(Bloomberg) -- Source Code Capital, among the earliest backers of TikTok owner ByteDance Ltd., is raising one of China’s largest venture funds as startups begin to draw renewed interest during the AI boom.

The Beijing-based investor plans to raise $300 million for a new US-dollar fund led by partner Samuel Huang, according to people familiar with the matter. If successful, that will mark its first major investment vehicle since early 2021. The target is preliminary, however, and could change, the people said, asking not to be named.

The envisioned vehicle — while small compared to the multibillion-dollar funds of the pre-Covid boom years — underscores how investors are cautiously exploring opportunities as AI becomes the dominant theme in tech circles. It also shows how capital may be returning after US investors took flight during Beijing’s tech sector crackdown and escalating US-China tensions.

Venture funding in China plummeted 40% in the first three months of this year, even with artificial intelligence bets almost doubling to $4.2 billion. Source Code’s fundraising, alongside 5Y Capital’s $700 million fund launched in 2023, will be closely watched as a gauge of appetites for renewed bets on the country’s tech sector.

A Source Code spokesperson declined to comment on the fundraising.

US investors, from endowments to pension funds, who bankrolled China’s internet miracle over the past decade have grown more cautious about funneling money into the country, with some withdrawing entirely. The former Sequoia China, which raised $9 billion across four funds in 2022, split off from its US operations under intense pressure from Washington lawmakers.

Founded in 2014 by former Sequoia China investor Cao Yi, Source Code manages around $5 billion across its yuan and dollar funds, according to its website. The VC firm last raised $1 billion in 2021 to make bets in early- and later-stage startups. It has invested in companies like Meituan, Ke Holdings Inc. and AI chipmaker Shanghai Biren Technology Co.

Cao met ByteDance founder Zhang Yiming in 2012 and Source Code started with a $5 million investment in ByteDance, which it redoubled at every opportunity, the VC founder said in a 2017 documentary about the internet firm.

Source Code has yet to distribute much of those gains to its investors, however, as there’s no indication of an imminent stock debut for the world’s most valuable startup. Source Code’s newer funds have struggled to deliver strong performance, which led Cao to cut some of his investment staff last year, the Information reported at the time.

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