Source Code Capital recently announced the completion of its RMB Fund V, raising over circa RMB 7 billion. The RMB fundraising was achieved in a short three months’ time period from start to finish. In addition to nearly 10 insurance institutions, new LP supporters include government guidance funds, such as the National Fund for the Development of Small and Mid-sized Enterprises (SMEs). A majority of LPs are recurring investors. For example, Yuan He Fund of Funds has invested in Source Code Capital for already four consecutive years. At the same time, RMB Fund V also attracted many new prestigious LP investors.
Source Code Capital currently manages around RMB 35 billion across both RMB and USD. Entrusted capital primarily come from LPs such as PRC central government guidance funds, financial institutions and insurances, leading local and global fund of funds, industrial enterprises, prestigious SWFs, as well as leading endowments, foundations and pensions.
Founding Partner Cao Yi said, “We would like to thank both our long-term existing LPs and new LPs for their extensive support. With the completion of RMB Fund V’s fundraise, we will be able to provide more sustainable and effective support to SMEs across various development stages, and help propel excellent entrepreneurs to become leaders in their respective industries, supporting their growth all the way from the seed stage till they become industry leaders. We will continue to find and create value through investments in new emerging technologies. We are dedicated to investments advancing technological innovation and development, and to do our part to support Industrial Digitization, Artificial Intelligence, Robotics, Advanced Manufacturing, Green Development, Enterprise Software, Healthcare and Biotech, and other fields.”
Wenna Jing, Head of RMB IR, said, “Source Code Capital continues to generate attractive returns for investors. This RMB fundraising received the extensive attention of the market. While working with both long-term and industrial capital to help technological innovation, we are devoted to maintain the scale of the fund at an appropriate level. We care for our investors, and we are committed to offer more high-quality products.”
Invest in Early, invest in Small, Invest in Technology
Since inception in 2014, Source Code Capital has backed and partnered with over 300 companies, of which 80% were in early development stage. These companies span across multiple sectors including Industrial Digitization, Artificial Intelligence, Robotics, Advanced Manufacturing, Green Development, Enterprise Software, Healthcare and Biotech, New Consumption and New Brands, and Global+.
Since inception, Source Code Capital has conducted in-depth research regarding the digitalization of the industry. It found opportunities for digital upgrades in several different industries. At that time, a large number of traditional industries were starting to experiment with digitalization. For industries such as textiles, pharmaceuticals, after-sales automobile market, logistics, and FMCG, this process became increasingly obvious rather quickly. Source Code Capital investment witnessed the growth and expansion of a number of industrial digitization and industrial Internet companies, including: Baibu, Xiaoyaoyao, Casstime, Ruigu, YQNLink, Yijiupi, Edianyun, Zhongneng United, and others.
In the past three years, Source Code Capital has invested in key technological innovation fields. These include Artificial Intelligence and Robotics, Enterprise Software, Advanced Manufacturing, and Aerospace Technology developed by companies such as ONES, Cyclone, Gaoding, Pera Global, D5, Taichi Graphics, Biren Technology, Silicon Integrated, GalaxySpace, and Space Transportation.
In addition, Source Capital has accelerated its investments in Healthcare and Biotech, with companies providing medical technology such as Weimai, Bota, Sibionics, Jianhai Technology, Metis, Galixir, Nutshell Therapeutics.
Regarding Green Development, Source Code Capital invested in the renewable energy automobile industry with Li Auto and NIU Technologies, and in “carbon neutral” related enterprises such as Unisun, Power Oak and Engrid in new energy.
Healthcare, Biotech and Green Development makes people’s life better, improving sustainability and their health. But what about the consumption model? Regarding new consumption, Source Code Capital has focused on innovative products and services that continue to explore ways to improve people’s livelihoods. It invested in companies such as Bytedance, Meituan, Ke Holding Inc., Ziroom, Pagoda, Linji Convenience Store, Bloks Group, PMPM, Moody, WonderLab, Modern China Tea Shop, etc.
Accompanying Entrepreneurs in the Long-run
From day one onwards, Source Code Capital always sought for a close relationship with entrepreneurs, and constantly improved on its array of post-investment support services. Putting so much focus on post-investment services was not really understood by the industry initially, and some people thought that post-investment services could not be systematized.
