The private equity industry in Chengdu has seen an increasing growth since it was established in 2009 by the Chengdu government and China Development Bank with the starting capital of 1.5 billion yuan, the South China Morning Post reported.
Only a few big venture capital firms were based in the city six years ago but as the national players and companies from emerging industries joined, the fund of funds now has built a combined asset of 6 billion yuan, as of March this year.
Wu Zhong, general manager of Yinke Venture Capital said that most of the companies that first operated in Chengdu during the early years have no functioning office or staff. But now, venture capitalists come in numbers, take up prime office spaces and live in executive residences.
Wu said he is confident of Chengdu's economy as there are sufficient numbers of startups.
Wu explained that his company, unlike the local government's fund of funds, does not require an investment in local firms. However, in the early years, it required its general partners to invest but the "non-market oriented" approach did not work, he added.
"If the project is really good, general partners certainly will invest. If not, how can you demand them to invest?" Wu said.
According to the report, those who invest in the fund of funds are required to participate actively in local fairs and must be incorporated locally, maintain local offices with staff.
"We are bullish on Chengdu's economy, and there are enough promising startups. The question is whether they can effectively spot them. This is why we require them to operate locally," Wu said.
Chengdu Detong-YInke Capital Fund, managed by Detong Capital, leads other eight other yuan-denominated funds which posted an annual growth of more than 50 per cent since it was founded in 2010.
The fund's general manager Li Nong said that they will stay in Chengdu as he saw some opportunities in the agri-tech, defense, and high-end manufacturing sectors.
"I'm committed to spotting 'original' unicorn companies. If the company is in Beijing and Shanghai, it will immediately be pursued by numerous funds. But here we get the opportunity," Li said.
Li said it is possible for Chengdu to become a private equity center before it becomes a true financial hub. "Private equity is special because despite its small scale, it's extremely active and can stimulate the whole system," Li added.