Granite Global Ventures announced Wednesday that it will absorb Chinese venture capital firm SIG Capital.

SIG's team of four partners will join Granite, which is based in Menlo Park, Calif., and Shanghai, with Zhuo Fumin and Jessie Jin coming aboard as managing partners and Michael Kuan and Steve Chu becoming venture partners. SIG manages Granite affiliate Venture Star Shanghai.

The SIG partners will continue managing the firm's portfolio as they begin working on Granite's deals, Granite co-founder and managing partner Scott Bonham said.

"We've been working with SIG for quite some time, and they have a very similar working methodology to us," Bonham said. "The SIG folks are very well connected in China. They know the entrepreneurs and bring a different set of experiences that help us go after this opportunity.

"The plan is that we're going to be one firm," said the investor, who founded Granite in 2000. "But they still have their commitments to their limited partners."

SIG Capital was formed in 2001 to capitalize on the enormous growth of China's economy, as well as take advantage of government support for domestic venture capital funds.

Separately, Granite on Wednesday also announced that it added a further $200 million to its third venture capital fund, Granite Global Ventures III, which now has a total of $600 million under management for investment in expansion-stage companies in the U.S. and China. The third fund originally closed with $400 million in the fourth quarter of 2006. Its predecessor fund, Granite Global Ventures II, closed in August 2004 with $230 million, and Granite Global Ventures I closed in December 2000 with
$160 million.

Bonham said that roughly 50% of its third fund will be invested in Chinese companies. Granite tapped existing limited partners for the additional funds, with Bonham noting that the new money reflects the firm's growing roster of partners.

Granite's previous funds have performed well. According to the California Public Employees' Retirement System, the firm's first fund had an IRR of 36.7% as of September 2007, a strikingly high return considering that it was invested during the tech industry collapse seven years ago.

Granite's China-based team of investors focuses on companies that stand to benefit from the country's fast economic growth. Its portfolio includes Internet plays such as online video startup Todou.com and e-commerce giant Alibaba.com Ltd., human resources services provider China Talent Group and logistics trucking company Shandong Rongqing Logistics Co. Ltd.

In the U.S., Granite invests more broadly in software, new media, computing, networking and healthcare companies. Among its exits in recent years were initial public offerings of AAC Acoustics and XenoPort Inc., as well as the 2006 acquisition of Sirna Therapeutics Inc. by Merck & Co. for $1.1 billion and Qpass Inc. by Amdocs Ltd., also in 2006, for $275 million in cash. -- George White