In this episode, we asked Hans about his 2021, where he shared his views on Web3, investing at an unprecedented pace, ESG, and the global capital market in 2021. Stay tuned till the end for some of our listeners’ proudest moments over the past 2 years!
For the full transcript of the show, go to nextbn.ggvc.com
Join our listeners’ community, go to nextbn.ggvc.com/community
Rita Yang 00:45
Hello, Hans. Welcome back to the show. Happy New Year!
Hans Tung 01:22
Happy New Year to you as well, Rita. What an interesting year it has been in 2021.
Rita Yang 01:27
It’s just hard to think that we haven’t seen each other since 2019.
Hans Tung 01:33
January 2020. I was in Beijing, the first week of January.
Rita Yang 01:43
So if you were to describe the past 2021 In just one word, what would that be?
Hans Tung 01:52
Oh, gosh, probably volatile, or volatility. At the end of 2020, you would think that with vaccine coming out in 2021, that COVID situation is going to be a lot more manageable. That obviously, delta and then most recently, omicron vary and become much bigger issue than most of us expected. Then you see the valuation of the tech sector gone through huge growth in 2020, very quick recovery, and then surpassing historical levels in the second half of 2020. And 2021 February was a high point. And then November was another high point. But the value has come down a lot, almost back to near pre-COVID level for many stocks. So that kind of volatility is something that we haven’t seen in a long time. And for most younger professionals, or founders, or even VCs, it’s the first-time people have seen this kind of volatility. But at the same time, you also see new areas emerging, like become hotter and become more mainstream, at least in terms of publicity, and fundraising attention, like web3, and so forth. So it’s been a very productive year, much more volatile than any one of us expected.
Rita Yang 03:08
Yeah, definitely. And you mentioned web3. And it’s one of those buzzwords that we cannot escape from. And since you’re in Silicon Valley, and you met with all the, you know, cutting edge founders all the time and Coinbase, you led to GGV’s investment in it. What would be your general observation on this, you know, big buzzword everyone is talking about even like my grandma was to ask me about it. Right?
Hans Tung 03:33
I think when Jeff and I, through an intro of our friends, to invest in Coinbase, it was a small check from from GGV, just kind of to learned about a market. Back then Bitcoin was all the rage in a lot of people thought it was overhyped. Since the government doesn’t want any decentralized currency out there. And that affects their voluntary ability to control the fiscal monetary policy, people think that we will go down zero at some point in future when hypes come down many people compare it to the tulip phenomenon from the Netherlands and then in the 1600s. So with all that backdrop, you know, we still thought it’s, it’s, we’re not sure, but that’s a given volatility increasingly around the world, maybe it’s in US government continue to print US dollars, maybe having something like Bitcoin would be an investable asset that people will like, but we all thought that we need to have real world application around Bitcoin in order for this to be truly valuable. And we’re both right and wrong. Bitcoins doesn’t have true end consumer applications, but it’s a store of value continues to go up in this increasingly volatile world. And when we wrote a small check, so we can take too much credit for it. But it’s just impressive to see how it has exceeded our expectation. And then, you look at all the recent debate between, for example, Jack Dorsey at Twitter, and then Marc Andreessen at a16z. And you see Elon Musk making fun of web three as marketing buzzword. It just it there’s a lot of different kinds of opinions out there. And I liked the blog post that my old friend from Bessemer critics and Andreessen has published. He compared Wikipedia and YouTube to the competitor before back in the early stage of the second web2, and web1. It just to see that the, the free ecosystem that’s emerging, where there’s a lot more open, developers can add value to it. There’s no centralized figure that can monopolize its upside ends up building a more valuable ecosystem over time. If I think back to web 1.0. where Google and Amazon. Amazon argues Google is web 1. And then Google that started 99 is 1.5. Those are the companies that are ends up being quite more centralized in keep more and more of the profits itself. And then you see more open system emerging Android, which is acquired by Google, and you see Wikipedia, you end up seeing that there’s more value being created by a more open system over time. As you catch up to a value prop is good value proposition from a centralized system that can be good early on. But over time, it’s the system as more open, developers can make money, more people can benefit ends up surpassing the value of catching up to the value created by the closed system. So you can argue that web2, I remember investing in web2 companies, and a lot of people doubt that web2 companies would exist that when one company would just take over that he didn’t. And then so for web3, I just think that we’re very in a very early stage, a lot of infrastructure companies being built out much similar to that stage with web1 back in the being of internet era. So initially, people are expecting more and user applications, which is what we thought about Bitcoin, but the infrastructure is being built out, whether it was Ethereum or other things, gets built out, over time, they will be in consumer application. So we’re still in the very early stage of web3, this is going to be a 20, 30 year run. Heaving, you miss it so far. Don’t worry, and there’s plenty of time to make it work. For those people who you know, bought Amazon stock in 2010, essentially 20 years after 15 years after the company was was founded, you can still make 10x return your hold for the last 10 years. So don’t worry about it. If you didn’t, you didn’t you didn’t capture any web three upside last year. We’re still like in year one- and two of 2020-year run. So, it is going to be very exciting time over the next decades.
