Episode 20: Jixun Foo of GGV Capital: Behind the Scenes of China’s Venture Deals

GGV Capital’s Hans Tung and Zara Zhang interview Jixun Foo (符绩勋), who is a Managing Partner at GGV Capital based in China. Jixun joined GGV in 2006 and has more than 20 years of experience in venture capital investing. He focuses on travel and transportation, social media and commerce as well as enterprise services in China. Jixun has led GGV’s investments in Qunar (去哪儿), Grab, Didi (滴滴出行), Youku-Tudou (优酷土豆), UCWeb, Mogujie-Meilishuo (美丽联合集团), MediaV, Full-Truck Alliance (formerly Yunmanman) (满帮集团), Meicai (美菜), and currently serves on the boards of XPeng (小鹏汽车), Hellobike (哈罗单车), Tujia (途家), Xiangwushuo (享物说), Zuiyou (最右) and Kujiale (酷家乐). Jixun played a critical role in many key strategic mergers and acquisitions, such as those of Youku-Tudou, Baidu/Qunar, Ctrip/Qunar, and Mogujie/Meilishuo.

Jixun has been recognized by Forbes China as one of the “Best Venture Capitalists” every year since 2006, and frequently appears on the Forbes Midas list. Before GGV, Jixun was a Director at Draper Fisher Jurvetson ePlanet Ventures, where he led the firm’s investment in Baidu. Prior to DFJ ePlanet, Jixun led the Investment Group under the Finance & Investment Division of the National Science & Technology Board of Singapore (NSTB) and has also worked in the R&D division of Hewlett Packard.

Jixun is from Singapore and graduated from the National University of Singapore with a First-Class Honors degree in Engineering, as well as a Master’s in Management of Technology from the university’s Graduate School of Business.

In this episode, Jixun discusses how he started his career in venture capital, the insider story behind the merger between Youku and Tudou (the largest merger in Chinese tech history at the time), why he invested in the bike-sharing company HelloBike (which overtook Mobike and Ofo to become the top player in the country), and what sectors excite him today.

Join our listeners’ community via WeChat/Slack at 996.ggvc.com/community.


Zara Zhang: Hi, everyone. We’re excited to announce a new program, GGV Fellows, designed to help sea turtles, or haigui 海归, and Chinese students studying overseas, to get to know the Chinese entrepreneurial landscape better. As a sea turtle myself, I know that many of us worry that we’re not jiediqi 接地气 enough when we go back to China, lack a local network, or worry whether we can survive in a fiercely competitive market where most people work 996 if not 007. This program is designed to address those concerns. If you are a Chinese student or professional who is studying or working overseas or have done so in the past, this is a program designed for you. It is a week-long program in January 2019, in Beijing, during most U.S. colleges winter break. You will be able to learn from executives at some of China’s most valuable tech companies and visit some of their offices. You will also participate in mixers with students at top Chinese universities like Tsinghua and BeiDa to build a local network. Please visit fellows.ggvc.com for the application link and for more information.

Hans Tung: Hi there. Welcome to the 996 podcast brought to you by GGV Capital. On this show we interview movers and shakers of China’s tech industry as well as tech leaders who have a U.S. China cross-border perspective. My name’s Hans Tung. I’m a managing partner at GGV Capital and have been working at startups and investing in them in both the U.S. and China for the past 20 years.

Zara Zhang: My name is Zara Zhang. I’m an investment analyst at GGV Capital and a former journalist. Why is this show called 996? 9-9-6 is the work schedule that many Chinese founders have organically adopted. That is 9 a.m. to 9 p.m. six days a week.

Hans Tung: To us 996 captures the intensity, drive, and speed of Chinese Internet companies, many of which are moving faster than even their American counterparts.

Zara Zhang: On the show today we have Jixun Foo, managing partner at GGV Capital based in China. Jixun joined GGV in 2006 and has more than 20 years of experience in venture capital investing. He focuses on travel and transportation, social media and commerce, as well as enterprise services in China. Jixun has led GGV’s investments in Qunar 去哪儿, Grab, Didi 滴滴, Youku Tudou 优酷土豆, UCWeb, Mogujie Meilishuo 蘑菇街美丽说, MediaV, Full Truck Alliance or Yunmanman 运满满, Mei Cai 美菜, and currently serves on the boards of Xpeng Motors 小鹏汽车, Hellobike 哈罗单车, Tujia 途家, Xiangwushuo 享物说, ZuiYou 最右,and Kujiale 酷家乐. Jixun played a critical role in many key strategic merger and acquisitions in China, such as those of Youku + Tudou, Baidu + Qunar, Ctrip + Qunar, and Mogujie + Meilishuo 蘑菇街美丽说.

