GGV Capital hits the fundraising trail amid fresh US-China tensions

The growth and venture investment firm based in California plans to invest the funds in start-ups as well as more mature companies with market values of at least $100m, according to documents presented at a public meeting of the Rhode Island State Investment Commission this week.

Targeting $1.2bn, the core GGV Capital VIII fund will invest mainly in later-stage financings of companies with valuations of $100m or more, the documents show. The firm’s GGV Capital VIII Plus fund will serve as a backup to invest in later-stage GGV VIII portfolio companies that require more capital. It has a $300m fundraising goal.

The firm’s eighth flagship fund is targeting fivefold returns on its investments, which will range from $10m to $50m. The Plus fund will only back promising portfolio companies in which the flagship fund has invested at least $25m, the documents show.

The firm also aims to raise $500m for its GGV Discovery III fund, which will make seed and Series A investments in start-ups with valuations of no more than $50m, the documents show. The fund is targeting investments that will provide 10-fold returns.

The Rhode Island commission committed $18m in public pension funds to GGV Capital VIII, $4.5m to the Plus fund and $7.5m in the Discovery fund.

The firm’s latest group of funds would be only marginally larger than its GGV VII vehicles, which collected $1.88bn before closing to new investors in 2018 and included a $60m entrepreneurs fund. But the firm’s fundraising efforts come as US-China political and trade tensions have escalated.

Jenny Lee, a GGV managing partner, cited the firm’s decades of experience in investing in both countries. Since the firm began operating in 2000, some sort of geopolitical crisis has erupted every two or three years, she said during the Rhode Island commission’s meeting.

“I’ve seen six cycles of ups and downs,” Lee said.

She stressed the importance of having the right support on the ground, and the firm has teams focused on public policy and government in both markets. Outside the U.S., GGV has offices in Shanghai and Beijing as well as Singapore.

“We don’t underestimate the risk but know how to navigate it because we have done this for the last 20 years,” Lee said. “We understand how to understand the risks” and find profitable exits from its investments, she said.

The firm plans to invest 45% of its flagship and Plus funds in each the US and China, while focusing mainly on Southeast Asia for the remaining 10%, the documents show. Half of the Discovery fund would be invested in China and 40% in US, with the remainder also primarily going into Southeast Asia.

As of June 30, GGV’s previous 12 funds generated a net internal rate of return of 17.8% since 2004, outperforming the US public markets, the documents show. The firm has backed China’s Tencent Holdings, which operates the WeChat messaging service, e-commerce giant Alibaba Group Holding and US home-fitness company Peloton Interactive, among other investments from the $5.4bn in investor capital it has raised since 2004.

Source: Wall Street Journal