How BioBAY Built a Capital Ecosystem in 15 Years: Insights from Three Top-Tier Investment Partners

On March 22, 2006, the groundbreaking ceremony for Suzhou BioBay was held in the morning. That afternoon, a signing ceremony took place for China’s first venture capital fund of funds, established by CSSD Venture Capital and China Development Bank. This fund of funds was the first RMB-denominated fund of funds in China to operate on a market-oriented basis, with a total size of RMB 1 billion at the time.

The groundbreaking ceremony for an innovative biomedical industrial park and the signing ceremony for China’s first RMB-denominated venture capital fund of funds were held on the same day.“By a fortunate coincidence, venture capital and the biopharmaceutical industry have converged perfectly at the same point, at the same moment in time, and at the same physical juncture.”Lin Xianghong, then Chairman of Sino-Singapore Venture Capital, later recalled.

Building an ecosystem is key to understanding the development of BioBAY over the past 15 years, with particular emphasis on continuously fostering a capital ecosystem where finance and industry mutually support each other. Since its inception, BioBAY has grown alongside investment institutions such as Suzhou Industrial Park Zhongxin Venture Capital (later renamed Oriza Holdings). In 2013, BioBAY, as a cornerstone limited partner (LP), initiated the establishment of YuanBio Venture Capital. By acting as an LP, BioBAY has brought together numerous investment firms, including industry-leading funds such as Lilly Asia Ventures.

VCBeat invited Fei Jianjiang, Managing Partner of Oriza Holdings; Chen Jie, Founding Partner of YuanBio Venture Capital; and Chen Fei, Managing Partner of Lilly Asia Ventures, to share their insights on how these three top-tier investment firms—Oriza Holdings, YuanBio Venture Capital, and Lilly Asia Ventures—have contributed to the development of the BioBAY capital ecosystem over the past 15 years.

BioBAY officially opened in 2007, but its establishment can be traced back to 2005. In October 2005, it was established as a wholly-owned subsidiary of China-Singapore Venture Capital, which also obtained the business license for BioBAY.

I believe that the relationship between CSSD Capital and BioBAY can be divided into three phases. The period from 2005 to 2007 marked the first phase of their relationship, during which we assisted BioBAY in building its management team, formulating industrial planning, and carrying out infrastructure development.

First, it is essential to identify the right talent. China-Singapore Venture Capital has always adhered to the principle that “professionals should handle professional matters.” Our initial team lacked members with a background in the biopharmaceutical industry; therefore, we believed we were not sufficiently qualified to lead or participate in the development of biopharmaceutical industrial parks. Consequently, it was necessary to engage professionals to undertake this task.

However, as a state-owned enterprise, China-Singapore Suzhou Industrial Park Venture Capital adhered to the compensation standards typical of such entities, which made it challenging to attract top-tier talent. Our breakthrough lay in adopting a more market-oriented recruitment approach—for instance, employing professional managers and offering competitive, market-aligned compensation packages and superior conditions to attract exceptional candidates. Ultimately, through multiple channels, we successfully recruited Liu Yuwen as BioBAY’s first General Manager.

Previously in China, the construction process for fully government-led industrial parks was largely similar: the government would define the direction for industrial development, designate a plot of land, and carry out planning, construction, and investment promotion.The government’s approach to industrial development prioritizes the present, so its investment promotion strategy focuses on identifying strong domestic companies. This was also the prevailing strategy for most domestic government industrial parks at the time.

Most importantly, as an investment institution, Sino-Singapore Venture Capital takes an investor’s perspective in developing industrial parks, which differs in two key aspects:We are not in a hurry to make plans or carry out construction; instead, we first study the industry.Because we aim to invest in the future, the industries prioritized for future development determine the current focus of investment promotion.

Back in 2005, China’s biopharmaceutical industry was dominated by generic drugs and active pharmaceutical ingredients (APIs), making it difficult to identify domestic investment targets with future potential. As a result, BioBAY’s business attraction team chose to look overseas from the outset.

Phase II, from 2007 to around 2013. During this period, CSSD Venture Capital (renamed Suzhou Venture Capital Group in 2007 and Yuanhe Holdings in 2012) was primarily focused on building an ecosystem for the future industrial development of BioBAY.

Industrial development requires attracting more talent from the sector, so the most critical factor is cultivating a favorable soft environment and industrial atmosphere. Suzhou was not previously a hub for the biopharmaceutical industry, with a weak industrial base, making it challenging to foster such an atmosphere. We have been exploring ways to achieve this, and one potential approach is to host conferences, specifically by bringing the Cold Spring Harbor Asia conference to Suzhou.

I was also fortunate to be involved. In 2006, after Watson’s visit to the Soviet Union, Liu Yuwen and I flew to the United States to negotiate with Cold Spring Harbor Laboratory. I clearly remember that the entire trip, including travel time, lasted four days, with two days dedicated to negotiations, culminating in the signing of the agreement. We also visited Watson’s home, which remains a memorable experience in retrospect.

