Venture capital firm DCM Ventures has raised a fresh $770m from backers, including Asia’s Tencent, Baidu and SoftBank, at a time when global investors are pouring more money into VC funds, despite a cooling in Silicon Valley.
Investments in venture capital firms hit a 15-year high during the first half of this year, underscoring how investor appetite has been unfazed even while the valuations of some prominent start-ups have been called into question.
Venture capital firms with ties to Asia have been particularly active, with two big rounds closed this week by firms that invest in tech start-ups in the region.
DCM Ventures, with more than $3bn under management, said on Thursday its new fund would split investments between the US and Asia, where previous investments include Renren and Kakao Talk.
Tech investor Jim Breyer and IDG Capital also announced a $1bn fund earlier this week that will invest primarily in start-ups inside and outside China.
Mr Breyer acknowledged that the mood of the market has shifted. “We are in a global late-stage valuation market of increased uncertainty,” he said, adding that late-stage start-ups with highly priced shares required more due diligence.
Investing outside the Valley does not eliminate that challenge, he added. “The risk is about the same, in terms of late-stage valuation risk in Silicon Valley versus China.” However, he emphasised that areas like machine learning and artificial intelligence still provided big opportunities for start-up growth.
The fundraising news from the two firms comes after venture capital firms raised $8.8bn in the second quarter of this year, according to a study by Thomson Reuters and the National Venture Capital Association. Although second-quarter fundraising was below first-quarter levels, it brings the first half total to $22.9bn, the highest investment levels since the dotcom era.
David Chao, partner at DCM Ventures, said that the backing of Asian tech companies in their latest round reflects their global ambitions.
“Until three or four years ago, China’s venture community was still largely a ‘me-too’ venture world,” he said. “It was largely copies of other US or Japanese or Korean models.”
That has changed now with the emergence of Baidu, Tencent and Alibaba as tech powerhouses that have been boosting their investments in Silicon Valley.
Asia’s Baidu, Tencent, SoftBank, Gree and Naver all participated in the round. DCM raised $500m for its “DCM 8” fund, $170m for its growth-stage fund and $100m for its seed-stage fund.