Fund focus: BA Capital backs youth

BA Capital's portfolio amounts to a snapshot of consumption trends among China's youth: Jiang Xiaobai, a liquor brand with a pop culture logo; Wangbaobao, a fashion-inspired oatmeal brand; Yuanqi Senlin, a line of sugar-free fizzy drinks; and Pop Mart, a manufacturer of dolls that fuse traditional Chinese history and Western physical characteristics.

"In the primary market, whether it is retail or consumer-internet, we invest in innovation, and the users who accept innovation most readily are young people," David He, BA Capital's founding partner, tells AVCJ. "So we back up companies and brands that serve the younger generation."

The Shanghai-based venture capital firm – also known as Black Ant Capital – recently closed its second renminbi-denominated fund with RMB1 billion ($147 million) in commitments. Fundraising is said to be underway for a debut US dollar fund with a target of $150 million.

He established BA Capital in early 2016 after leaving his previous job as head of strategic investment at ByteDance. A first investment came nearly 20 months later owing to the amount of time it took to raise Fund I. That vehicle closed at RMB380 million in the same year.

The firm focuses on the consumer sector, specializing in emerging brands. While fresh produce delivery and community group buying have captured the market's attention following COVID-19, BA Capital sticks to areas it knows well and places its trust in data. "We screen all available data to find trends and targets. We do in-person checks on shopping centers and convenience stores," says He.

Moreover, the firm disputes any notion that retail has a lower barrier to entry than tech-heavy business models. "The simpler the business, the harder it is to form a big company, right? For example, before Hey Tea, the milk tea industry was highly fragmented. China is a complicated market, so it is difficult for investors to judge potential market size and trends," He explains.

BA Capital has two key criteria in company selection: it only considers start-ups with large addressable markets, and then only backs the leading player in each segment. Once the firm has picked a preferred candidate, it invests across multiple rounds.

He points to Wangbaobao as an example. The company stood out because it was experiencing sharp growth, but the traditional oatmeal market is relatively small, which suggested limited upside. BA Capital's answer was not to position Wangbaobao as an oatmeal player; the company's horizons had to be broader

"Wangbaobao's customers might never have bought oatmeal before. Many people eat it as a snack. The user groups and use methods are completely different. It is a new category and a new market. The difficulty is judging the scale of that market," says He.

Ning Wang, founder of Pop Mart, is among the LPs in BA Capital's second renminbi fund. For He, it represents an opportunity to build an ecosystem of entrepreneurs-turned-LPs who can pool their knowledge to help portfolio companies. "It will be an ecosystem that benefits entrepreneurs, investors and consumers," –he says.

BA Capital has backed 15 start-ups in the past four years. Other Fund II portfolio companies include online-to-offline fashion retailer KK Group, yogurt brand Simple Love, barbeque restaurant chain Henjiuyiqian, and fashion social e-commerce platform Harmay.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Venture
• Consumer
• GPs
• Fundraising
• BA Capital
• China