Ever since his early investment in Baidu–and he’s been on the Board at Baidu for more than eight years, Jixun has been recognized by Forbes China as one of the best venture capitalists every year since 2006, and has frequently appeared on the Forbes Midas list worldwide. Prior to DFJ e-Planet, Jixun led the investment group under the Finance and Investment Division of the National Science and Technology Board of Singapore, which is called NSTB, and has worked in the R&D Division of Hewlett-Packard. Jixun is from Singapore and graduated from the National University of Singapore with a first class honours degree in engineering, as well as masters in management technology from the university’s Graduate School of Business.

Zara Zhang: Welcome to the show, Jixun.

Jixun Foo: Thank you.

Zara Zhang: So I wanted to start with your earlier career. How did you end up in venture capital?

Jixun Foo: Well it’s a bit of a twist and turn. You know I started to have the idea of being in venture capital when I was in Hewlett-Packard. I was an R&D engineer, and I spent some time in the U.S. I spent some time in the Valley, spent some time in Corvallis, Oregon, looking at all the innovations then. That was still ’95, ’96.

Hans Tung: Corvallis, Oregon? Really? OSU, Oregon State University.

Jixun Foo: It’s where HP has its printhead division, so I kind of went back and forth a little bit.

Jixun Foo: And so it’s interesting how a lot of the technology innovation actually happens in the U.S. and even though I was a R&D engineer at Hewlett-Packard it was more of a localization effort, reformatting the printer if you will. You know, in different size and shapes to fit the different market segments.

So that was where I said, well, in Asia at some point innovation has to take off. We have to have our own product technology innovation capability. And so you know I figured out whether I wanted to be an entrepreneur or an investor. so that’s where I really had the idea. But really there wasn’t a lot of startups. There wasn’t a lot of venture capital, and I thought a good stepping stone would be to join some venture capital then. There were a few like Walden and Vertex and so on.

But when I wrote my CV, nobody really bothered to call back. So that was then. So the stepping stone for me was really NSTB, where I went in and started an incubator. I did that about four or five years. I know as part of the government initiative–.

Hans Tung: What year was this?

Jixun Foo: 1996 to 2000. That was the time where I wrote papers and I went around to world, actually. I went to Israel, I went to Ireland. I looked at all sorts of innovation initiatives, London, Cambridge, etc. I think it opened up my eyes a bit.

The opportunity really came in 2000 when DFJ started expansion. You know, Tim Draper has this vision looking at venture capital and growing venture capital beyond the 20 mile radius.

Hans Tung: Of Silicon Valley.

Jixun Foo: And so I started DFJ e-Planet. That’s where I joined DFJ e-Planet, and it was my stent into the industry.

Zara Zhang: One of the deals you did at DFJ e-Planet was Baidu. Could you talk about how you first met Robin Li 李彦宏, the founder? And why did you think it was a good idea to invest in them?

Jixun Foo: Well to me to be honest I think at that time there were just waves of returnees from U.S. back to China. And through the DFJ network, which is a pretty powerful network with a strong affiliate network, I was referred to Robin. But I remember my first contact with Robin was over a video call to the Singapore office.

Hans Tung: Was it a Skype call?

Jixun Foo: No, no, we had a Polycom. We had a video call with Robin and so that was when I first met Robin and Eric. I found it interesting and went to Beijing and visited their office at Zhongguancun 中关村at that time. And I still remember, it was this pretty rundown place called Beida Ziyuan Binguan 北大资源宾馆, just outside of BeiDa. There were very few people. They had like 13, 14 people then.

And so, why invest? You know looking at the environment, looking at these guys coming back, I mean leaving their family behind and coming back to strive and make a difference in the market that they believe is growing. It’s you know, it’s just you feel the passion. And that really kind of gave me the view that hey, you know, these guys could do it. So that’s on the people side. That’s 2000.

Hans Tung: That’s 2000.

Jixun Foo: That’s 2000, mid-2000. The other thing is that I did a bunch of research. Honestly, it was a lot more desktop at that time, and there was no Google. It was really comparing with what’s more a lot more desktop at that time and say “OK you know and it was no Google”. It was really comparing with Inktomi and Akamai. Inktomi was doing the search engine for Yahoo and was powering a number of the portals. Baidu had the same model.

Hans Tung: The B2B model back then.

Jixun Foo: Yes, B2B model is information service provider and I remember that was the thesis I wrote in the manual I gave to my partners. And so that was a thesis. But I think underlying it there was this view that as information grows and as there are more websites and there’s more content, the way portals are organized, information through a directory is not enough. So search has to be eventually a gateway.

I wouldn’t have predicted the business model at that time. I just predicted the need and predicted the guy.

Hans Tung: And then, obviously, Baidu–2002 was it? Pivoted to a B2C model.

