And our support does not end when the companies we back achieve success. We continue to walk alongside them on their respective journeys to achieve the goals they set. In some cases, we even push them to realise their potential further. This was the case with Grab. Our managing partner Jixun Foo was pivotal in advising founder Anthony Tan to transform the company from a ride-hailing app to a super-app valued at $14 billion today.
With all this done and said, we now arrive at a pertinent question: how exactly do VCs like us make our investment decisions? In this article, we delve into how we make our investment calls, with insights provided by our managing partners, Hans Tung, Jenny Lee, and Jixun Foo.
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How we make our investment decisions at GGV (as told by Jenny Lee)
Harvard Business Review suggests that the VC decision-making process is highly practical, following a systematic flow that begins from basic deal hunting and potential return considerations to sealing the contract.
GGV does follow this flow to some extent, and we are especially interested in startups that ingeniously use technology for economic and social good. Below are vital traits that GGV looks out for, as Jenny Lee shared in an interview with KrAsia:
- Harnessing AI and machine learning algorithms to model and personalise datasets
- Using online data to deliver better offline services
- Cross-border knowledge transfer when expanding from one region to another
- Usage of computer vision, robotics, and machines to invent new disruptive products and services
Practical considerations aside, we also like to adopt a people-first approach in our decision-making process. Money is undeniably a key motivator behind our decisions, but we must not forget the people who make the magic possible: the founders and their employees.
As Jenny Lee said in the same interview with KrAsia,
“It’s a passion for me, not a job. The job as an investor is a lonely one and requires strong individual conviction around deals, independent thinking, and the tenacity and resilience to weather through tough times and uncertainty with the founders.
At the same time, it is a great practice ground for honing your EQ, IQ, and a problem-solving mentality as you are constantly working with people with different backgrounds and different interests, both at the board level and company level.”
This nuanced appreciation of people’s differences is precisely what informs Jenny’s approach to investing in startups. She points out setting aside her personal biases and beliefs, “suspending disbelief” to listen carefully to the founders.
Jenny also goes beyond merely financing the startups to guide the founders themselves, helping them to develop the tenacity necessary to weather any storms that could potentially arise during their startup journeys.
She also removes her investor hat from time to time, considering the ever-changing consumer and market needs from the consumer’s perspective to make well-rounded and informed investment decisions.
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Bowery’s Irving Fain (as told by Hans Tung)
Hans formed a good first impression of Irving Fain, CEO and co-founder of vertical farming and digital agriculture startup Bowery. In particular, Hans was drawn to Irving’s enthusiasm and persistence when he presented the solution he had come up with to address the need to cultivate crops on a large scale.
On top of that, Irving is systematic and fully transparent with his process, from his thoughts and initial plans to strategy formulation and execution. As Hans remarked in his podcast interview with Irving,
“[A] good attribute about you is that you share [your] analysis. If people ask you tough questions, you can back [your answers] up with analysis and data. Even if the data is not all the way there, you show a clear path of how you [will] get there. And that is extremely convincing to people to develop a conviction in you.”
Thanks to all these traits, Irving gained Hans’ trust even when he didn’t have a concrete action plan on hand. He was given free rein to experiment with different aeroponics, aquaponics, and container farming solutions. Irving faithfully compiled data and analytics throughout this experimentation process to keep Hans and his other investors up to date.
This transparency convinced Hans to continue pouring his faith in Irving, even when the enterprise did not promise to deliver outstanding results. Eventually, Hans’ faith in Irving paid off.
Not only did Irving end his experimentation phase by building his first indoor vertical farm, but he also developed an AI-powered operating system called BoweryOS. This OS gave Irving a competitive advantage, as its smart intertwining of computer vision, automation, and machine learning-enabled modern farmers to cultivate their crops efficiently in real-time, 24/7.
BoweryOS was the key to Bowery Farming’s growth, allowing the startup to build a distributed network of farms. According to Irving, each new farm further benefited the network by providing extra data to improve overall operations.
Today, Bowery Farming has a net value of $2.3 billion, with $300 million raised in its latest funding round in May 2021.
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XPeng Motors’ He Xiaopeng (as told by Jixun Foo)
For He Xiaopeng, electric car manufacturing was initially meant to be a side venture to complement his day job as the co-founder and product developer of Chinese mobile Internet software and services provider UCWeb.
That was the impression Jixun Foo formed when Xiaopeng presented an electric car prototype that he built with a small team of engineers and manufacturers in 2013. In a podcast episode Jixun did on Xpeng Motors, he remarked that the initial enterprise “was interesting, but didn’t have a lot of drive.”
Despite this, Jixun understood and appreciated the value of electric cars – this is especially in light of the support provided by the Chinese government in terms of infrastructure and subsidies.
While Jixun initially explored other players in the electric car world, he eventually fell back on Xiaopeng for three reasons.
One, Xiaopeng’s existing entrepreneurial experience could potentially enhance the user experience for electric car owners. To illustrate this point, Jixun analogically compared Xiaopeng to a smartphone. Smartphones are a step-up to simple functional phones, loaded with a wealth of functions like photo-taking and contactless payments to enrich the user experience. In Jixun’s eyes, Xiaopeng was like a smartphone, as he could leverage his entrepreneurial experience with his first venture to inform and guide his electric car manufacturing journey.
Two, Xiaopeng had a genuine passion for cars. This went beyond a surface-level appreciation of make and model, with Xiaopeng exploring the ins and outs of cars and their internal mechanisms.
Three, Xiaopeng had already established a robust name for himself as the co-founder of UCWeb. This meant that it was much easier for him to garner the trust of investors. As Jixun very aptly put it,
“Investors will not only follow you. They will also follow your money.’
Add to that Xiaopeng’s natural charisma and confidence, and Jixun was certain that he would succeed as an electric car entrepreneur. And this was why Jixun tirelessly pushed Xiaopeng to enter the industry full-time, and he eventually did so in August 2017.
Jixun’s trust in Xiaopeng proved to be well placed. Today, XPeng Motors is considered to be a rival for Tesla, achieving its IPO in Hong Kong in June 2021, where it raised a total of $1.8 billion. XPeng Motors also became the first Chinese electric vehicle company to penetrate the Swedish market, with its experience centre located at the Westfield Mall in Scandinavia.
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People first, product later
As the above accounts from Hans, Jixun, and Jenny reveal to us, the vim and vigour of the founders count most when we make our investment decisions.
While it is unquestionable that the products are essential, it is only with the right attitude and foresight that they can be taken to their fullest potential, growing and developing sustainably in the long run.