GGV targets $2b for China, US tech investments

The fund launch – scheduled for 2020 or 2021 – comes as deteriorating US-China relations point to a decoupling that encompasses technology as well as trade. GGV sees opportunities in both markets, envisaging a 45-45 split in its eighth venture capital fund and accompanying top-up vehicle, with the balance going to Southeast Asia and other geographies. The early-stage fund is likely to be 50% China, 40% US, and 10% rest of world.

The venture capital firm introduced the three-vehicle structure with the launch of its sixth VC fund in 2016 and retained it through the seventh in 2018.

The target breakdown for the upcoming vintage is $1.2 billion for the venture capital fund, $300 million for the top-up or plus vehicle, and $500 million for the early-stage or discovery fund, according to a document released by the Rhode Island State Investment Commission. In 2018, GGV raised a combined $1.4 billion for venture and plus, and $475 million for discovery. There was also a $60 million entrepreneurs fund for members of the GGV network, primarily start-up founders.

While most of the capital raised in 2016 was deployed in China, the Rhode Island document shows that the US thus far accounts for 44% of the combined 2018 pool versus 38.5% for China. Notably, the Southeast Asia share has risen from 3% to 14.5%.

GGV claims to have made 18 investments in Southeast Asia and India since 2005, generating a gross multiple of 3.4x. Ride-hailing business-turned-super app Grab, for which the firm led a Series B round in 2014, is the most valuable holding.

Across all its investments, GGV has delivered a gross IRR of more than 25% and a net IRR of more than 17% since inception. The firm has invested $4.2 billion across 388 companies, of which 63 have achieved unicorn status. Distributions – arising from 43 IPOs and an unspecified number of M&A and secondary exits – amount to $3.1 billion. IPOs in Asia so far this year include Australia-founded e-commerce software provider BigCommerce and Chinese electric vehicle manufacturer Xpeng.

The document states that GGV became acquainted with Xiaopeng He, founder of Xpeng, on investing in UCWeb, his previous start-up. This was sold to Alibaba Group in 2015 and He followed. Jixun Foo, a GGV managing partner, encouraged He to leave Alibaba and form Xpeng, and GGV took part in the company’s Series A round in 2017 at a valuation of $600 million. Xpeng had a market capitalization of $15.1 billion in August. Value creation efforts included Jenny Lee, another managing partner, introducing Xpeng to EV and autonomous driving start-ups in the US.

GGV introduced a portfolio support platform in 2015. The team now numbers 24 with competencies across marketing, recruitment and talent management, legal and government relations, business development, data analytics and finance.

The strategy for the new funds remains the same: social and internet, which ranges from online marketplaces to education to shared economy; enterprise technology, including cloud services and enterprise technology; and smart technology, which covers smart cities, artificial intelligence, 5G, and automation.  

Employees' Retirement System of Rhode Island (ERSRI) had $8.5 billion in assets as of June 2019. Of this, $814.5 million - or 9.6% - was deployed in private equity. The portfolio includes Asia-focused funds managed by Baring Private Equity Asia and The Carlyle Group.

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• Topics
• Greater China
• North America
• Fundraising
• Venture
• Technology
• LPs
• China
• USA
• GGV Capital
• TMT
• Employees' Retirement System of Rhode Island (ERSRI)