Jixun Foo: Yeah it was really 2001.

Hans Tung: How difficult was it to get to that decision?

Jixun Foo: It was not a straightforward decision. At that time, had Sina 新浪, Sohu 搜狐, NetEase 网易–we had all the major portals as our customers.

Hans Tung: Paying customers.

Jixun Foo: Yes, paying customers. But we are not really making a lot of money, it’s like a few hundred thousand US, for the year. And so it’s a fundamental question of where are we going to capture the value. Now obviously going to see, setting up your own portal, you’re competing with your customers. And so that really puts the board on to a lot of conversations, like, are we sure we’re going to do this.

I think one, Robin was very determined, because he felt like it’s either this or you die. There’s no outcome. There’s no market. There’s no value. Yes, you can get some business. But there’s not a big business. So I think that determination he had at that time was really, really important. And so the reference that we had was really not Google. I mean Google wasn’t there yet, in 2001. So it was really Goto.com. Goto.com was a company that DFJ actually invested in, that had the model for pay for performance. They acquired the first five placements on all the search results in all the major portals and then they basically–but they do arbitrage business. They don’t really own the search. Both Robin and in some ways, Google as well, figured out, hey, that’s the model that they could monetize over time. Goto.com had actually proved that the business model worked.

Zara Zhang: So you grew up in Singapore, went to school there and worked there in the beginning of your career. When did you come across the idea that you should leave Singapore? And why specifically China?

Jixun Foo: So I grew up in Singapore. My dad and my mom both were Chinese speaking. They were both teachers, and I grew up in a very Chinese speaking family. My dad had a masters in Chinese history so I had the affiliation or affinity to China, even when I was young. I think a lot of it is the fact that I grew up in a family that you know gave me the confidence and some level of understanding you know and affinity to China. And so when the opportunity comes along it’s like okay. I should go spend some time.

My first trip to China was back in second year of university. So at that time you know I did an exchange program in Hong Kong University and then I did a trip to China. It was quite an experience. One, China was still very–that was 1990. The country was still a very closed country, it was still limited by resources.

Hans Tung: This was before Deng Xiaoping opened up in 1992 with his tours of the South. So yes it was very early.

Jixun Foo: And I took a train through Hong Kong from Shenzhen all the way up to Baotou 包头 which is north of Beijing. And I remember when I tried to cross that border, there were people who say hey you know can you… So it was still a planned economy. So there’s this coupon that if you can bring it across and get a stamp, they would actually be able to get the product across, which was a television, without the import tax. And so I tried to do that. I was thinking I could get away with it. I was a student, I could make some money, and I was caught. At immigration, I was brought into the immigration room, and I was questioned. Initially I was trying to defend.

Hans Tung: This is not a side of Jixun we know well.

Jixun Foo: And then, I gave out on the guy. It was quite an experience. And in the process of traveling to China you see the different faces of China. And the important thing is that over the years you see–I think what’s important for people to know about China is it’s not about what you see at an instant. It’s about the change that you see in the process, because that change is the one that is power.

It’s not just simple change in infrastructure, but it’s also the change in the people, the mindset. I think that was the thing that actually caught me and said, this is a country that can come up, that could be really, really powerful.

Zara Zhang: Really agree. When I’m in school here–I go back around once a year, and every time I go back I don’t recognize the country. And I think right now, if I don’t go back for more than three months, it’s completely different.

Jixun Foo: Yeah. Well, you know, just the kids that we talked to yesterday, right, in our spot of outside conversation. These kids are amazing–the power, the confidence, they know what they want. I mean if you compare this same group of kids to their parents, the generation before them, they are very different. The change that they are going through and the intellect it’s unleashing in this country is the one that’s really amazing for me.

Hans Tung: This generation Z is growing up with a lot more confidence, a lot more information than anyone else before them. And it’s empowering to see them right in front of our eyes.

Zara Zhang: So how did you first come across GGV, and what made you want to join the firm?

Jixun Foo: GGV was actually founded by four founders, Thomas Ng, Joel Kellman, and we had Hany Nada and Scott Bonham as well. I’ve known Thomas and Joel–Thomas was my colleague at NSTB. So he ran a fund at that time under NSTB called TDF, and TDF later became TDF China, and TDF China became KPCB. So anyway that’s a little bit of a history there. So Thomas and I go way back. I’ve known him since ’96.

After I joined DFJ, I had the idea to leave DFJ. We started to have conversations about what’s next. He wanted me to come and spend time at GGV and help set up GGV in China. At that time, there was also Jenny. It was 2005. I remember Thomas got his team, we spent time together. We went to this Alibaba big event in the West Lake in 2005. That’s where I spent a lot of time with Haney, with Jenny, and so the idea was kind of coming together.

