This article first appeared on China Ventures. Oasis was authorized to translate and publish its contents. Yuqian Shi translated the article for Oasis.
In early 2021, GGV Capital, the global seed-to-growth venture capital firm famous for its investments in leading internet businesses like Airbnb, Alibaba, Xiaomi, XPeng, Kuaishou, and Grab, announced a new fund of approximately RMB 20 billion (USD 3.1 billion).
To date, GGV has RMB 50 billion (USD 7.7 billion) of assets under management.
In a recent conversation with China Ventures, Foo Jixun—one of six managing partners at the firm and a regular on the “Top Venture Capitalists” list by Forbes China since 2006—shared his insights on the VC industry in China and the global markets, as well as his biggest takeaways since joining GGV in 2006.
China Ventures (CV): Many prominent Chinese VCs today have traditionally capped their funds in the range of RMB 30–40 billion (USD 4.6–6.2 billion). What does it mean for GGV to have reached approximately RMB 50 billion (USD 7.7 billion)?
Foo Jixun (FJ): With low interest rates on the US dollar, the current market has become very liquid. Every VC firm is doing its best to keep up with the times in this ever-changing market. Some are even quicker at building up their reserves than GGV.
In addition, the COVID-19 pandemic is accelerating digital transformation. China has made remarkable progress in terms of digital transformation on the customer side within the last two decades. On the enterprise side, however, the shift towards digitalization and cloud computing has only just begun. Digitalization has plenty of room for development both at home and abroad in the next two decades.
As this trend accelerates, the market will become more crowded. And so long as market opportunities exist, GGV will be ready to facilitate its growth.
CV: What are GGV’s strategies in early-stage investments?
FJ: We don’t aim to cover a wide range of fields, but rather focus on a particular sector in which we have faith.
For us, an increase in reserves doesn’t necessarily mean an increase in staff count. Having additional people on the team doesn’t always lead to more success. Instead, it could bring forth more perspectives and opinions, making it harder for the team to reach final decisions, resulting in greater costs.
Head-to-head competition among firms all come with a price. Investment strategies are formulated on the basis of trade-offs made through consideration of various factors. Being part of a global team, our managing partners must be on the front lines to achieve efficient decision-making.
CV: What do you mean by being on the front lines?
FJ: Each managing partner should take charge of their decisions and the resulting consequences. While the culture shared among GGV’s partners is that we are encouraged to collaborate and offer opinions on the challenges and pitfalls of each investment prospect. Each of us is empowered to take ownership of our work.
CV: After becoming the figurative captain of GGV in 2011, you made drastic reforms to repair the “ship,” like asking part of the staff to leave the firm. It’s atypical for an investment firm to perform such a radical restructuring. Why did it have to be done at the time?
FJ: GGV was financially on the rocks when I started as a partner in 2011. I had two choices: quit, or turn the firm around. So I decided to stay and make changes. My attitude toward restructuring has always been to do the right thing, even if they may not always feel good. Thus, after setting a new focus on mobile internet businesses for the firm, I allowed the most qualified employees to remain and asked the rest to leave.
From 2000 to 2010, GGV raised a total of USD 1 billion. In the following decade, we brought that to almost USD 8 billion.have increased that amount eightfold. I am pleased with the results, although I had to make many difficult decisions and cruel choices.
CV: How do you prevent yourself from missing out on promising startups?
FJ: Risks arise when going down the wrong investment path and can result in significant losses. To mitigate these risks, I persuaded myself to go on the front lines, actively traveling with my team to oversee the progress of new projects to understand recent trends and seize new investment opportunities. If I had not put myself forward, I wouldn’t have discovered the bright prospects of the electric vehicle industry and subsequently encouraged He Xiaopeng to start XPeng Motors.
Most of the situations where I missed out on rare investment opportunities occurred between 2011 and 2014, when GGV was restructuring. Admittedly, I didn’t have a thorough understanding of the markets in lower-tier cities, which led me to miscalculate the risks. I still keep the business plan of Pinduoduo, which I didn’t invest in at the time, on my desk to constantly remind myself of past mistakes.
CV: You once wrote a post on WeChat about the ways investors handle stress. What’s the source of your anxieties?
FJ: On a macro level, I am mainly concerned about uncontrollable factors, new monetary policies, and various economic issues that could potentially affect the pace and strategy of my firm’s growth. As for the firm itself, I worry that our efficiency is slipping as we grow in size. I am constantly looking for ways to optimize our work processes.
Personally, I have never felt anxious about being overtaken or replaced by someone else in the future because I know that I can’t work in investment forever, and that someone more capable will come along eventually. A firm with sound internal processes and a culture such as ours will inevitably produce that person.
CV: What’s your plan for the future?
FJ: There is a book by Stephen Covey titled First Things First, in which he mentions the “4 Ls,” which is “to live, to love, to learn, and to leave a legacy.”
Accordingly, I aspire to live my life, continue loving this industry, keep learning, and leave behind a legacy. Few VC firms survive after their founders or leaders retire, but I hope GGV can continue to live on after I leave the firm.