Chinese venture capital is going global and aiming big.
GSR Ventures, an experienced Chinese venture firm, is setting up
a new $5 billion fund called the GSR Global M&A Fund focused on
technology assets overseas. But in an interview with The Wall
Street Journal, GSR Ventures co-founder Sonny Wu says the firm,
which was set up over a decade ago, could buy assets worth double
that.
The new fund will look to follow a template GSR established in
March when it led the purchase of 80% of Philips NV's lighting
components and automotive-lighting operations valuing the company
at $3.3 billion. That template involved buying a company where
China growth would be key to its future. GSR Ventures also was an
early investor in Chinese ride-hailing app Didi Dache, which was
valued at $15 billion in its latest fundraising.
Mr. Wu spoke with The Journal about China's growing ambitions
overseas and the type of deals the GSR Global M&A Fund will
target.
WSJ: What are your potential acquisition targets?
Mr. Wu: We could make a single investment in the range of $2
billion to $10 billion—that's our sweet spot. We're targeting
category leaders, those No. 1 or No. 2 [in their industry]: mature
companies that are slow growing. But with our [abilities to add
value], they can grow faster in China.
WSJ: Are there funds available in China to do deals?
Mr. Wu: In China today, there is a lot of money available to do
deals. It's not just strategic money coming from companies or the
government, but also bank money sitting around. They're sitting
there, in my view, saying they can't do this or that because
they're constrained by the product type. What we can give them is
reasonable return and capture some upside for ourselves.
WSJ: What is the impact of China's recent stock market decline
on raising your $5 billion fund?
Mr. Wu: I think what happened in [the stock market] the last
four or five weeks helped us.If a month ago I told you we're going
to do an industrial investment fund, people would think I'm crazy.
Why would I do that when I can make two times my money in two
months in the bubbly market? I think now there's some sanity and (a
view that) we need to focus on the fundamentals.
WSJ: Why are global buyouts more interesting nowadays than
venture capital?
Mr. Wu: The venture capital market is fiercely competitive, much
more than 10 years ago; every uncle and aunt is an angel investor.
You also have [companies like] Baidu, Alibaba, and Tencent, who are
dominant [in the venture world today]. We've been the most focused
investor [on that opportunity] in the last 10 years, but
innovations locally are very lumpy. You don't get a Didi Dache
every year.
Write to Rick Carew at rick.carew@wsj.com
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