After thorough research, Source Code Capital established a systematic and product-oriented post-investment services framework. Across 10 functional modules and 28 products, we provide services in Code Brain courses, public affairs, PR, HR and organizational development, capital markets, business laws and taxation, and strategic, business development and related growth advice. Some products include, for example: weekly talent recruiting updates, organization consultation, industrial policy research, capital market consulting, and public relations support.
Zhang Junbin, Founder and CEO of Narwal said, “Source Code Capital not only is an investment institution, it also assumes the role of a “co-founder.” It does not only provide financial support, but also helps with organization, processes, systems, and some external collaborations. More importantly, Source Code Capital does not let short-term market fluctuations influence me. They respect and help me keep my ideas, my philosophy and my visions.”
Silicon Integrated founder and CEO Deheng Liu said, “Starting a business is difficult for entrepreneurs. Every day is spent in anxiety. During this process, I often talked with some colleagues from Source Code Capital. Each discussion felt fruitful, giving me a lot of insight and help. Every month, the post-investment team sends me a book. Those are carefully selected, and every time I read one, my relationship with Source Code Capital matures and develops. It is like growing together.”
Shao Tianlan, Founder and CEO of Mech-Mind Robotics, said, “Soon after our establishment, we met Source Code Capital. We have been in contact since my early entrepreneurial process. When the company reached a mature enough stage, we immediately thought of Source Code Capital. Why? Because we have similar philosophies. This is a very good and trustworthy foundation. It is like having an old friend joining in to start a business. It feels very good.”
Dr. Hao Cui, Founder and CEO of Bota Bio, said, “The entrepreneurs and the investors are like brothers-in-arms. They face many problems together. The idea of “create enduring real value” as put forth and proposed by Source Code Capital is impressive. This is what we want to pursue. Source Code Capital is also a firm that continues to grow, just like us. This is a process of mutual companionship. In the past few years, we both experienced growth and struggles. I am proud to have been able to witness our respective developments.”
Creating Enduring Real Value
Source Code Capital had less than 10 people back in 2014 at inception. It gradually grew its organization across investment, post-investment, and platform. It now has 7 Partners and a professional team of more than 100 people, coming from very diverse backgrounds such investment management, product technology, entrepreneurs, corporate executives, consultancy, etc. Its leadership, industry knowledge and capacity to work as a team continue to increase. Its offices are distributed across regional institutions located in Beijing, Shanghai, and Shenzhen.
Over the past five years, Source Code Capital has been exploring ways to build an “intelligent organization” in the investment industry. The firm has been implementing an organic collaboration of sensing, computing, and executing, and it is constantly evolving. How to provide timely, effective and accurate feedback and review mechanisms? How to make the most of the respective advantages of the “distributed computing” and the “centralized computing” system? How to design a reasonable organizational structure with an institutional mechanism, a process system and other transmission control units? How to advance through culture consensus instead of rules? How to continue to stimulate organizational development and personal development in order to attract the best talents? Those are problems and challenges that need to be continuously addressed. It is these difficult challenges that drive the continuous “intelligence” of the organization, through which the firm might help every team member reach his or her full potential of “computing power,” and continue to iterate “algorithms” under a common mission, common vision and strategic goals. The overall output of the organization is a steady stream of competitiveness, creativity and growth.
At the 2021 Code Class CEO Annual Meeting, Cao Yi said: “We want to keep making the hard but right choices. Keep innovating, keep doing things that create value for entrepreneurs and the industry. Research, judgment, “vanguard-like non-consensus” investments, investing in “qualitative change” and focusing on the long-term. Insist on trusting visionary people, stand firm on the importance of a durable company. To think and do things like entrepreneurs. Our philosophy of cooperation is not based on short-term interests, not trying to maximize profits. We are willing to be fairer with entrepreneurs and partners alike. We hope that the whole industry can be more equitable, more lasting, and have a longer-term perspective on things. This may be the ‘entrepreneurial spirit’ of our industry, and the philosophies, ideas, and actions we develop will attract the people we want to work with. I think in the next 15 years, there will be a large number of world-class companies coming from China. We want to help them.”
With the completion of RMB Fund V, Source Code Capital will take root in China’s fertile soil of entrepreneurship and innovation. Invest in early, invest in small, invest in technology. Source Code Capital aims to stay at the forefront of the next big thesis, and stay ahead of consensus thinking. It will constantly look for the best entrepreneurs, and provide valuable help to enterprises. Source Code Capital seeks to continually provide its investors with excellent returns. It is here to create a community of innovations, here to create enduring real value together.