Certainly, as an investment institution and one of the first to settle in BioBAY, Oriza Holdings has participated in the majority of investments.

Since its inception, BioBAY has grown in tandem with investment firms. For this reason, BioBAY possesses an innate understanding of capital, with an investment mindset ingrained in its DNA.BioBAY also made investments in some of the companies that initially settled in the park, which have yielded substantial returns, such as Innovent Biologics.

Innovent Biologics has elevated the development model for enterprises within BioBAY to a new level, representing a modern approach that integrates capital with industry. It can be said that as early as 2011 and 2012, Innovent had already secured support from the capital market, adopting a capital-market-driven model from the outset.

At this point, I believe that BioBAY’s own capabilities and the development of its ecosystem have reached a certain stage.

Oriza Holdings also recognized that its capabilities and resources had inherent limits. Around 2013, BioBAY became fully independent from the Oriza Holdings system. The relationship between Oriza Holdings and BioBAY entered a third phase, resembling that of sibling entities, reverting to the dynamic between capital and an industrial park—mutually supportive and committed to shared development.

After 2013, a key initiative undertaken by BioBAY was to build its own capital ecosystem and attract more healthcare-focused investment institutions to Suzhou. In 2013, YuanBio Venture Capital was established, with BioBAY being one of its most significant investors. Chen Jie, the founding partner of YuanBio Venture Capital, was also recruited through market-oriented mechanisms.

By acting as a limited partner (LP), BioBAY has brought together numerous investment institutions, not just YuanBio Venture Capital. This approach aligns with the strategy employed by Oriza Holdings in managing its fund of funds.

In my view, the most significant achievement of BioBAY over the past 15 years has been its systematic and sustained development of every aspect of the industrial park. Its development strategy has remained consistent regardless of leadership changes; each successive administration has continuously cultivated an ecosystem where capital and industry mutually reinforce each other, with the entire team maintaining a forward-thinking approach to capital operations.

Industrial investment requires substantial capital support, and capital also needs a connecting link.Investment is a relay race; after the initial investment, subsequent rounds require follow-on investments from other institutions. A lack of such continuity can raise concerns among investors. However, BioBAY has established a robust investment ecosystem that brings together pharmaceutical investors across various sectors and stages.

Over the past 15 years, the industry has been undergoing constant change, necessitating continuous research into what constitutes the future of the industry;However, I believe that what has remained unchanged for BioBAY since its inception is its commitment to building a biomedical industrial park through professional and market-oriented approaches, and to systematically cultivating an investment ecosystem.

YuanBio Venture Capital was established in 2013, when most companies in BioBAY were still in their early stages of development. Many promising startups required financial support. However, at that time, some PE or VC funds based in Beijing and Shanghai lacked a comprehensive understanding of BioBAY companies due to their geographical distance from Suzhou.

The rationale behind establishing YuanBio Venture Capital was clear: at the time, government guidance funds in the industrial park struggled to serve as a model for market-oriented funds due to constraints inherent in the state-owned system, particularly in attracting external capital, recruiting professional talent, and streamlining approval processes.If BioBAY takes the lead in establishing a market-oriented VC fund, it will play a guiding and demonstrative role, thereby attracting more funds to invest in BioBAY.

Meanwhile, as YuanBio Venture Capital’s largest cornerstone limited partner (LP) and a key initiator, BioBAY naturally provides comprehensive support to the firm. With its in-depth knowledge of projects within the park, BioBAY helps YuanBio identify high-quality enterprises, which in turn receive financial backing from YuanBio. Of course, BioBAY, New Yuan Holdings, and other LPs also stand to gain financial returns.

Based on the above three backgrounds, YuanBio Venture Capital, with BioBAY and New Jianyuan as its limited partners (LPs), was established.Decided to adopt a market-oriented mechanism, focusing exclusively on the biopharmaceutical sector, with initial investments centered in BioBAY.

For the first fund, in addition to capital contributions from BioBAY and New Jianyuan, we also needed to raise funds from the market. Under the investment climate at that time, fundraising was extremely difficult.

At that time, few Chinese pharmaceutical funds were genuinely engaged in venture capital (VC), and there was a scarcity of investors willing to back early-stage ventures; the capital market could be described as one dominated by private equity (PE) participation across the board. For innovative drug investments, a very practical issue—and the primary concern for investors—was the exit strategy. In 2014, we could only explain to our limited partners (LPs) that many innovative drug companies had established offshore corporate structures with the intention of listing on the NASDAQ in the United States in the future.

