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DT Ventures launches growth fund

The appetite for early stage VC firms to participate in growth stage investments with dedicated funds has spread to Asia.

DT Ventures, the China-based firm—formed as a partnership between Lightspeed Venture Partners, Madrone Capital Partners and Pantheon Capital—has raised about $283 million toward a proposed $350 million growth fund, according to regulatory filings.

The fund, DT Capital China Growth Fund, comes less than a year after the firm closed its second early stage fund at $122 million, which is getting close to being 100% invested.

General Partner Greg Penner, an early stage investor with Madrone Capital Partners in Menlo Park, Calif., and a director at Baidu.com (Nasdaq: BIDU), says that much of fund II has been invested in later stage deals. Penner says the growth fund does not signal any shift in strategy or focus of the firm, which will continue to make early stage deals in China.

“I wouldn’t say that there are no early stage deal opportunities in China,” he says. “In China, venture firms tend to have more growth stage funds than early stage; that’s just the nature of the business over there.”

In the United States, however, many investors agree that mezzanine and private equity investors have left a hole in the market when they moved upstream to participate in mega-deals and the buyout boom. Hoping to fill the void, at least five early stage venture firms have launched their first growth funds in the past year: Draper Fisher Jurvetson ($300 million); Ignition Partners ($275 million); Index Ventures ($600 million); North Bridge Venture Partners ($550 million) and Redpoint Ventures ($250 million).

John Malloy, founder of early stage investor BlueRun Ventures and the affiliated Nokia Growth Partners, agrees that he has seen more early stage investors moving to growth stage investments in the United States. He says the trend is not because of a dearth of early stage deals, but because of a general business cycle that has produced many growth stage opportunities. BlueRun is currently raising a $350 million early stage fund.

DT Ventures, which is also known as DT Capital Partners, invests in consumer, media, energy and tech companies in China from offices in Beijing and Shanghai.

The firm is led by co-founder and Managing Partner Roman Shaw. Shaw, who could not be reached for comment, is one of China’s best known VCs, having previously founded DragonTech Ventures, one of the earliest China-focused venture firms.

Investing alongside Shaw are Partners Lixin “Joe” Tian, William Chen and Jun Zhao.

The firm’s first fund, called DragonTech Ventures Management, raised $63 million in 2000. Among its investments was Suntech Power (NYSE: STP), which it backed in 2005. The company, a China-based developer of photovoltaic cells, went public several months later.

DT Ventures also was an early stage investor in Harbour Networks, a Beijing-based developer of networking equipment that has raised more than $100 million in early and late stage financings.

Limited partners in the firm’s second early stage fund include MCP Holdings (the holding company of Madrone Capital Partners), AlpInvest Partners, Eleven Rings, Lightspeed Management Co. and Pantheon Ventures Ltd. MCP Holdings is also listed as an LP in the growth fund.

Alastair Goldfisher contributed to this report.