GGV Capital Raises $1.9 Billion to Back U.S., China Startups

(Bloomberg) -- GGV Capital, a venture capital firm that was an early backer of Chinese e-commerce giant Alibaba Group Holding Ltd., has raised $1.88 billion in funding for technology startups in the U.S., China and emerging markets.

The amount, which is the largest GGV has raised to date, will be distributed across GGV’s funds that focus on companies at different stages, including $460 million for early-stage startups and $1.36 billion for later-stage companies.

Founded in 2000, GGV has made nearly 300 investments in companies across the U.S. and China, including Slack Technologies Inc., Chinese ride-hailing leader Didi Chuxing and Airbnb Inc. Of those investments, 51 are valued at more than $1 billion and 25 of them are publicly traded, including Square Inc. and Zendesk Inc., according to the fund.

Venture funds are becoming larger as startups stay private for longer, meaning investors have to commit capital at later stages to maintain their equity stakes. They’re also competing with sovereign wealth funds, mutual funds and hedge funds hunting for higher returns in technology startups. SoftBank Group Corp.’s Vision Fund has raised almost $100 billion to invest in the technology sector and Sequoia Capital is raising about $8 billion for global tech investments.

“We pick founders early, work with them, and we need a larger-sized fund to stay with them over time,” said Hans Tung, a GGV Capital managing partner. “Companies are staying private for longer periods of time and require more capital.”

Tung said GGV’s competitive advantage is its global expertise, with six partners in the U.S. and China, that allows it to spot opportunities other investors may have missed. For instance, having insights into Alibaba’s growth helped the firm identify the opportunity in Wish, a San Francisco-based e-commerce firm that targets customers with low-priced goods, which is now valued at $4 billion, according to PitchBook Data Inc. Tung also said the fund’s investments in the exploding bike-sharing market in China aided their decision to bet on similar companies in the U.S. The fund has also been investing more in emerging markets, including Southeast Asia and Latin America.

More American venture capital funds have been angling to seek a piece of China’s fast growing technology sector. In addition to Sequoia Capital and Lightspeed Venture Partners, which has a track record of investing in Chinese startups, conservative billionaire Peter Thiel is said to be considering strategies to invest in the country and startup incubator Y Combinator is setting up a China arm. The greater influx of foreign money is offsetting declines in investments from Chinese domestic venture capital firms, amid new regulations and China’s clampdown on credit.

©2018 Bloomberg L.P.