AVCJ Awards: VC Professional of the Year: GGV Capital's Jixun Foo

Q: Earlier this year GGV reached a $622 million final close on its fifth Sino-US venture fund. How was the fundraising process compared to Fund IV?

A: This time it was a lot easier. There are several factors. First, the overall market for technology companies isn't just in recovery mode, but picking up momentum. Second, venture capital performance has been good. Through IPOs such as Alibaba Group and Qunar.com, as well as M&A activities, LPs have received cash distribution from the exits over the last 6-12 months. The final factor is our team. For example, we added Hans Tung to deepen our talent pool and I think LPs saw a lot of strength in what we are building.

Q: Valuations are also going up. To what extent has an internet bubble emerged?

A: There is a bubble in the sense that valuations have become inflated, but you have to put this into perspective. Compared to last year or the year before, valuations have definitely gone up a lot and the main reason for this is the mobile revolution. It is disrupting brick-and-mortar businesses and creating a new economy - and that is why a lot of money is pouring into the market. With that in mind, when we are looking at deals we have to ask, ‘Are these companies going to be around for the long term?' and ‘Is the market large enough for them to grow bigger?' If the answer to both those questions is yes, then the bubble is less of a concern. It is really about whether we are able to back the best companies at the best time.

Q: Does the speed at which technology evolves make it harder to conduct due diligence?

A: If we don't have enough time to make a proper judgment, we won't do the deal. In some situations, an entrepreneur comes to us and asks us to sign a term sheet within a week. If I don't know the industry or the founder, the chances of getting this done are very low. So I tend to back serial entrepreneurs or companies with which I am familiar. It could be that I got to know the founder when he raised seed capital, or I understand the space because I have studied it closely.

Q: In which areas do you invest most prolifically?

A: I don't think our focus is necessarily unique. By looking at areas such as travel, enterprise software and financial services, our focus isn't so different to that of other VC firms. However, we have our own knowledge and expertise in all of these verticals. For example, we have done well in mobile commerce through investments such as Meilishuo and Wish. Through these we have learned how to scale companies in the space. This familiarity means not only can we understand an entrepreneur's idea very quickly, but we can also help the entrepreneur develop the business. As a result, when entrepreneurs think about which VC firm is strong in a particular area, they will naturally think of GGV.

Q: How has the angel investment environment evolved in China and what does this mean for GGV?

A: The success of internet companies such as Alibaba and Tencent Holdings has made a huge impact. More people want to invest in young companies because they envisage big outcomes. In China, 50,000-100,000 technology-related start-ups will be launched this year, many by college students with new ideas. We estimate that 5,000-6,000 companies receive seed funding and only 1,000-1,500 reach the Series A stage. I think the seed capital phenomenon will remain for the next few years, given the rise in angel investors and the development of crowdfunding platforms. This partly explains the inflation in valuations because there is more capital available for start-ups. We work with some angel investors to identify potential deals - for example, we partnered with Lei Jun on YY and UCWeb. We are multi-stage but we mostly in participate in A through C rounds.

Q: How does GGV address the China-US cross-border opportunity?

A: GGV started with a vision that the world is converging and this remains the case. We have a couple of portfolio companies that are cross-border by nature. Wish is a mobile shopping app developer that serves US consumers but its entire supply chain is in China. The company is helping Chinese merchants to sells goods to US consumers. Another company, sports wearable device maker Zepp, was founded by Chinese entrepreneurs and its products are manufactured in China, but its target market is the US. When convergence happens, our knowledge of the world beyond China can help start-ups scale their business.

Q: GGV invested in Southeast Asia-based taxi-booking platform GrabTaxi earlier this year. Have you added a new geography to the existing China-US footprint?

A: We are China- and US-focused but we are also thesis-driven. One thesis is that we believe in the power of mobile internet to connect customers and service providers. On-demand services and the shared economy is a big trend and it is changing a lot of businesses and consumption behavior in general. It is not geography-centric. There is a similar opportunity for mobile taxi-booking services in the US with Uber and in China with Didi Dache and Kuaidi Dache. When we looked at GrabTaxi, we liked the CEO and we recognized the demand for these services in Southeast Asia is high. So on one hand, the Uber phenomenon can happen anywhere. On the other, this is a very local business model that requires local talent. For example, GrabTaxi has to deal with day-to-day operations involving its network of drivers. Someone can't just turn up from the US or China and take over the market.

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