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Tencent veteran raises $ 120 million fund to bet on next zoom

(Bloomberg) – China’s tech sector has seen booming successes in e-commerce, social media and smartphones. Venture capitalist Peter Cheng is betting the next big opportunity will be in enterprise software, with local alternatives to Oracle Corp. and Salesforce.com Inc. His Eminence Ventures raised $ 120 million for his second fund, with backing from Emergence of Silicon Valley Capital and Unicorn Capital Partners of Hong Kong. Eminence, founded in 2017, fully invested its first fund – $ 37 million raised from dozens of individual investors. Cheng’s experience in the enterprise software industry dates back 25 years until a stint at Oracle , followed by jobs at eBay Inc. and Tencent Holdings Ltd. This helped convince him that the sole focus of his venture capital firm should be on startups aspiring to become the next Salesforce or Zoom Video Communications Inc. for China, a nascent $ 12 billion arena. Some of its startups have already seen their valuations skyrocket after receiving money from large venture capitalists like Sequoia and Temasek, as well as Jack Ma’s Ant Group Co. “If you keep looking at an industry over and over and over again. again, when the right deal comes, you know it’s the right one, ”Cheng, 51, said in a video interview from his Shanghai office. Jason Green, founding partner of Emergence Capital, said Cheng is uniquely positioned to capitalize on startup opportunities in China. Emergence also saw the potential of enterprise software, hitting the jackpot with an investment in Zoom as its business exploded during the Covid-19 lockdowns. “In China, as in the United States over the past 15 years, we’re going to see moves to the cloud for businesses,” Green said. “Like me, Peter is very focused on wanting to be the best in the world at start-ups.” Green said his company would seek to co-invest in Chinese cloud service startups with Eminence Ventures. The services market is expected to grow by around 40% per year over the next five years and reach $ 40 billion in revenue by 2025, according to JPMorgan estimates. Cloud services are among the fastest growing companies for giants like Tencent and Alibaba Group Holding Ltd., while emerging companies like Tuya Inc. and Agora Inc. have in recent years raised billions of listings. in the USA. has yet to create its own Zoom, which in less than a decade has grown into a $ 2.7 billion company providing go-to communications software to nearly half a million businesses around the world. Eminence Ventures invested its first fund in 17 startups focused on a wide range of business software. None of these outfits were written down, and its biggest hit is eSign, which provides electronic signature services to businesses and governments. The Hangzhou startup achieved unicorn status with a pre-cash valuation that has increased 12 times since Cheng made his first bet in early 2018, he said. Deeper backers, including Ant and the state-run Shenzhen Capital Group, have invested in later cycles. “Give it ten years and you’ll probably see a $ 100 billion cloud company in China,” Cheng said. “The competition is intensifying. But we are the most concentrated, and concentration strengthens expertise. Born and raised in Taiwan, Cheng moved to the United States in the 1990s to pursue an MBA after studying computer science in college. His first foray into Silicon Valley was as a product manager at Oracle. He then got a job at eBay in 2002, first building the site’s digital marketing products in San Jose, then moving to Shanghai for a six-month stint, during which he failed to help the retailer. American to turn the tide in a losing battle against Alibaba’s Taobao. “You can never conquer the Chinese market with Western mindsets,” he said. In 2007, Cheng co-founded the online marketing platform AdChina, which was later acquired by Alibaba. In 2013, Tencent hired him to support the company’s media advertising assets, including video and news portals. By this time, China’s largest tech company had barely begun to expand beyond its core business of video games. Its advertising revenue – also generated by apps like QQ – jumped 146% during Cheng’s two years. As a venture capitalist, Cheng now orchestrates its bets using the same strategy pioneered by Alibaba and Tencent: adopting and improving business models in China that had worked in Silicon Valley. ESign’s largest US counterpart, DocuSign Inc., is a $ 36 billion company. Cheng says two-thirds of Eminence’s portfolio fits this profile: Beijing-based Recurrent.ai, which provides artificial intelligence-based voice tools to drive sales, is similar to Chorus.ai; and the Shanghai-based Duckbill operates a platform that connects truck drivers and businesses, much like Next Trucking. This is also true for Cheng, who first met Emergence’s Green when he personally invested in AdChina. Even his company name was inspired by his American partner and mentor – Eminence and Emergence are abbreviated as “em” in their web addresses. “It’s easy to bet on someone with a background. It’s much harder to bet on someone early in their journey, ”said Unicorn Capital founder Tommy Yip. “We are betting on Peter early because we believe he has the potential one day to become the emergence for China.” More stories like this are available at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP

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