HongShan Capital Group (HSG; ) is a Chinese

venture capital Venture capital (VC) is a form of private equity financing provided by firms or funds to start-up company, startup, early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in ...

firm founded in 2005. It was previously the China investment arm of

Sequoia Capital Sequoia Capital Operations, LLC is an American venture capital firm headquartered in Menlo Park, California, specializing in seed stage, early stage, and growth stage investments in private companies across technology sectors. the firm had appro ...

(Sequoia) and was known as Sequoia Capital China and Sequoia China before it was rebranded and spun-off as an separate entity. HongShan is headquartered in

Hong Kong Hong Kong)., Legally Hong Kong, China in international treaties and organizations. is a special administrative region of China. With 7.5 million residents in a territory, Hong Kong is the fourth most densely populated region in the wor ...

, with additional offices in

Beijing Beijing, Chinese postal romanization, previously romanized as Peking, is the capital city of China. With more than 22 million residents, it is the world's List of national capitals by population, most populous national capital city as well as ...

Shanghai Shanghai, Shanghainese: , Standard Chinese pronunciation: is a direct-administered municipality and the most populous urban area in China. The city is located on the Chinese shoreline on the southern estuary of the Yangtze River, with the ...

London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...

Singapore Singapore, officially the Republic of Singapore, is an island country and city-state in Southeast Asia. The country's territory comprises one main island, 63 satellite islands and islets, and one outlying islet. It is about one degree ...

, and

Shenzhen Shenzhen is a prefecture-level city in the province of Guangdong, China. A Special economic zones of China, special economic zone, it is located on the east bank of the Pearl River (China), Pearl River estuary on the central coast of Guangdong ...

. HongShan has expanded its focus over the years beyond early-stage investing to also cover growth stage, infrastructure, healthcare and consumer, and buyout funds. The firm manages around $56 billion in assets.

Background

Sequoia China (2005 to 2023)

In 2005, Neil Shen and Zhang Fan co-founded Sequoia China with under the guidance of Sequoia partners

Michael Moritz Sir Michael Jonathan Moritz (born 12 September 1954) is a Welsh billionaire venture capitalist, philanthropist, author, and former journalist. Moritz works for Sequoia Capital, wrote the first history of Apple Inc., '' The Little Kingdom'' ...

and Douglas Leone. The two were selected by Sequoia to lead the firm's venture in China. In 2009, Zhang resigned from Sequoia China for personal reasons leaving Shen to be entirely in charge of Sequoia China's operations. By that period, the firm had raised a combined $1 billion for three U.S. dollar-denominated China funds and 1 billion yuan for a local currency yuan-denominated investment fund. Afterwards Sequoia China raised more money, mostly from US

institutional investor An institutional investor is an entity that pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked ...

s and built a successful investment record which included companies such as

Alibaba Group Alibaba Group Holding Limited, branded as Alibaba (), is a Chinese Multinational corporation, multinational technology company specializing in E-commerce in China, e-commerce, retail, Internet, and technology. Founded on 28 June 1999 in Hangzho ...

, JD.com,

Meituan Meituan ( zh, p=Měituán, c=美团, literally "beautiful group"; formerly Meituan–Dianping, literally "beautiful group–reviews") is a Chinese shopping platform for locally found consumer products and retail services including entertainment ...

and

ByteDance ByteDance Ltd. is a Chinese internet technology company headquartered in Haidian, Beijing, and incorporated in the Cayman Islands. Founded by Zhang Yiming, Liang Rubo, and a team of others in 2012, ByteDance developed the video-sharing ap ...

. Historically 90% of returns came from consumer, consumer tech and healthcare fields. No other US investment manager had same level of success in China as Sequoia China. By 2023, Sequoia China had invested in over 1,000 projects. In June 2023, Sequoia announced that it would be splitting off Sequoia China as an separate entity and would be completed by 31 March 2024. This came at a time of rising tensions in

China–United States relations The relationship between the China, People's Republic of China (PRC) and the United States (US) is one of the most important foreign relations in the world. It has been complex and at times tense since the Proclamation of the People's Republi ...

where Chinese leaders did not want to see US investors reaping rewards from their companies and US leaders did not want to see money being used to invest in Chinese technology such as

semiconductor A semiconductor is a material with electrical conductivity between that of a conductor and an insulator. Its conductivity can be modified by adding impurities (" doping") to its crystal structure. When two regions with different doping level ...

s. However Sequoia denied that rising tensions were the reasons for the split. Sequoia China would be rebranded as HongShan (a

pinyin Hanyu Pinyin, or simply pinyin, officially the Chinese Phonetic Alphabet, is the most common romanization system for Standard Chinese. ''Hanyu'' () literally means 'Han Chinese, Han language'—that is, the Chinese language—while ''pinyin' ...

romanisation In linguistics, romanization is the conversion of text from a different writing system to the Roman (Latin) script, or a system for doing so. Methods of romanization include transliteration, for representing written text, and transcription, ...

of its Chinese name, which means redwood) in English but its Chinese name remained the same. Going forward, the firm will be raising capital as a Chinese venture capital firm rather than as the Chinese arm of an American venture capital firm.

