Zhejiang VC's USD13.1 Million Bet on Chinese WorldSSP Winner ZXMOTO Has Beaten Expectations, GM Says

(Yicai) April 2 -- Zhejiang Venture Capital Group's investment of CNY90 million (USD13.1 million) in Chongqing Zhangxue Machinery Industry, also known as ZXMOTO, which became the first Chinese motorbike team to win a title at the World Superbike Championship, has so far "exceeded expectations," according to the general manager of the state-owned firm.Zhejiang VC has always prioritized early-stage, small-company, and hard-tech deals, Cheng Junhua said yesterday. The initial spark to invest in ZXMOTO was a viral video of 19-year-old founder Zhang Xue chasing a television crew on his motorcycle and repairing an engine blindfolded, but the emotional appeal was only a starting point, he said, adding that to make an actual investment process requires deep due diligence and a rigorous investment committee process.Established in April 2024, ZXMOTO secured a double victory in the World Supersport category at the Superbike World Championship's Portuguese round at the end of last month. It was the first win by a Chinese motorcycle maker at a top-level event, breaking decades-long dominance by giants Ducati Motor Holding, Yamaha, and Kawasaki Motors.The investment in ZXMOTO was a collective decision by the investment committee, no one needed to be strong-armed into it, Cheng noted. The project simply had to be presented clearly, with its highlights explained and its risks ruled out, he noted. "Decisions grounded in conviction, that is our mature and complete management mechanism."ZXMOTO bagged CNY20 million in a fundraiser from a fund under Focus Capital for a 9.2 percent stake in the company in July 2024, while Zhejiang VC invested CNY90 million in a Series A financing round through two of its funds this January.Cash flow was a serious concern for ZXMOTO in its early days, with the company even struggling to process payroll on time, leading to Zhang having to borrow from friends, suppliers, and even his landlord to cobble together CNY7 million (USD1 million) to cover the gap. However, Zhang stayed cautious about outside capital, going back and forth with Zhejiang VC on valuation before eventually agreeing on a figure in excess of CNY1 billion (USD145.2 million)."ZXMOTO is still loss-making, the founder holds overwhelming control, and the exit path is unclear, which are all risks," another state-owned VC company noted.Policy improvements in fault-tolerance mechanisms, return-on-investment requirements, and long-cycle performance assessments have given state-owned VC firms greater operational room in recent years, Cheng said, adding that every investment carries pressure, with the only way to minimize it being to understand the project thoroughly.Ongoing monitoring, support, and reassessment remain essential after the initial check is made, he pointed out. "Investing is not easy street after the money is out. It is a long process that only ends when the project successfully exits."Zhejiang VC values ZXMOTO's intense technical focus, deep understanding of the industry, and the sharp product and research and development instincts that come from iterating on technology, Cheng said. "The championship win will attract more top talent to join, and I am even more confident about the future."The guiding principle of Zhejiang VC is to "stay quietly by a company's side when it doesn't need you, and show up promptly when it does," Cheng stressed.Zhejiang VC was set up in 2000 as one of China's first market-oriented professional VCs, focusing on new materials, information technology, healthcare, and equipment manufacturing. Its shareholders include Zhejiang Provincial State-Owned Capital Operations and several other state-owned entities.Editor: Martin Kadiev