AVCJ Awards 2016: Fundraising of the Year - Venture: GGV Capital

GGV Capital's latest VC fund, unlike its predecessors, is structured as three separate vehicles. In adding a dedicated early-stage tranche to an existing strategy underpinned by a traditional VC fund and a top-up vehicle, the GP wants to cover the entire venture spectrum: it could theoretically support a company from seed through late-stage growth rounds.

The fund, which was oversubscribed, closed at $1.2 billion in March, with existing LPs accounting for the majority of commitments. The early-stage vehicle has a corpus of $250 million, of which more than 80% will be deployed in China. A further $657 million has been allocated to the main fund, $225 million for the parallel top-up vehicle, and $50 million for an entrepreneurs' fund.

"As the VC world has evolved, it's very important for us to understand what our investors want in our fund, as well as our customers," says Jenny Lee, managing partner at GGV. "In this case, the customers are the CEOs, the founders. We want them to know that we have a product for them at every stage as they grow their companies. That's why we structured it differently than before."

The early-stage vehicle is seen as particularly important given GGV expects to see more Chinese serial entrepreneurs starting new businesses and it wants to team up with these proven players almost from day one. In addition, the early-stage opportunity is likely to become larger as China transitions into a truly innovation-driven economy and the exit market is maturing, with M&A just as prevalent as IPOs, which means more acquisitions at earlier stages.

While seed and Series A rounds involve more risk, GGV seeks to mitigate this by concentrating on sectors with which it is familiar. It has three main targets: social and mobile commerce, the internet-of-things (IoT) and robotics, and software-as-a-service (SaaS) and cloud technology.

The top-up vehicle - which writes larger checks of $30-50 million for select companies - is not a new development; a similar entity was raised in 2015, the year after the main fund. However, this time around it was decided to raise all the capital concurrently. "The top-up fund is now better aligned with the main fund, with a fixed ratio of participation by all LPs," says Jixun Foo, managing partner at GGV. "When we raised two vehicles separately there were some conflict considerations for LPs that we needed to consider."

Over the last three years, the firm has added to its value-add capabilities with the introduction of a portfolio services support group that provides standard legal and HR advice as well as recommendations drawn from the experience of four of the firm's venture partners. "Being multi-stages means we must have the appropriate resources to allow us to leverage all the expertise we have built up over the last 15 years and help CEOs in a more sophisticated and customized way," says Lee.

Pictured: Teck Loon Goh of GGV Capital

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• Topics
• Greater China
• Fundraising
• Venture
• China