However, the initiatives undertaken by enterprises within BioBAY genuinely represent the future direction of China’s pharmaceutical industry. We engaged in thorough communications with our Limited Partners (LPs) to bolster their confidence. Thanks to the endorsement from BioBAY, as well as comprehensive support from Oriza Holdings and the industrial park, we successfully completed the fundraising for our first fund. The majority of the capital raised was market-oriented. We secured early support from CreditEase Fund of Funds, while other investors included prominent private entrepreneurs from Suzhou. I also leveraged my personal network, reaching out to friends, former classmates, and past business partners.

It should be noted that while BioBAY serves as our primary investment hub, we do not limit our investments to companies within BioBAY. From the outset, we have positioned ourselves as a leading biopharmaceutical venture capital firm in China and globally. The leadership of Suzhou Industrial Park and BioBAY are both open-minded and supportive, sharing our commitment to investing in high-quality projects to strengthen and expand YuanBio Venture Capital.

As BioBAY continued to expand, the need for collaborative partners grew. During the fundraising of YuanBio Venture Capital’s first fund, BioBAY, as a limited partner (LP), invested exclusively in YuanBio Venture Capital and Tonghe Capital. As the number of projects settling in BioBAY rapidly increased, greater participation from additional funds became necessary. Since 2017, BioBAY has established collaborations with more capital entities, either acting as an LP or through other arrangements.

As BioBAY continues to expand, YuanBio Venture Capital is also growing. In our Phase I and Phase II funds, BioBAY accounted for a relatively high proportion of the capital commitments; however, our limited partner (LP) base has since become increasingly diversified, with the introduction of multiple fund-of-funds and even state-backed investors as LPs. YuanBio Venture Capital’s deal sourcing channels have also broadened, with the establishment of offices in Beijing and Shenzhen to further extend its reach across China.

YuanBio Venture Capital and BioBAY are both growing rapidly, but their core partnership has remained unchanged.BioBAY has served as a cornerstone investor and held a seat on the investment committee for YuanBio Venture Capital’s Funds I, II, III, and IV. Each successive leadership team and core management group at BioBAY has maintained close communication and collaborative ties with YuanBio Venture Capital.

In YuanBio Venture Capital’s investment portfolio, the proportion of investments in companies based at BioBAY reached 40%–50% during Phase I and has remained stable at 20%–30% since Phase II.

YuanBio Venture Capital’s first investment was in Kintor Pharmaceutical, a company based within the park. We had a thorough understanding of and high regard for Dr. Tong Youzhi. In 2014, Dr. Tong encountered financing difficulties; after prolonged negotiations, an investment deal failed to materialize, even though the project urgently required funds to enter clinical trials. YuanBio Venture Capital made a sole investment of RMB 20 million in Kintor Pharmaceutical. A little over a month after signing the investment agreement, Ktor obtained clinical trial approval. The RMB 20 million was critical for the company to conduct its Phase I clinical trials.

YuanBio Venture Capital’s Phase I fund invested in numerous projects similar to Kaituo, with companies such as Biocytogen, Ascentage Pharma, and Nanomicro Technologies receiving YuanBio’s investment at critical junctures. Now that the firm has launched its Phase IV fund, it is once again facing a downturn in biopharmaceutical investments. Many projects are encountering fundraising difficulties, reminiscent of the market conditions in 2014 and 2015.

However, investment is ultimately a commercial activity. Founders seeking to continuously scale their enterprises cannot rely solely on YuanBio Venture Capital. The funds affiliated with the Industrial Park wield significant influence and enjoy an excellent reputation in the market. They are highly professional, capable of supporting startups, and play a guiding and demonstrative role in the market.

When we invest in projects in other regions, local government guidance funds or local LPs often participate. Frankly speaking, there is concern that such investment decisions are driven by administrative mandates from the local government rather than market-based considerations.However, in Suzhou, investments made by YuanBio Venture Capital or other funds with BioBAY as a limited partner (LP) represent broad market recognition and serve as an endorsement for the portfolio companies’ subsequent financing rounds.

I believe this is the ecosystem; the investment ecosystem that BioBAY has built over the years is crucial.

As I understand it, between 2020 and 2021, many domestic funds established offices in Suzhou, with some even initiating and setting up funds there, registering their RMB-denominated funds in the Suzhou Industrial Park.Suzhou has become increasingly active on China’s venture capital and private equity landscape, with BioBAY undoubtedly playing a pivotal role.

Since the inception of Lilly Asia Ventures in 2008, we have established ties with BioBAY.

At that time, Shanghai, Suzhou, and Hangzhou were all key regions for our investment strategy. From our initial engagement with BioBAY, we could sense that their vision and strategic focus were more elevated and long-term than those of industrial parks in other cities.