I had the option of say, going to start a fund with somebody else, or join a platform. A partnership is not that easy. You want to join a group with which you have some affinity. You may not be alike, but at least you have some cultural connection. You have some common understanding. You have some common friends and common grounds and so you can go a long way. So that was a big part of my consideration when I joined GGV, was the fact that I’d known Thomas for a long time.

Hans Tung: Well. What was different about GGV versus the other U.S. firms? Because I remember, back in 2002, 2003, 2004, Baidu had a tough time raising money from Sand Hill Road. Everybody on Sand Hill Road could have seen Baidu and met Baidu, and could have invested. Everyone passed. So what was it about GGV that made you feel comfortable that it was not just another Sand Hill VC who missed China?

Jixun Foo: I think for GGV, actually Thomas, Hany, Scott and Joel, the group started out with a fundamental view of the cross border. We believed that there was a lot of intellectual leverage we could get across U.S. and China by being on both sides. I saw how the team spent time together. In fact I met them more than once.

I met the whole team in Singapore, I met the whole team in Beijing, I met the whole team in the Valley. So you can see how they were spending time together to interconnect a lot of the views, sharing of all the views and ideas. And up to today, I think that’s the approach that we continue to take GGV. Across this partnership, we spend time across both regions, having our sites whether in the U.S. or in China. And being on the ground, seeing what’s happening, is important.

So I think for many of the Silicon Valley folks, you know, where I was at DFJ. To be fair, I think Tim Draper is someone really that spent time traveling around. But most people would not. Maybe they would do it once in a long time, in one year, or two years, three years. But not frequently like ten times a year. So that’s the engagement. I think only when you touch and feel and not just reading materials in articles, you can make a better connection and therefore you can make a better-informed judgment on what you are investing.

Hans Tung: You have that many of the largest M&A’s in the history of Chinese Internet sector starting with Youku Tudou, which was the first ever multibillion dollar deal that got done in Internet in China. When I read about it, I was extremely impressed and inspired by what you did and what else is possible. I thought it was going to be a different era, starting with that deal, with more to come. How did you think about that deal? How did you think about structuring that deal, and how did that get you to do more things like that over the last five years?

Jixun Foo: So you know, as I spent time on Tudou, I spent time with Gary, and I looked at how this company had evolved. It is interesting. They were the first mover in the market of online video. It started more of a bit of a video podcast and then it evolved. And it became more mainstream content. And so as it became more mainstream content you know there’s a lot more content acquisition and costs escalated. It’s not just use acquisition cost, it’s content acquisition cost. So as you look at this vertical, the competition starts to get intense in 2011 with the cost of content escalating as much as five to ten times.

And you know it was like 100,000 to 200,000 RMB per episode, to 1 million to 2 million RMB per episode. It shot up very quickly. So that was the first thing, looking at the market. And looking at GGV, we had quite a bit of money in there. We also brought other investors into the deal, Temasek and so on. You know I feel really responsible. It’s a lot of money in there, like $20 million, at least for our fund, we had 10% of our fund. The question was really what’s next.

And you know, Tudou, with all the ups and down, it did go IPO. We IPO’d fairly well, but the market also reacted to the point that the valuation came down, you know, $400 million. And we had $200 million in cash. But guess what? That $200 million cash will last about 12 months. That’s really scary, right? Well where else can you raise capital? So in my mind. Consolidation has to happen. This market has to get consolidated.

So I went around talking to people. I spoke with Gary, I spoke with Victor at Youku . I spoke with Gong Yu龚宇 from iQiyi 爱奇艺 at Baidu. So I started talking to them, saying hey, obviously I’m coming from a position where I’m looking at Tudou. And I told Gary, “if consolidation is going to happen, you want to be the first because you capture the most value by being the king maker”. So that was a thing that I really tried to get him to think about.

Hans Tung: He’s number three, but he can make whoever a stronger number one.

Jixun Foo: Well, I mean in terms of traffic it was kind of number two. One, two, three, but in that ballpark. They’re not that far apart, but you can really be the king maker in that instance. And there’s also other players, the P2P players. PPLive PP视频, PPStream PPS影音, and so on.

Hans Tung: But iQiyi had Baidu, which got a lot more traffic, the possibility that no one else. So yeah.

Jixun Foo: So we knew something had to happen, so therefore, by playing that hand I was able to get the attention from–I think, when I talked to the CEO’s, I think everybody knew that. The biggest issue is trust. Like, how can we do this? because when you have M&A, everybody has to open up the kimono. Everybody has to say, this is what I have.

Hans Tung: Right. Give us something, open up something.

