How do Chinese VCs view global opportunities in 2024?

In 2023, we at Momentum Works met with many Chinese investors traveling through Singapore looking for and assessing global opportunities. With the pandemic finally over, everyone is looking for new growth areas amid the newly reopened environment and the boom of AI. 

Due to a lot of uncertainties, many new and old Chinese VC friends are anxious; in our conversations, we heard a lot of thoughts, encountered many (hopefully still positive) opinions, and received a lot of inspiration.

Interestingly, in 2023, we strongly felt that everyone had a more global perspective – we didn’t hear anyone talking about “dimensionality reduction attacks” （”降维打击” – a term populated by the Three Body Problem) or opportunistically playing whack-a-mole.

Everyone calmed down and realized that some of the things are constant – in this process, they thought more comprehensively and seriously about the global market, and found opportunities that truly suited them.

Here, we share some thoughts from Vision Plus Capital, hoping to inspire everyone. The full text is originally published in Chinese; we wish everyone a Happy New Year and a successful year of investing.

Read on! 

 

This year, how do Chinese investors view global opportunities?

Over the past year, China’s economy has emerged from the pandemic, but geopolitical challenges persist, compounded by the impact of interest rate cycles, causing continuous fluctuations in the capital market. Many familiar opportunities have changed or seemingly disappeared, causing significant anxiety among both LPs (Limited Partners) and GPs (General Partners). Looking globally, what can US dollar fund investors still invest in?

In our view, technological innovation continues to happen, and the dividends of global development are still progressing alternately. Investors based in China still have tremendous advantages in seizing new opportunities. Our answer is “to be based in China and look to the world” (立足中国，放眼世界).

Established for 8 years, Vision Plus Capital has conducted dual-currency investments in RMB and USD, investing in over 150 startups, covering markets in Asia, Europe, America, Latin America, the Middle East, and Africa. Recently, Vision Plus Capital held its annual meeting for USD investors, where it elaborated in detail on our views, evolution, and future predictions about US dollar fund investments. 

“To understand the major events of the world, you can’t do without focusing on three arrows, and for USD investors, it’s about needing, wanting, and having to,” said Yiran Liu (刘毅然), a managing partner at Vision Plus Capital.

Here we share our main views on China-based US dollar fund investments:

 

• Investment direction: the “three arrows” of global investment

The wave of technical development is like the guiding three arrows in complex global investment, directing us toward new opportunities. At Vision Plus Capital’s 2023 US dollar fund  investor annual meeting, managing partner Yiran detailed the three arrows from Vision Plus Capital’s perspective:

The first arrow represents “Mobile Internet” (pointing from China to emerging markets)

In this direction, the Chinese version of the “time machine” is still dazzling. The development of the past decade has brought a batch of China’s leading internet companies to a scale and strength comparable to global giants. 

If a decade ago this arrow pointed from the US to China, we believe today it is pointing more from China to emerging markets. Especially in many native applications of mobile internet, technologies, models, and talents from China are radiating their successful examples in this vast market (China) to various emerging markets, particularly evident in ecommerce, logistics, and fintech.

The rise of Southeast Asian ecommerce platform Shopee and logistics company J&T Express illustrates the direction and power of this arrow. In this regard, Vision Plus Capital has invested in Southeast Asian fintech unicorn Advance Intelligent Group, Middle Eastern ecommerce platform Fordeal, and the recently fast-growing North American last-mile delivery platform Uniuni. 

Additionally, Vision Plus Capital’s portfolio companies, including Latin American fintech company Stori, African logistics company SpeedAf, North American local services platform Fantuan, and others have become representative companies in their regions, which can be seen as a global re-emergence of Chinese experiences and resources.

Some of these companies are headquartered in China, while others are local startups  whose founders or co-founders areethnic Chinese. Their commonality lies in fully leveraging China’s experiences while serving local market needs with localised teams. With the spillover of China’s digital capabilities and mature entrepreneurial talents, such examples will become increasingly common. 