Driven by the long-term strategic vision of successive leadership teams, robust policy support, and comprehensive one-stop services provided to tenant companies, BioBAY’s industrial scale expanded rapidly in the following years.This is an observation we have made over the past decade. Ten years ago, we were merely convinced that this industry would inevitably flourish; whether it would take root in Suzhou, Shanghai, or other cities remained an open question. Today, however, the answer has become abundantly clear.

I remember clearly that after 2009, many biotechnology companies in Shanghai gradually relocated to Suzhou over the following five to six years due to factors such as talent policies and production bases.

BioBAY’s ecosystem has become increasingly robust. Since 2008, companies of various types have clustered within the park. In recent years, we have observed that the park has begun implementing strategic zoning, with innovative pharmaceutical companies concentrated in one area, medical device and diagnostics firms in another, and enterprises in emerging fields such as mRNA and cell therapy grouped together in a dedicated zone.

Our first investment in the park was made in 2009, and the invested company, Borui Biopharmaceuticals, has already been listed on the STAR Market. Our investment logic has remained unchanged over the past decade: high-quality enterprises must have excellent founders and management teams, leading technological reserves and product pipelines, and products with broad market potential. We aim to help such companies grow and expand.

Lilly Asia Ventures’ second investment in the park was Innovent Biologics, which also remains its largest investment to date. We got to know Dr. Yu Dechao early on. Our investment in Innovent came only about five months after Fidelity’s, albeit at twice the valuation, and we have participated continuously in every subsequent financing round. This has proven that as long as we select high-quality companies, investing at any point in time is the right decision.

Following its investment in Innovent, Lilly Asia Ventures assisted the company in several key areas. First, it helped optimize Innovent’s equity structure. More importantly, it facilitated a robust strategic partnership between Innovent and Eli Lilly and Company. The two companies have engaged in multiple strategic collaborations, with a total value amounting to billions of US dollars. This represents the largest-scale cooperation ever between a Chinese innovative pharmaceutical enterprise and a multinational corporation, encompassing a series of collaborative initiatives.

Looking back today,Lilly Asia Ventures has invested in 21 portfolio companies at BioBAY, with total investments amounting to approximately $700 million, averaging over $30 million per company.Lilly Asia Ventures has made consecutive investments in many companies, continuing to participate in follow-on rounds even after their IPOs.

If ranked by region,Lilly Asia Ventures has invested in the most companies in Suzhou and Shanghai, far surpassing other cities.

I observed that,Around 2016, BioBAY began to attract significant attention from external capital on a large scale. External investors tend to focus on the industry’s strategic high grounds, which are located in Shanghai and Suzhou, with Suzhou’s key hub being BioBAY.

In my view, the strategic direction of the industrial park is largely aligned with our future investment focus. The park aims to attract more cutting-edge innovative enterprises that represent the future direction of industrial development. Naturally, securing a presence in BioBAY involves intense competition and high entry barriers. Therefore, after venture capital (VC) firms invest, they also assist portfolio companies in establishing operations within the park, providing support across various areas such as production facilities, R&D laboratories, and follow-on financing. In this way, a highly positive and synergistic relationship has been established among the industrial park, VC institutions, and enterprises.

“I believe the most distinctive feature of the corporate ecosystem cultivated by BioBAY is its forward-looking vision and comprehensive planning; meanwhile, it is highly supportive of resident companies, making it a truly service-oriented park.”

For investors, evaluating projects in the past was also highly convenient, with a large number of enterprises and high efficiency, allowing for due diligence on multiple companies at once. Throughout last year, I frequently visited BioBAY to assess projects and engage in extensive exchanges with enterprises. Lilly Asia Ventures has also established an office in Building A3 within the park.

Suzhou’s overall venture capital and private equity ecosystem is also highly favorable, benefiting LPs, GPs, and portfolio companies alike.

BioBAY is also a key LP in our RMB fund, enabling deeper communication and engagement among all parties.Since 2015, the second, third, fourth, and fifth RMB funds of Lilly Asia Ventures have all been registered in Suzhou.

Suzhou is home to Oriza ChunKun, China’s earliest and most market-oriented successful fund-of-funds. If a GP has received investment from Oriza ChunKun, I believe it will garner greater trust and support from LPs in the market, serving as an implicit endorsement.

Suzhou-based LPs, such as Oriza ChunKun, BioBAY, Suzhou Fund, and Suzhou China-Singapore, all possess forward-looking industry insights and make investment arrangements accordingly.

The superiority of Suzhou’s venture capital environment is further reflected in the transparency and convenience it offers across various aspects, including company registration, exit mechanisms for invested enterprises, and taxation.

Certainly, when assessing the venture capital and investment environment cultivated by a city, the primary focus is on its industrial layout.We will not place the fund in a city with a relatively weak biomedical industry, but rather in one that is experiencing rapid growth.If the industry in which a portfolio company operates is highly sound and experiencing rapid growth, it will have a mutually beneficial, positive impact on the city where it is located.