Jixun Foo: So you have to open up. You have to have trust. And that’s one. Two is, you have to figure out the management. You know that there can’t be two leaders. Somebody has to step aside, and what do we do with the management? It’s not just one person, it’s one team. That’s always the tricky part with M&A. So I think I was able to figure that out. That was in 2012. I remember it was Chinese New Year, and I had a call with Eric Li 李世默from Chengwei Venture 成为资本. And then soon after we had multiple calls after that and we brought everybody to a neutral ground. We had to bring everybody to a neutral ground which was Hong Kong. And we had a closed door session between Youku and Tudou. It was almost a full day, through the night, and we shook hands. And we took just about three weeks from that point on to iron out a merger agreement that could be announced. Obviously they are both listed companies. The whole completion of the transaction will take time. It would take about six months.

Hans Tung: I’m going to be a little naughty and ask. Obviously you’re very close to Baidu, you know, both Robin and also Gong Yu from iQiyi. How come Baidu wasn’t the one that merged with Tudou?

Jixun Foo: Well you have to ask them. I knew that at that time, when they saw the news, it was a little bit of a shock for them as well.

Hans Tung: But they were in the discussion. It’s not like they weren’t in the discussion.

Jixun Foo: They were part of the discussion. So to be fair, we’re friends, and I will lay the opportunity down for you, but if I want to get the deal done, I think speed and certainty is important. So that drive and conviction and determination to do this is important.

Hans Tung: Obviously Victor did.

Jixun Foo: Victor did.

Zara Zhang: In terms of exits, do you think entrepreneurs should start thinking about that from day one, and have a clear idea of how their companies will exit? Or do you think they can wait until later?

Jixun Foo: No, I think you have to start with idea that if you want to go and build something, you don’t build something and say I built to sell. Now the outcome is really hard to sell. I’ve been in this business for the last 18 years in China, and I think the first 10 years, most people would say IPO is the way to go. First, there weren’t many super unicorns that could make large acquisitions. But from 2010 to now, over the last eight year, we have these ginormous companies like Ali 阿里and Tencent 腾讯and Baidu and JD京东. So they have they now have the market cap, if you will, to make large acquisitions that make interesting outcomes. So I think the market has changed, so M&A, just as in the U.S., will become, or can be a very interesting exit, in some ways it can be a better exit. If you are completely looking at liquidity point of view for both entrepreneurs and investors.

I think a lot of people don’t realize that up until the Youku Tudou merger, IPO was primarily the only way for people to get exits. In the U.S. whereas it was 80% M&A, in China was all IPO until then. So after the Youku Tudou deal, you engineered a few more prominent big name M&A’s. The next one was Baidu’s investments into Qunar with a controlling stake.

Hans Tung: That was another unusual move. One had a controlling stake but also the company was able to go public. I remember the only two deals that was done at that time when it was Sohu 搜狐and their game company and then that was what you did with Baidu and Qunar. So how did that work. And once again, how do you generate trust on both sides to have both sides agree that yes, one will have a controlling stake, but two, management has control operationally, and to be able to take the company public?

Jixun Foo: Yeah well I think the story was that Qunar, back in 2011, was started off as a metasearch play. You were competing with you know Kuxun 酷讯 initially. But over time, if you wanted to take Qunar to another level, so it was more like a Kayak in the U.S. So if you want to take Qunar to a bigger company, that business model is not enough.

It has to evolve beyond a media company and become an OTA. That’s a tall order. How do you become an OTA? I mean really, that whole supply chain is being controlled by both Ctrip and Yilong 艺龙网..

So there are two outcomes. One is we sell the company. At that time we had the option of selling the company, say $600-700 million to Ctrip or the like, or we continue to grow the company but we needed some ammunition. So the idea I had at that time was if we could have Baidu invest, we could make Qunar become the de facto gateway for travel search, it would be very powerful. Then at least I control the demand end, and then I can work on the supply chain. So that was the idea.

And so I brought the Baidu team I brought CC 庄辰超and Fritz from Qunar together and have a conversation. And I was able to work out a deal with them. Obviously, it was complex because Baidu definitely wanted control. So we negotiated a control stake to 60 percent. And we wanted to maintain independence, so we had seven board seats of which Baidu had four. But there was a fourth seat that they appointed me to as the dividing vote. So that was how we structured the deal. And it went pretty well.

And so the company continued to grow their business. In 2013 we IPO’d the company, but competition becomes intense with Ctrip.

Hans Tung: And the Alibaba came into the sector, as well.

Jixun Foo: And so by 2015 we figured that, you know, James Liang 梁建章 came back to Ctrip and started a conversation of more consolidation, and so we did. We did that M&A with Qunar back in 2015, and it was a great outcome for us. It really priced Qunar at $7 to 8 billion. So it was a 10x step up.

