the core reason electric vehicles weren't advancing effectively was the slow pace of battery technology innovation. The team resolved to position in the battery sector, discovered Qichao Hu returning from MIT, and made an approximately $20 million Series A investment in SES.

Subsequently, SES completed six funding rounds. The vast majority of participants were strategic investors; the only financial institutions were Vertex and parent company Temasek. In 2022, SES successfully listed on a U.S. exchange, generating hundred-fold returns for Vertex.

The SES investment was Vertex's largest China deal in 2013, and the starting point for its China team's hard tech investing. SES's growth gradually solidified Vertex's direction: wary of hype, embracing technology, placing chips where capital competition was relatively thin. As a result, among Vertex's numerous portfolio companies, apart from Mobike (invested in 2016), one rarely sees the big names spawned by capital-fueled frenzy.

Xia told Waves that the decision to persist with this approach had both internal and external reasons: first, Vertex China's early founding team had tech investing in its DNA; second, facing rapidly rising labor costs, they believed technology could help many industries reduce costs and improve efficiency. "This was another starting point for our investments."

Over more than a decade of venture capital tides, Vertex's "road less traveled" was evident not only in investment direction but also in its restraint regarding scale.

Vertex launched its first China-focused USD fund in 2008, then maintained roughly a three-year fundraising cadence. Its five USD funds scaled at approximately $100 million, $160 million, $250 million, $300 million, and $500 million. Combined with its first RMB fund of 2.2 billion yuan, second fund of 3.5 billion yuan, and an angel fund of around 400 million yuan, Vertex China's total AUM now approaches 20 billion yuan. Compared to those dual-currency funds boasting hundreds of billions and swinging for the fences, this scale is noticeably "slimmer."

But in Xia's view, rather than calling Vertex conservative, it's more accurate to say steady. Individual fund sizes aren't large, deal pace isn't dense. Typical Series A-B checks run from 40-50 million to 100 million yuan; angel and early-stage deals around 10-20 million yuan. "Too large a scale would actually drag down return coefficients."

Whether "the world's first hybrid lithium-metal battery stock" SES, "the STAR Market's first innovative drug stock" Chipscreen Biosciences, or Horizon Robotics — in numerous cases, Vertex consistently entered at the early Series A stage. Another representative example is the "dark horse domestic RF company" SmartMicro, which Vertex backed in 2013, waiting a full ten years until its successful 2023 IPO.

Clearly, rather than chasing frenzied premiums after a company's key product metrics are proven, Vertex prefers to judge whether it can identify and precisely assess future development earlier than others.

It's hard to say whether choosing the tech investing track a decade ago caused Vertex to miss out on a glorious era — after all, many mythic outsized returns were born there. But this approach has indeed been key to Vertex's continued fundraising success to this day.

Its long-term presence in tech, stable and specialized team, and disciplined scale expansion — these are sufficiently attractive to RMB LPs, especially insurance capital, that require persistent strategy and high risk control.

Perhaps this, too, is a different kind of victory.

Entering the AI Game

A careful comparison reveals subtle adjustments in the second RMB fund's investment directions. Beyond traditional strengths like semiconductors, robotics, and healthcare, it specifically names large model-related applications.

Xia publicly shared his observations on AI several years ago. He noted that AI has been a focus for Vertex over the past decade, because it plays a significant role in empowering all industries, and cost reduction, efficiency improvement, and labor replacement have been key investment themes. But he always felt first-generation deep learning technology wasn't fully mature, wasn't general-purpose enough, "and customized models had relatively limited imagination space and application scenarios."

By 2017-2018, as core algorithms and training frameworks gradually became open-sourced, judging the commercial potential of AI companies became a challenge for investors.

Xia believes this was due to two factors: on one hand, different industries and customers had highly diverse AI application needs, with细分方向 potentially completely different; on the other, entrepreneurs seeking funding all claimed productization was easily achievable, but whether they could truly deliver, whether having a product meant having the capability and opportunity to rapidly bring it to market, and whether scale could be achieved quickly — these tested investors' judgment.

If the previous wave of AI merely replaced some low-end labor, this time it's "a force that threatens humans in every domain."

Xia stated that the team has prepared to systematically deploy AI investments from this point forward.

Currently, Vertex's AI portfolio spans a very broad range: novel large model technologies, software and hardware technologies that enhance AI computing power, AI-native B2B and B2C products, and AI-powered solutions for various traditional industries, among others. The team will continue its pragmatic style, investing in outstanding AI companies with technological innovation capability, product-building capability, and massive commercialization potential.

"Compared to the U.S., Chinese companies have their own advantages. For instance, the U.S. enterprise software ecosystem is exceptionally mature, so startups can only work within existing product systems. But China's enterprise services ecosystem is still in its early stages, without giant monopolies, which gives native AI products enormous opportunity," Xia said.

Image source | IC Photo

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