Rita Yang 07:53
That’s a that’s a great insight. We can’t get carried away by the FOMO.
Hans Tung 08:01
You know web1 was 10-15 years run. Web2 was also a 10-15 years run. So, what three what ends up being like that. And so being thoughtful, being choosy impact on companies that you think is going to be part of ecosystem going forward and stick with it, hold on to it and not worry about the volatility going up and down is I think the better approach but having said that, we went through the volatility just having 2020 21 It’s hard to be calm when you see your net worth goes up and down by 50, 80% in a matter of weeks. And so having the ability to be able to not get carried away or is up or down is extremely important. Obviously easier said than done. But that’s the key to successful investing.
Rita Yang 08:51
Yeah, and so for funds that have gone through cycles. I guess we have partners like you to help us navigate through that.
Hans Tung 08:58
Yeah, amazing to work with our colleagues here. I mean, you know us we work well as a team. And this year especially you look at if I look at Jixun’s exits from 2020 with Xiaopeng and then the Glenn’s exits of HashiCorp. Both have done extremely well post IPO and it just a fun to see two people doing well and you know, we have a lot to be thankful off. We have expanded more into New York into an A relative scale somewhat into Latam and India. It has been interesting to see GGV globalize and we double down on Southeast Asia which is Southeast Asia and finally our roots of GGV. So, it has been interesting to see us globalize announced two years ago.
Rita Yang 09:51
Yeah, we added five more new portfolio companies in Latam in 2021. I think this would be the highest in GGV’s history. If I’m not mistaken, yes. Will you share with us? What are you seeing a lead time that has, you know, kind of accelerated the pace?
Hans Tung 10:06
Sure. If I step back GGV is kind of global from day one, back in 2000. We started in both in Silicon Valley in Singapore. So always had more international outlook led at the US to China throughout the 2000s, and 2010s. And then we double down on our routes in Southeast Asia last four or five years, the Jixun’s investment in Grab, leading a series B of Grab in 2014 was epic in hindsight. And we used to invest in the US mostly in Silicon Valley, and over the last 567 years have expanded in now we have over 40 investments in New York. And then in the process of doing that, just when you see consumer companies expanding and growing, the lessons we got from Silicon Valley, and Beijing and Shanghai, have helped us to spot consumer trends better in Southeast Asia and in Latin America, in India as well. And so, as these regions become more urbanized in developing products and services for a rising middle class with increasingly fast Internet growth and penetration, especially on mobile internet and smartphone, it just becomes more obvious for us to invest in things that we know well in new regions. And these new regions like Latam and India, we end up partnering with a lot of local funds. So, we provide global data points, and they have local knowledge, and we share what we know to help founders scale. So it’s been fun working on Latam deals with Latam VCs and funders, in Brazil, in Colombia, and Mexico in particular. And so we’re in particular to attend you know, you have a region of 600 million people, and GDP per capita, roughly around seven to 8000, comparable to China, with a fast rising, internet, smartphone, internet penetration, and founders increasingly ambitious, that they have seen Nubank come public, they have seen Rappi and iFood doing well. So these companies are getting bigger and bigger and more successful and draw some next generation of founders who will be willing to try. So we’re very happy with our investments in Latin in 2021. And many, many of them we started with a personal check in a seed round and then convert that to GGV’s investment by transferring our personal investment to GGV at cost. So, there’s no conflict to the file and helping the fund to source and curate. And it’s been a privilege to work with the founders and local funds in that respect.
