Source: Itjuzi.com
Author: Judy
The following is an excerpt from the interview with Itjuzi.com:
"Fund size is often inversely proportional to its returns at particular investment stages"
Itjuzi.com: INCE Capital managed to raise more than $ 350 million within 3 months. What are the core capabilities behind this? What are LPs most interested in the new fund?
JP Gan（甘剑平）: I think the main reason is that LPs recognize our team's track record in offering decent returns for many investors. We also have rich experience in investing in and operating physical enterprises, so investors believe that we can make the fund successful.
IT Orange: How do you respond to and convince them?
JP Gan: China ’s GDP growth has now dropped from about 10% a few years ago to about 6%. But 6% still means it is one of the fastest-growing countries in the world. Besides, China is the world ’s second-largest economy with an annual GDP size in trillions (US dollar). 6% growth rate is again very, very impressive. As a global investor, our investment needs to have a presence in China. In addition, in terms of consumption, it is actually witnessing a trade-up.
Itjuzi.com: You said that you didn't pursue the size of the fund. "Fund size is often inversely proportional to its returns at particular investment stages.” Can you explain it more?
JP Gan: A “niche” fund has the advantages of fast decision-making and deal-sourcing. It also enables more accurate judgment and relatively better control over risks and returns.
"I do not believe that VC can be run like an enterprise"
Itjuzi.com: Many domestic investment institutions are growing bigger and bigger. They are run increasingly like a company and platform, with clear team divisions for fund-raising, investment, post-investment, etc. You once said "I don't believe that VC can be run like an enterprise". Could you elaborate on this point?
JP Gan: The judgments on the risks and returns of a deal, on the market, and on future technologies, products and founders all vary from person to person. It is difficult to cut a project into front, middle and back offices and offer segmented services. An investor needs to have a clear judgment on such risks, and be willing to take them - once you make the call, you need to follow through the deal from beginning to end. Your specific judgment on certain unknown factors is often lost in the “assembly line” approach.
Itjuzi.com: If we take Silicon Valley as the benchmark of the VC business, how is the style there? Is it more like a “organized corporate” or a “star ranger”?
JP Gan: I think the vast majority of Silicon Valley VCs are of the Ranger-style. Most of the well-known benchmarks of the industry fall into this type. A few partners bring together several people and start investing. Each partner ensures that he makes the investment in the most outstanding entrepreneurs in his social network and grow together with the company step by step. This is a common approach.
Itjuzi.com: China's venture capital has also been developing for about 20 years. What is the level of maturity compared with Silicon Valley?
JP Gan: In terms of the amount of funds raised in China each year, VC practitioners, investment returns, etc., I think it’s basically on a par with Silicon Valley. In certain new technology fields, especially applied technologies, China may be far ahead of Silicon Valley. For example, mobile payment in China, including food delivery service, face recognition, etc. have far overtaken Silicon Valley or have been on the same level. In addition, there are also bountiful of exit channels in the Chinese market, whether it is going public in Hong Kong or the Mainland, or on different boards such as ChiNext or STAR, etc.; meanwhile, China is also witnessing very active mergers and acquisitions.
"The industry experience of a VC is reflected in overall fund management"
Itjuzi.com: Has INCE Capital already formed its own team style or a new fund culture in the past few months since inception?
JP Gan: I think we are continuing our past practices, with the special “sniper” style, trying to be as fast, decisive and accurate as possible. We are able to swiftly grasp market changes, and find the leaders or pioneers in each sector segment, offering funds needed to grow with them.
Itjuzi.com: Does each partner or investment manager at INCE Capital have a special segment focus?
JP Gan: No, we do look at or study multiple segments at the same time, but mostly focus on technology and consumer business.
Itjuzi.com: You just mentioned that some young investors born after 1990 or 1995 had made very good investments.
JP Gan: Yes.
Itjuzi.com: You have been in the VC business for a long time. What is your main advantage as regards your rich experience?
JG Gan: I think experience helps a lot in making a sound judgment on general directions and fields to play, as well as the balance between risk and return. I once said that investors are always torn between greed and fear. Some deals may look very attractive, but also come with huge risks; other projects may be relatively “surer”, but with lower returns. As a more experienced investor, I believe I can strike a better balance between the risk and return or fear and greed per se, than some of the young guys. So, one of my duty is to control and manage risks, including the overall fund planning, and make better judgment. I am not just looking at a single deal, I am accountable for the entire fund. Some of the young investors focus more on individual deals. So, if I can build a sound framework and foster their sense of balance between risk and return, I think the whole fund will perform very well.
Massive opportunities hidden in the consumption ideas and habits of Gen Z.
Itjuzi.com: One of the key reasons why INCE Capital keeps its eyes on Internet and Big Consumer business is the "Gen Z". How are they different?
JP Gan: Gen Z refers to the population born after 1995 or 2000. Most of them in China are single child in their family. They grow up in a macro environment where the reform and opening up policy brought fast economy development. Most of them are well educated. They are also the first generation in China who have not experienced war or major social and economic turmoil, with a strong sense of security towards their lives. Gen Z generally enjoys the care and support from their parents and four grandparents. In terms of housing, many of them have not only one apartment, but even two or more. They have a relatively strong spending power. Gen Z also tends to have more dreams. Being more idealistic, they are willing to spend more on things they love, such as entertainment, culture, food, tourism, etc.; in terms of specific consumption areas, they also tend to prefer ACG, and don’t care much about the conventional luxury brands. They are more willing to try things out for themselves, and exchange ideas with their friends, before deciding what to buy. Gen Z has very different consumption ideas and habits.
Itjuzi.com: How do you reach the needs or interests of Gen Z in the earliest stage?
JP Gan: There are many ways. For example, I have been a director at Bilibili.com since investing in the company in 2013. I learn a lot about young people every time I join a meeting with them. In addition, we have some investment managers at quite a young age, who can give us some suggestions based on their preferences. At the same time, we also have access to many data sources, such as our expert networks, consulting companies, etc. We leverage these data to capture opportunities in the market.
Itjuzi.com: At present, investments in data science, smart technologies, and so-called hardcore technologies are on the rise. Does this phenomenon mean that a new round of technology change is underway? What are the potential opportunities in Internet consumer business brought by this change?
JP Gan: Besides Internet consumer business, INCE Capital also stays on top of the smart industry and technology sectors. Enhancement through artificial intelligence and big data - such as automation and smart technology in industrial scenarios, can also help some consumer companies to make better choices in terms of merchandise, product optimization and market channels.