Hans Tung: With Baidu’s investment.

Jixun Foo: It was more than a 10x step up from Baidu investment, because Baidu investment was really at a discount. But if we had sold the company that 2015 outcome would have been 10x more.

Zara Zhang: How do you negotiate a deal that’s acceptable to everyone at the table? Especially a lot of the times people may have different interests and one player might be more dominant than the others. How do you make sure everyone agrees to a set of terms and accepts the final agreement?

Jixun Foo: First of all you have to understand what everybody wants. So Baidu has this strategy at that time. If you looked at iQiyi, and iQiyi was run relatively independently. They had a strategy for certain verticals that they wanted a majority or as much of a stake as possible. But they were willing to have that management and empowerment given to the team that ran the business. So that was what Baidu wanted–okay, I’m going to own that vertical, but I’m going to let you run it.

Hans Tung: Tencent has that similar style as well.

Jixun Foo: Tencent has similar style, but Tencent doesn’t require that large ownership. Baidu is more a majority type arrangement.

So, you have to figure out what they want. And the management, what do they want? I think for the management team as well, CC who would want to step up as the CEO, because you know he will elaborate on that to be able to take this company from just a media company to an OTA company, because that’s what he really wants to do. So he’s willing to give up that ownership at that time to do that.

So I think it’s a question of just making those needs met. And you know, and building an arrangement, creating arrangement which allows both sides to get what they want.

Zara Zhang: With the recent merger of Yunmanman 运满满 and Huochebang 货车帮, which are the largest trucking companies in China, the angel investor, Wang Gang 王刚, actually became the CEO.

Jixun Foo: Yeah. So I think that on that deal, I must say that there’s a lot of investors, we’re a relatively minority shareholder of Yunmanman 运满满. I would give a lot of the credit to Wang Gang 王刚. Last year, in August, I was traveling in Europe and Wang Gang 王刚 called me and said “hey, this is the deal, I’m going to do this”. He was positioning himself as the investor but he was the one who was really negotiating the deal. He told me he was going to get it done in two weeks.


I said that’s not going to work. The few things I told him was like “that’s not going to work”, because they were very comparable in size. And I think there was no one management that could say fuzhong 服众 (be convincing) right? So one side is saying that “I give up, you are better than me”.

At that time, the leadership of the management team was not that clear. So, I posted to Wang Gang 王刚and said, if you want to do this, the best thing, the right thing for you to do is become the CEO of the company. And he’s ex-Alibaba. He has operator experience. He has the credentials of seed investor in Didi. So he has that clout to do this. Anyway, the whole deal took months to actually figure that out.

And I think Wang Gang 王刚 did a tremendous job of talking to the various investors on both sides, including the government that supported both sides. You know the respective governments. There’s a lot of–this is very local business. So I think he managed to weld all these things together and cut a deal. I must take my hat off to him, and he’s done a fantastic job.

Hans Tung: He’d written quite the deal for Didi and Uber. Just after the Youku Tudou merger, everyone had become more used to doing M&A’s. He also put in Meituan美团and Dianping 大众点评and then etc., etc. What do you think are external factors that made it easier and more possible to have M&A after 2011. What were the factors evolving with Alibaba and Tencent that made it easier and possible to have these kind of deals happen?

Jixun Foo: Well I think that there’s a lot more M&A, but the external factor is really market. I think China’s pace of change and innovation has accelerated. Market adoption, consumer education, everything is at an accelerated pace. You look at how evolved. You look at how payment evolved in China. a lot of that has to do with capital. There’s a lot of capital being pumped into subsidies, into the programs and subsidies and so forth, to drive adoption. So on one hand you have rapid adoption in a market which is driven a lot by capital. On the other hand, it drives competition at different levels, which also requires a lot of capital.

So you know, there’s a limit to how much capital you can raise, whether you are Didi or Kuaidi 快的. There’s a limit to how much valuation people are willing to pay. And so I think capital is a factor that actually drives those M&A’s, because you can no longer raise more capital, enough for you to burn. So you have to figure out what’s next.

That forces a lot of the consolidation. I think it started really with online video and now it evolves into the other verticals like Didi and Kuaidi, Uber China, so the ride sharing space and bike sharing. We have Meituan and Dianping, which is more the takeout business and the coupon business. So you’ll continue to see this happen, because the capital market can no longer take those financial subsidies and finance. It has to foster consolidation. I think that’s a big factor. I think the other thing is just, with the Youku Tudou case, it’s a mindset shift. People understand what that means. The guys who sold their business through the M&A if they exited, they actually made good, they got their first pot of gold.

But I think when you see that it’s also important. Right. So all the entrepreneurship effort, their hardship, it’s paid for. They don’t just walk away without anything. So I think that outcome also helps. So I think there’s a few factors.

