Prospect Avenue Capital

The sourcing model relies on Liao Jieyuan's network from his prior career in Asian special-situations and distressed-debt investing. The firm typically enters processes where growth-stage companies are seeking a lead investor willing to provide a term sheet with both equity and convertible features, which puts it in competition with non-bank lenders and later-stage VCs simultaneously. Proprietary sourcing is supplemented by relationships with regional boutique advisory firms.

The firm uses both. Prospect Avenue Capital evaluates growth-stage companies for minority-equity stakes but is structurally able to pivot to convertible notes, preferred equity, or warrants when traditional equity terms cannot be agreed. This flexibility is a legacy of Liao's background in credit, not a recent pivot, and defines the firm's identity. Pure equity deals are done when a company's revenue trajectory supports standard VC pricing.

The firm is a domestic Beijing-headquartered manager but has historically raised capital from foreign institutional LPs, including European allocators. That cross-border funding model places it among a cohort of mid-sized independent China managers that must navigate both onshore regulatory complexity and offshore LP expectations. The firm has not publicly announced a RMB-denominated fund.

The firm does not publish a negative sector list. But based on its disclosed activity and team expertise, it is not known to invest in consumer internet, heavy manufacturing, real estate development, or companies with state-linked ownership structures. The focus stays on enterprise software, fintech, and healthcare technology where growth can be modeled on ARR or revenue multiples rather than on gross merchandise volume.

The firm structures downside through convertible instruments with ratchet mechanisms, liquidation preferences, and occasionally collateralized terms when dealing with asset-heavy technology companies. This is an unusual skill set for a manager with a venture mandate: the team can hold a portion of the investment in instruments that outperform common stock in flat or down exits, creating an asymmetric risk profile that LPs in standard China VC funds do not receive.