Rita Yang 12:42
So for the past two years, I mean, you haven’t done much trouble compared to where you used to be. But we would love to hear you know, one or two most memorable interaction you’ve had with founders in 2021. Yeah, in person or on Zoom,
Hans Tung 12:59
As you know, I used to travel every almost every other week pre COVID. Many trips are international. Over the last two years, it’s mostly been just zoom meetings. And numbers, Zoom is increased from 6,7,8 per day to sometimes 13,14,15 a day. It’s a lot more efficient to have zoom meetings, even though the quality of interaction may not be the same as in person. So, what has been most memorable over the last one year has been in person meetings? Right before omicron become the issue. We had a New York founder dinner. The second one we had this first one was 2019. And this is 2021. And over 30 founders came to our event and over 10, people from GGV Silicon Valley flew to New York for this. And it was just amazing, in a room with so many GGV founders and see how we have built up our New York president from three deals as of 2016 to not over 40 investments in a span of five years, two of them during COVID. And it just it just the one word I would choose was magical. Everybody was so happy to see each other. Several of them thought that they were the original OG founder from 2016 2017 cohort. And to see so many new friends around around the table. We have built a huge portfolio around FinTech around the consumer and increasingly, more enterprise, and SmartTech. So a lot of funders have are in a similar area, whether it’s food or FinTech or consumer, and so they have a lot to share with each other, and a lot of know each other already. So it’s been a good ecosystem to see the that emerging.
Rita Yang 14:45
Awesome. Talking about the volatility of 2021 venture funds has increased by 50% this year, and the types of investors also kind of dramatically changed. According to The Economist, only three or the 10 biggest venture investors by assets under management are traditional VC firms. I mean, traditional in a way that there are financial investors that used to bet on early-stage companies like us. So what’s your take on this? And how do we keep our competitive advantage?
Hans Tung 15:17
Yeah, two folds one back in 2013. I remember, actually at 2012, I remember spending time with Scott and Chase at Tiger global, was honored to be invited to their internet conference anyway in a conference. And it was impressive to see their founders under one roof interacting with one another, and see them take a hedge fund, and then recently started investing on a private side earlier and earlier. And then now this will happen on private side makes them smarter on the public side, and on the public side, the AUM that they have built up. And the earnings are they generated a distributor or an annual basis, helping to fund more expansion on a private side and outsource a lot of DD. It is impressive to see them at work. And remember walking away thinking that that is going to be the model over the next 10 years. And back then now a lot of people know of Tiger global, and a lot of VC firm feel that you have to be an early-stage VC first, in order to build a true VC platform. And it’s amazing to see what Tiger and other hedge funds when I follow suit, what they have achieved over the last 10 years, the kudos to them for pioneering this model. And when I joined GGV, GGV had a chance because it was global in DNA from day one, that you can build a global platform and leveraging data points from one region, one sector for the for the other. And the lessons we learned from one region can be applied in another region. Learnings from one sector like consumer can be applied to how you build enterprise product and make it more social and shareable. So, all that. And then the outcome, some portfolio could be buyers of product and service from our enterprise portfolio. So, there are a lot of sort of learnings and inspirations at that time to see that you can build a global platform, you’re multi saving, investing, and you’re in multi region multi geo. You can have so much more synergy and insight that will tilt investment success to your favor. And so over the last 10 years, with Kudo to Jixun’s leadership and Jenny’s ability to work with LPs, first 10 years of GGV, we raised a bit over 1 billion. And then the last 10 years, the second decade, we raised over close to 8 billion in total. And you look at our track record, last three years, we had 20 IPOs. And we have this year in 2021, we invested $1.3 billion and 67 new investments. New investments, so number of investments and the dollar amount doubled from 2020 to 2021.We kind of double our number investments and doubled our investment amount. And so, if we didn’t have consciously tried to do