Zara Zhang: You know you’ve led a lot of GGV’s investments in mobility and transportation companies, including ride sharing companies like Didi and Grab, bike sharing company Hellobike 哈罗单车, trucking company Yunmanman, and also connected car company Xpeng Motors or Xiaopeng Qiche 小鹏汽车. I wonder what makes you excited about mobility and in your mind in 10 years, how will people be moving around.

Jixun Foo: Yeah so I think that’s a thesis that our firm–I work with Hans, I work with Jenny, and we talk quite a bit about it. When we first started, this whole thing was a concept about shared economy, ride sharing. And so we first invested in Grab and later on we caught up with Didi, and then the whole trucking service as well.

I think one is if you look at the old business model, whether it’s on the consumer end or the business end, it’s not easy to connect demand and supply. That’s a fundamental issue which mobility you know where whether it’s on the consumer end all that business and it’s not easy to connect demand and supply. So that’s a fundamental issue which mobility actually creates because it’s location based. So that technology mobility solution actually makes that connection worth. And then along with that I think that’s the first step. And then we went on from connecting people, the guy providing the service with drivers to a person to connecting with an object which is a car or a bike, to start with.

So I think that the mobility solution will evolve as the supply end which is the vehicle, goes from the bike which is more self-drive self- ride, to a car which can be more autonomous over time. The connection will change. It will go from people to objects. So there will be a lot more technology that needs to go in there, to make the car more intelligent and autonomous over time. If you see the evolution of this sector, these things are going to converge. –the car company and the ride sharing platforms are going to converge. Yunmanman 运满满, the Full Truck Alliance has to think about how to build trucks that are autonomous, and that’s part of Wang Gang’s vision as well. So that connection will shift over time, and so I think for GGV is we have to invest in that vision. We invest ahead. So these pieces of jigsaw somehow will come together. Now they may be working independently as different companies and still collaborate with each other, or they may merge with each other at some point. We don’t know.

But I think it is a direction that the market is heading, that car, the supply end will become more intelligent, will become more amendable, if you will. On this side, it will just become more intelligent as to telling you what kind of service you need. So you can ride a bike if you are just going for a 1 to 3 kilometer or 1 to 3 miles. Or you can get a car. So in that same app you should have all the transportation services that you need, versus having like multiple apps. So I think that will be more consolidation that could happen in this category.

Zara Zhang: So one investment that was not as obvious from day one was the bike sharing company, Hellobike. So when when you met them the sector was already very heated with a lot of investors by going into Mobike 摩拜 and Ofo, and the major markets in China were pretty saturated already.

Hans Tung: The company was doing a parking app.

Zara Zhang: And they failed at their first attempt, and the founder is very young, so what made you believe that it was a good idea to invest in them? Obviously, it was a very prescient decision because they are the number one independent bike sharing player in China right now.

Hans Tung: A lot people don’t know that, that they’re number one now.

Zara Zhang: And it’s backed by Alibaba, who has raised millions of dollars.

Jixun Foo: Yeah well. So when I first looked at this bike sharing space I was trying to figure out like how do you make money.

Hans Tung: Less than 1 RMB per ride.

Jixun Foo: Less than 1 RMB, and it has competition, you can predict that you don’t even need to pay to get a ride. How do you make money from a ride sharing service? That was my first question. So we met ofo at that time, and there were different questions that we had in mind about both companies. This ofo had a very simple bike, really just a bike with a lock, a mechanical lock. and when I looked at the model, it was 200 RMB a bike. But the cost of operating that 200 RMB bike was quite high.

At that time, Dai Wei 戴维 (David Wei) the CEO of ofo, had his model. And as I was looking at the model, I said it’s hard for me to predict a model because I think the cost of operations will go up. The number of rides per day could shift as you go from summer to winter. Things like that. So so when I looked at the model it wasn’t quite making sense to me. And Mobike, similar.

So when Hellobike came to me, it was already a portfolio. they had a service for parking at that time and was not going very far. This was his second venture. And then he tried to tell me that I was going to do this, which is his third initiated, right? So why should I believe you? But through his first two ventures, he has accumulated a lot of operating know-how. He understood a lot of the issues behind bike operation, product issues and how to make his service operationally efficient. So I thought that the team of engineers was a good team of engineers.

And so the one interesting thing is, initially I wasn’t completely convinced. I said well why don’t you go and do some trials in some selected cities. And he did. He went to two cities and he did some trials. He came back with the numbers and then he started to open my mind a bit about what this can be. Number one, I think the number rides, actually this is a big market. so just from a frequency of engagement, it was far higher than the Didi and Grab. I kind of did a back of the envelope estimation at least for China, that these rides per day could get to 100 million rides per day. That’s a big number, in terms of user engagement. So that’s one thing that caught me.