The second arrow represents “computing” (pointing from the US to China)

In 2023, cloud-native iteration is still in full swing, and AI has sparked a new wave, with new technology’s “arrow” continuing to point from the US to China. In computing, the US still maintains the leading edge, but the Chinese market is catching up rapidly, and “benchmarking” remains a frequently mentioned term here.

In recent years, with the US cloud data warehouse platform Snowflake, middleware platform Confluent, and others going public, cloud-native represents the cutting-edge development in the international cloud computing field. In this area, Vision Plus Capital has invested in several leading companies such as Yunqi (云器) and AutoMQ over the past two years, benchmarking against US-listed giants.

This year, in the field of artificial intelligence, large models/GPT have sparked global interest. Chinese startups are catching up. In addition to the major tech companies launching foundation models, various startups have also begun exploring the integration of AI in specific industry domains. Our investments in companies like Li Auto (理想汽车), AISpeech (思必驰), and DPTechnology (深势科技) have successively launched their large models, upgrading their AI capabilities. Our newly invested company, Udeer (有鹿机器人), is actively exploring embodied intelligence, providing a “brain” for robots. Additionally, in the AIGC field, Vision Plus Capital has already started global deployment of capital.

This is a battlefield where opportunities and challenges coexist. On one hand, China’s cloud computing and AI giants have cultivated a large talent pool, and the vast application market in China provides fertile ground for AI training and data. At the same time, AI has become a global competition, and Chinese companies need to keep up with the latest global technologies and applications to find their footing.

The third arrow represents “smart hardware” (pointing from China to global)

This is still an arrow starting from China, but it can radiate across mature and emerging global markets, possessing global competitiveness.  Chinese smart hardware is gaining success globally .”

The trend of electrification / intelligentisation (电动化 / 智能化) is sweeping the globe, and the golden opportunity now facing Chinese companies going overseas is the significant upgrade from “digital going overseas” (数码出海) to “intelligent manufacturing going overseas” (智造出海).  Simply put, electrification / intelligentisation means “powered by / having electricity and having digital network, having brains / intelligence (“要有电，要有网，要有脑”).” The infrastructure benefits, software and hardware engineer advantages, and supply chain strengths accumulated by the Chinese economy make these three “havings” easier to achieve. The collective breakthrough of Chinese electric cars in the global market is a clear example, with similar innovations entering the robotics field. Companies invested by Vision Plus Capital, such as Li Auto, Tuya Smart (涂鸦智能), HHO, ADDX (积加科技), and others, based on these three fundamental dividends, have started exploring global smart hardware products. The latest investment in Pebble, an electric recreational vehicle (RV) from Silicon Valley, also works closely with the Chinese production supply chain.

Vision Plus Capital partner James Wang (王琦) also stated that in the smart hardware field, Vision Plus Capital will focus more on new products and categories driven by supply chains and technology, including home intelligent hardware and new energy mobility use cases. Additionally, Vision Plus Capital will continue to pay attention to new product opportunities in vertical fields combining AI with consumer goods globally.

 

• Investment strategy: China + world investment portfolio

The interplay of innovative arrows and continuous updates in technology judgment pose challenges to investors’ capabilities.

Many investors are concerned about the characteristics and abilities required for US dollar-denominated General Partners (GPs) under new circumstances. In Yiran Liu’s view, given the increasing multipolarity of the world, and heightened geopolitical and capital market uncertainties, “in the three arrows we observe, a modern dollar-denominated GP needs to at least exert control over two aspects to build an investment portfolio that can counter market volatility risks. The requirements for investors are “to have”, “to want”, and “to need” (既要、还要、也要). 

Based on this design and strategy, the Vision Plus Capital team focuses on hard technology, computing innovation, and cross-border innovation as the three key areas for dollar-denominated investments. In designing the investment portfolio, the focus is on “what is China’s strength, what is the global trend, and what is the combination of China+World“.