HongShan (2023 to present)

In July 2023, HongShan announced that had set up and office in

and was making plans to use it as a base to invest in

Southeast Asia Southeast Asia is the geographical United Nations geoscheme for Asia#South-eastern Asia, southeastern region of Asia, consisting of the regions that are situated south of China, east of the Indian subcontinent, and northwest of the Mainland Au ...

. It was speculated that it would be competing with Peak XV Partners, the Indian and Southeast Asian investment arm of Sequoia China that was also split off in June 2023. HongShan has stated there are no plans to open an office in the US. In October 2023, the United States House Select Committee on Strategic Competition between the United States and the Chinese Communist Party asked Sequoia in a letter to provide details about investments in

artificial intelligence Artificial intelligence (AI) is the capability of computer, computational systems to perform tasks typically associated with human intelligence, such as learning, reasoning, problem-solving, perception, and decision-making. It is a field of re ...

and other high-tech sectors made by it and HongShan. Members also questioned Sequoia if its decision to split-off HongShan would insulate some capital flows from US regulatory scrutiny. This was because HongShan relied on

limited partners A limited partnership (LP) is a type of partnership with general partners, who have a right to manage the business, and limited partners, who have no right to manage the business but have only limited liability for its debts. Limited partnership ...

to finance deals so the split would not stop US institutional investors from continuing to invest in it. In addition, members also sated HongShan would be likely to scrap the

national security National security, or national defence (national defense in American English), is the security and Defence (military), defence of a sovereign state, including its Citizenship, citizens, economy, and institutions, which is regarded as a duty of ...

screening mechanism that Sequoia had created to evaluate investments by its companies. Members also accused HongShan of funnelling US capital into investments that contributed to

human rights abuses Human rights are universally recognized moral principles or norms that establish standards of human behavior and are often protected by both national and international laws. These rights are considered inherent and inalienable, meaning t ...

and military modernisation with examples being DeepGlint and ByteDance. Additional requests included identifying any limited partners domiciled in China or that manage funds for

state-owned State ownership, also called public ownership or government ownership, is the ownership of an industry, asset, property, or enterprise by the national government of a country or state, or a public body representing a community, as opposed to ...

or affiliated entities and to confirm the number of HongShan's limited partners that are US investors. So far US limited partners were not targeted and institutional investors that invest in Hongshan are confident they can continue their relationship with HongShan after the

United States Department of the Treasury The Department of the Treasury (USDT) is the Treasury, national treasury and finance department of the federal government of the United States. It is one of 15 current United States federal executive departments, U.S. government departments. ...

finalises restrictions on outbound investment mandated by an

executive order In the United States, an executive order is a directive by the president of the United States that manages operations of the federal government. The legal or constitutional basis for executive orders has multiple sources. Article Two of the ...

. In November 2023, it was reported that despite scrutiny from US lawmakers, several new investors signed on with HongShan. They include

CalPERS The California Public Employees' Retirement System (CalPERS) is an agency in the California executive branch that "manages pension and health benefits for more than 1.5 million California public employees, retirees, and their families".CalPERSFa ...

and

University of Washington The University of Washington (UW and informally U-Dub or U Dub) is a public research university in Seattle, Washington, United States. Founded in 1861, the University of Washington is one of the oldest universities on the West Coast of the Uni ...

Investment Management. Existing investors such as

CPP Investment Board The Canada Pension Plan Investment Board (CPPIB; ), operating as CPP Investments (), is a Canadian Crown corporation established by way of the 1997 ''Canada Pension Plan Investment Board Act'' to oversee and invest the funds contributed to and h ...

and

Regents of the University of California The Regents of the University of California (also referred to as the Board of Regents to distinguish the board from the corporation it governs of the same name) is the governing board of the University of California (UC), a state university sys ...

added additional commitments. In July 2024, HongShan raised its first new fund as a separate entity. It raised 18 billion RMB ($2.5 billion) for its new fund to invest in startups. In October 2024, HongShan set up a London office to look for investment opportunities in Europe with plans to make overseas investments. In November 2024, it was reported HongShan was struggling to deploy its large cash pile in a sluggish domestic market and tightening US controls.

References

* {{authority control Chinese companies established in 2004 Companies of Hong Kong Financial services companies established in 2004 Investment management companies of China Venture capital firms of China