SHENZHEN’S deep-pocketed village collective funds, made rich during the city’s rapid urbanization and industrialization over the past decades, have now found a new destination to park their money: the venture capital (VC) market.

On July 12, 16 joint-stock cooperative companies in Longgang inked a deal with Shenzhen Capital Group, one of China’s most successful venture capital firms and controlled by the Shenzhen city government, to jointly set up a private equity (PE) investment fund.

The new fund focuses on information technology, high-end equipment manufacturing, new materials, biotechnology and new energy, industries targeted by Shenzhen’s “20+8” industrial supporting funds, which are deemed key to fostering the city’s industries of the future.

The fund’s total size is 505 million yuan (US$70.80 million), with 405 million yuan contributed by village collective funds and the rest invested by Longgang’s district government-owned investment firms and Shenzhen Capital.

As a new force in Shenzhen’s venture capital industry, the city’s village collective funds have played an increasingly important role in promoting science and technology innovation and easing difficulties in fundraising for venture capital firms.

More importantly, these collective funds have facilitated the transformation and upgrading of Shenzhen’s village collective economy, the China Fund News said in a report.

Since the beginning of this year, Shenzhen’s village collective funds have sped up their pace to make inroads into equity investment.

In January, Luohu set up Shenzhen’s first equity investment fund with money contributed by city and district government-owned firms and village collective companies. The 170-million-yuan fund, which will be invested in strategic emerging industries, drew a total of over 100 million yuan from 11 village collective firms in Luohu.

The successful launch of the fund is regarded as a trailblazer for jointly setting up equity investment funds between State-owned investment firms and village collective companies in Shenzhen.

A similar fund was launched in Guangming in February and more and more village collective firms in Shenzhen have shown interest in equity investments. In July, more than 70 village cooperative companies from Luohu, Longgang, Yantian and Dapeng participated in the “Shenzhen venture capital day,” initiated to boost the city’s high-quality economic growth and build the city into an international VC/PE center by attracting innovation capital.

According to statistics released in 2021 by the Shenzhen State-owned Assets Supervision and Administration Commission, the city has nearly 1,000 village collective companies with total assets of nearly 250 billion yuan.

These firms own more than 100 million square meters of properties, have an annual income of over 22 billion yuan and a profit of nearly 10 billion yuan.

Shen Meng, executive director of Xiangsong Capital, hailed Shenzhen village collective firms’ push into VC/PE investments, saying that this essentially integrates social capital effectively into the venture capital funding chain, which can find better investment directions for village collectives’ idle funds and reduce investment risks through professional experience of institutions like Shenzhen Capital.

“It achieves a three-way win-win situation for village collectives, venture capital institutions and target companies,” Shen told the Jiemian News. (Yang Yunfei)