this, we wouldn’t get to the scale and the track record that we have we have built. So I always feel that fortune favors the prepared and bold. So, if you believe that we have a right strategy, built the culture and teamwork, to have the guts to pull the trigger to make that work. And I think we’ve been very fortunate to be able to cover our position in ecosystem to work with other local funds and developed global insights and our amazing platform team led by Lily in China and Jenn in the US to be able to work with our founders. And if I look at some of our colleagues, whether its Robin in New York, you know, Dimi and Wei Han in Southeast Asia, Madhu in India, just building up team that are very good at helping us to get connected to new geo new areas. And then our IR team led by Jenny, with strong contribution from folks like Yatine and Jesse. A total team effort. The data team being built up by Raymond in the work has been put in to help us to analyze the data we have across the 300+ portfolio. It just is so much knowledge and insight that we accumulated, it gives us a competitive edge. But fundamentally, I know Jeff, my partner Jeff likes to say, it’s about people is what meaningful interaction people gotta think that you are both a good person and a smart person who can help them, you got to have both, and his ability to connect with founders to help them if and for them to think that we’re trustworthy. That’s the fundamental core at what we do to make all this strategy work.
Rita Yang 20:15
Obviously, it’s a very hot market. How do you deal with that? Is that a factor of the amount of money that we deploy in the market? And how do we balance between, you know, not get carried away by FOMO? And at the same time, getting into the right company at an earlier stage?
Hans Tung 21:07
Yeah, excellent question. Definitely having a bigger AUM allow us to compete and invest companies as companies come in with higher valuation than before. I mentioned earlier, the public market has had correction in price in 2021. Most recently, since November, you look at the tech sector, the FANG, the big guys, the Facebook, the Amazon, the Apple, Google of the world, have held up their valuation. And this rotation out of tech, in this rotation within tech, as economy opens up more money have left tech to go after companies that are in a traditional offline world. That’s opening and poised for economic recovery, and symptom within tech, there’s flight to size and quality, smaller companies might have recently become more impacted. And then the big companies have retained their valuation growth over the last two years. So as a result of that happening, there’s going to be a trickle-down effect into private market as well. Yet, the best companies in the power market that’s growing fast, will still be able to raise money at high valuation. But most of the company should, in the first half this year be more impacted, we’ll see. Of course, one the founders do well, because this is the best time for the founders to take advantage of the fundraising market, raise the capital need to whether through any winter that may come and expand wild year, the sector growing and fundamentally, you look at what’s happening with the digital economy in the world. Ecommerce as a percentage of retail is roughly twenty some in China, and in the mid teens in the US. So there’s still a lot of room for growth, even e commerce, which is probably among the most, you know, internet penetrated sector in all categories in the economy. If you look at media, which is probably the most internet enabled sector right now, in the US online ads is still less than 50% of total ad spend. And so if you use those two sector as a barometer, then all the other sectors are still much less penetrated, much less internet enabled. So over time, the rest of the economy, the rest of the other sectors should catch up to the degree of internet stableness in media and in retail. As such, you can imagine, even with our web three, over the next 10, 20 years, there’s a lot more growth happening in different parts of the economy, for the company to become more digitized. And as a result, not only consumer will do well, but the enterprise market b2b market will grow even faster over the next decade. So there’s a lot of stuff going on right now. And even though we have raised more funds than ever, we have invested faster than ever. There’s still more companies that that are very interesting that we may not be able to invest in them. If we look at the top funds, everyone is investing in fundraising at a rapid pace because of that, because we just in the midst of the fastest digitalization trend in the in humankind. And that’s the backdrop of what we’re dealing with.
Rita Yang 24:28
So what are the most exciting trends for you to see in the new year?
