Qingdao Haisi Cycle Fund: Behind The Fundraise With Cycle Capital Management
On December 12, Montreal-based Cycle Capital Management announced the first closing of The Qingdao Haisi Cycle Fund a joint CAD $116M fund between Qingdao City Construction Investment Group and the firm.
The fundraising process began in 2013 in collaboration between the Qingdao City Construction Investment Group and Cycle Capital Management which will target growth-stage industrial technologies companies across North America and China.
The fund has already made its first CAD $9M investment in Haier-Ririshun Lejia, an affiliate of Chinese consumer electronics and home appliances company Haier. Haier-Ririshun Lejia’s SaaS solutions work to improve last-mile package delivery and extended warranties for ecommerce companies.
The CVCA connected with the team at Cycle Capital Management to discuss the details behind the collaboration and first close of the fund.
How does the successful completion of the fund complement Cycle Capital Management’s thesis?
China is the world’s largest market for cleantechs and with its recent Five-Year Plan, the country aims to create a strong foundation for a low carbon economy by increasing its effort in clean energy investment and related R&D spending. The public environmental policies, the presence of important industrial players and investors and the need for China to adopt technology-enabled solutions that can answer major global challenges such as industry dislocations and climate change are important drivers of innovation – our core business as an impact cleantech investment platform.
Is Cycle Capital Management interested in exploring any other strategies?
Cycle Capital’s strategy is to target companies with high growth potential, led by talented management teams, developing innovative intellectual property and leading-edge technology targeting large markets. As such, the Qingdao Haisi Cycle Fund embodies a bridge to provide Chinese, Canadian and North American capital and strategic resources to the startups – key elements to enable the emergence of disruptive technologies by flagship businesses that are competitive in the global market.
Is there anything particularly interesting about this fundraising that you’d like to emphasize?
There are 3 important principles that we’ve learned from our experience of doing business in China: trust, friendship and time. Before even thinking about closing a deal in China, you need to find the right partner and develop a relationship of trust with him. Secondly, friendship is an important value in China, including in business. That’s very different from what we’re familiar with in the Western world. And all of this takes time, so if you’re really determined to broaden your business horizons, you need to spend time on the ground getting to know the Chinese society and your business partner. The notion of time in the Chinese culture is seen as an asset and is not a linear concept, while it is seen as a liability in our culture.
On a scale of 1 to 10 (1=not at all challenging; 10=very challenging) how challenging did you find the fundraising to be?
8. The fundraising process was challenging in terms of Western expectations. It took us a whole lot of patience to go through the whole process. But the experience and profound friendship relationship we’ve developed with our partner made it a very valuable and fascinating experience that we can now leverage as an added value we can provide to our portfolio companies.
What single factor do you attribute to the success of your fund’s closing?
With insights, our resilience, determination and authenticity enabled us to develop a real trustworthy relationship, which became the key to our success.
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