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China’s Source Code Capital builds mentoring network for investee start-ups

Network provides better visibility of investee companies’ performance and guide for follow-on investments, says founding partner

PUBLISHED : Tuesday, 06 February, 2018, 7:33pm
UPDATED : Tuesday, 03 July, 2018, 9:07pm

Beijing-based emerging venture capital Source Code Capital says it has built a mentoring network resembling an accelerator for the 100 start-ups that it invested in, as following through an investment is as important as starting one.

Founding partner Charlie Cao said linking up the 40-plus investors who have invested in Source Code funds with founders of its portfolio investee companies would provide the start-up entrepreneurs with access to mentoring and guidance from experienced executives from Chinese private and state-owned firms.

As China grew into the world’s second largest market for venture capital deal flows, Chinese managers like Source Code are developing their own models to manage post-investment relationships with their portfolio companies.

Source Code’s model – Code Class – resembles an accelerator programme common in the US and Europe, which is focused on intensive mentorship and guidance. The difference is the start-ups in the Code Class network have already commercialised their ideas, and would have passed the stage of requiring seed funding that an accelerator programme usually provides.

“Through such a network, we can have better visibility on the business performance of our investee companies. This allows us to make better judgement on whether we should make follow-on investments, or support their next round of financing,” said Cao.

In January, Source Code, which manages several US dollar funds worth US$750 million and renminbi-denominated funds totalling 3 billion yuan, made several investments into start-ups in artificial intelligence technology and the internet sector. It provided series A financing to Ziroom, an internet flat leasing operator, in a four billion yuan deal led by Warburg Pincus, Tencent Holdings and venture capital firm Sequoia.

It has also provided follow-on series B financing to Zichan 360, a non-performing asset servicer which uses artificial intelligence to calculate bad loan asset valuation and recovery rate.

This allows us to make better judgement on whether we should make follow-on investments, or support their next round of financing
Charles Cao, Source Code

“Code Class is also our way of offering post-investment support to our portfolio companies. We often see how leading venture capital firms in the US delegate a lot of their own partners and managers’ resources in supporting portfolio companies, which is vital to early-stage companies,” said Cao.

Code Class meets every quarter.

Source Code is backed by senior executives associated with China’s leading internet groups including Tencent, internet automobile service operator Autohome and venture capital fund Sequoia.

Source Code’s anchor investors also include Wang Xing, founder and CEO of Meituan Dianping, the world’s fourth most valuable start-up and China’s leading food delivery app, and news aggregator Toutiao’s founder and CEO Zhang Yiming.

Cao envisages that the next step is to look at how to bring overseas investors into Code Class.

One way could be to link up Source Code’s existing Southeast Asian investors with portfolio companies that aim to expand into that region.

In India, Source Code funds are invested in Indian news aggregator mobile app RozBuzz and mobile payment app Bluepay Asia.