Hans Tung 24:35
Yeah, I think it’s similar to what we’ve spoken about already. What is web three? For the younger founders and younger VCs? It’s a I remember, my VC career took off when web2 took off. So you see web3 coming. It’s a trend that will propel growth of many younger founders and VCs in their in their lifetime. So that’s very exciting. At the same time, you see a shift from consumer b2c Investing and growth to b2b, and to enterprise. And that’s another big trends that will last for another 10 plus 10, 15 years. So, both are a big trend that are impacting the tech world more than ever. And I’m, despite the recent correction, I’m still more bullish on tech. And I’m wanting to diversify within tech and the size and scale and region. And so that there will be a time flight to quality and size and this interest in pure growth stock, pure adventure stock. But I think in the long run, most people in tech will do well, the key is not to be affected by the up and down, stay steady, and keep on executing on the right strategy and continue to gain skill.
Rita Yang 25:50
So final question for Hans. In 2021, we’ve seen ESG becoming a more relevant topic, especially amongst the capital worlds. What’s the rationale behind this? And what has GGV done on that front?
Hans Tung 26:03
Yeah, it’s a great, great question. I think the me to movement made a huge impact. Just what many people about the inequity, that was, that was all around us. And then don’t COVID And even before COVID BlackLivesMatter also was becoming a lot more serious issue that people were paying attention to these two movement made as an impact even in the tech world. So more VCs and founders increasingly are talking about it and think about ways to address that. I think COVID can accelerate of that. We don’t need quite a bit to BlackLivesMatter in 2020. But we’re not as vocal as we probably in hindsight could have been. And so in COVID, wine, especially with the rise of Asian hate, you see, a people being shot in Atlanta says of a more Asian woman, it just a lot about to the forefront. So, for that specific in response to a specific tragedy. In crime, we started an online drive to match donation will donate initially $100,000 to match anyone else who want to donate to the community groups that were fighting Asian hate. And then we I think we’re all together with support from most of the top 30 funds in Silicon Valley, and New York and Boston. As well as a lot of contribution from Eric Yuan at Zoom, in collaboration with Jeremy Liu at Lightspeed. And then the Goodwater team, we ended up raising $5 million for that in public, the largest of its kind, we donated to the Asian Foundation, Asian American foundation as well led by Jerry Yang, Joe Tsai and other business leaders from that community. And so, we did a lot more than we did, as we learn from Black Lives Matter that we need to be more vocal about these kinds of issues. And Jeff and Jen both spend quite a bit of time with All Raise on increasing diversity of having more women, female board directors in the tech companies that were involved with, in that effort has as become part of a larger twin of adding more diversity to reporting in we not only did that in this in the US, but also in Asia, what is Southeast Asia, India or China, we donated a lot more to COVID efforts in trying to bring more diversity to these other places as well. So all now, I thank Jesse from our team will these are ESG efforts with support from Crystal, Grace, Kandi and Alice. And this is still very small, very small compared to our overall efforts in overall issue is going to be address but it’s a good starting point. So, I think the next generation of founders and VCs care about these topics a lot more, a lot more social conscious, and the LPs are pushing the ESG agenda more as well, all these are good, because when you look at Tech, a lot of wealth was created in the last 20 years. It’s time to get back and address some inequalities that happen along the way. So this is something that’s both practical and also morally correct.
Rita Yang 29:41
Thank you so much, Hans, for sharing your insights with us.
Hans Tung 29:44
Thank you, and you have been with us for two plus years now. And you have helped us to take this podcast to new level. And I think we’ve surpassed you posted that we surpassed 1 million downloads a few weeks ago. And most of that growth happened during the next billion up for the Experian phase of our podcasts, it has been amazing to feature founders around the world with you. So I thank you for what you do.
Rita Yang 30:13
Thank you for the kind words, we’re looking for more millions of downloads.
Hans Tung 30:17
That’s right. And it’s not easy to take the time to do this amongst our busy schedule, but every time we interview a founder that’s excited about what he or she does, it makes life much more interesting. And sharing your story with many people who want to want to help them is even more rewarding. So this is why we still do what we do.
Rita Yang 30:37
Fantastic. Thank you so much.
Hans Tung 30:40
Thank you, happy 2022 And hopefully this year will not be as volatile as 2021 but even more prosperous for everyone who’s listening.
Rita Yang 30:48
Thank you. Take care.
I would like to receive news and updates from GGV.