In the field of hard technology, AI, electric vehicles, and new robotics are Vision Plus Capital’s current focus areas. The AI direction investment portfolio already covers hot areas like AIGC, AI4Science, and Embodied AI. Vision Plus Capital’s US dollar fund has also invested in strong technology-driven autonomous driving/robotics industry chains such as QCraft (轻舟智航) and Udeer (有鹿). Vision Plus Capital’s US dollar fund is also exploring strong technology-enabled medical technology companies, such as investing in Genlight (佳量科技), a leading brain-computer interface technology company. 

Yiran Liu specifically pointed out that in the collision of the new era technology and major products, we can vaguely see the ecological microcosm of the two tech powerhouses, China and the US: If we liken software technology to “the sky,” US AI giants like OpenAI, Microsoft, Meta, Google, etc., lead the latest technological frontier. If we liken hardware products to “the ground”, there are relatively few American companies, with only a few like Apple and Tesla progressing somewhat solitarily (e.g., Musk recently mentioned that the top ten competitors in the electric vehicle field would be him and nine Chinese companies). In contrast, China has a more balanced ratio between “sky and earth,” not only having many cloud computing giants embarking on AI journeys in the sky but also having a complete intelligent hardware industry on the ground with global competitiveness, providing the best industrial environment for AI technology implementation. In these soft-and-hardware integrated arenas, Chinese companies still have huge opportunities, which also means opportunities for Chinese investors.

In the cross-border field, Vision Plus Capital started early, maintaining industry-leading investment quantity and performance. Vision Plus has already invested in fintech unicorns like Stori, focusing on emerging / new markets, new infrastructure, new audience segments, and new species. Vision Plus Capital will also delve deeper into the combination of electrification / intelligence with local markets. Our recent investment, the electric RV company Pebble, whose team consists of industry veterans from Apple, Tesla, etc., has already brought a breath of fresh air to the traditional American RV industry.

Beyond portfolio design, Yiran Liu also believes that investors need to reconsider these three arrows from a global capital market perspective. The design of these three business forms corresponds to three exit paths: US stock, Hong Kong stock, and A-share markets. In the next few years, with increased market volatility and rising geopolitical uncertainties, high demands are placed on dollar GPs’ global exit capabilities. “The choice of these three IPO listing locations is what we mean by having, wanting, and needing,” Liu Yiran said.

 

Closing remarks: Seeing the world

In this year’s US dollar fund annual meeting, Vision Plus Capital set the theme as “I See the World”: Over the past 7 years, in the field of cross-border investments, Vision Plus Capital’s dollar fund has invested in over 20 companies, covering industries such as ecommerce, fintech, and logistics. In recent years, it has expanded its layout in the fields of artificial intelligence, new energy vehicle industry chains, and smart hardware products. If we were to separately account for this global cross-border virtual investment portfolio, Vision Plus Capital would still achieve impressive investment performance.

Although this development process involves different technology fields and market characteristics, Vision Plus Capital’s investments have always revolved around the three arrows of the technology development wave, based on China’s advantages and experience, embracing local markets. 

For more global entrepreneurs, Vision Plus Capital not only brings an international investment perspective and advanced industry insights but also introduces numerous Chinese supply chains and talents, helping companies achieve global expansion and resource sharing. Finally, relying on Vision Plus Capital’s team’s international background and global LP network, they have also played a significant role in many cross-border enterprises’ subsequent financing and in connecting with international capital.

Looking back at Vision Plus Capital’s “cross-border Journey”, from the “Chinese-style going overseas” (中国式出海) of the mobile internet to the global opportunities of the technology wave, our progress has always been in sync with the advancements of Chinese infrastructure, Chinese talent, and Chinese technology. This is the unique advantage we have accumulated as an investment institution based in China in the process of “seeing the world”. 

Based on these advantages, our investors have traveled across Asia, Europe, America, Latin America, the Middle East, and Africa, seeing the world and discovering new opportunities.