The second thing is, you know he was telling me that hey you know I’m not just doing bikes. I’m going to do electric power bikes over time but there’s a lot more product and technology issues that you need to deal with, like charging the bikes, and do have wireless charging and do you have charging stations, etc. So those are issues that he hasn’t quite figured out yet but he said hey, directionally, this is what I’m going to do. I’m going to increase the frequency of engagement but also the distance for travel. So that got me interested. So I brought you in, Hans, and Jenny.

Hans Tung: How did you get over the concern that the subsidy would still be there and our pool would be kept artificially low for a while? Or did you feel that, given your past experience with all the consolidations, that won’t last forever, then we’re already a year, two years into it, so the amount of investment you had to take on was less.

Jixun Foo: So honestly, do I’d bet on this guy becoming number one right from that instant? Not really. I was like, what’s my downside?

So the other thing about bike sharing is that China has close to 400 cities with more than a million people. Even at that time, Mobike and ofo were largely in tier 1 cities. There was room for them to grow. So that’s one thought. The second thought is, because even after this, given all the experience I have with them, the worst case scenario is they get consolidated at some point. So that’s value for what they’re doing. So that’s how I thought about the initial investments, that hey, if they do this and they do this right, in a worst case they get consolidated. So that’s why I got you and Jenny, we spent some time and we put in the first $5 million and the second $3 million. And we continued to finance it until Chengwei Venture成为资本 came along later, and today they are by far the largest player. They are more than 25 million right today. You know they are the aggregate of ofo and Mobike.

Hans Tung: With ofo I can understand, because of the way his team had a bike that was not as intelligent. But what do you think is the reason that Hellobike could overtake even Mobike, which was number one for a long time?

Jixun Foo: My read on Mobike was not so much on their product. My understanding was just what was happening with the management. Not as unified. So that was an issue that I could see from afar, or I heard from afar. So that was the thing that I think eventually kind of took on itself. Li Bin 李斌, the real founder behind Mobike, the Chairman. But he’s really doing NIO 蔚来汽车, which is really his pet project, where he has hundreds of millions of dollars of his own money where he goes all in, as an EV company. So what is the company and so where does he sit, right? where does he stand? So it’s different. I think that if the entrepreneur has high conviction and you know, goes all in on one thing, the chance of success is just higher.

Hans Tung: Right. GGV was not a major investor in the automotive sector between 2000 and 2010. There were other investors who rushed into that space, because you know automotive is a huge sector that drives economy in China.

However in the last six to eight years, or last four to six years, GGV has become a major investor in this space, led by you with investments in Didi and the Hellobike and Xiaopeng Auto and Full Truck Alliance. So within a very few years we’ve become a major investor in this space. So, a lot of people say is the first mover advantage that important, or do you wait for the right signals in order to decide when to double down on a category?

Jixun Foo: I think when you invest you learn. And so I think the initial investments in Grab gives you a vantage point as to what’s happening in the ride sharing space. And then Didi and Hellobike, and now you see how people are thinking about what’s next. I think a lot of it is evolution versus me trying to say this is what I’m going to invest five years down the road.

You know it’s really a process of talking to these entrepreneurs and saying okay, this is how I see my business evolving, and you get vibes along the way. And I think Didi and Grab and Full Truck Alliance, they have a common theme. It’s more connectivity, and simplifying the connection and making the supply and demand more efficient. That’s the fundamental. Then beyond that when I invest in EV’s, it’s really a different mind. It’s really that when it goes to Hellobike, the object, the car, the vehicle, has to become more intelligent. So Hellobike gives me that sense that the object, with AI, with all sorts of sensory technology, will become more intelligent. And I believe that in the next three to five years, or five to ten years, cars will become more intelligent and hence why I started looking at that space, and talking to Xiaopeng 何小鹏and saying hey, if you want to do this, you should go all in and go full-time.

Hans Tung: He was co-founder of UC Web, and was at Alibaba for a while.

Jixun Foo: And I look at this category, just as Tesla was founded by Elon Musk, and there’s not many people that can do this. Not many entrepreneurs because you almost need people who have done it before.

You need a serial entrepreneur. Why this is so hard, it’s such a big supply chain. You have to assemble talent that believes in you, and unless you have done it before, it’s like, who are you? And you have to have the financial muscle to say this is what I want to do. And investors will want to follow you. So you know, Li Bin from NIO actually puts in hundreds of millions of his own dollars, and Elon does the same thing. They’re putting money where their mouth is. So there are not many players who can do this right. And hence, it is a big category. China sells 26 million new cars every year. It’s a huge market. So if he can capture it, it will be a huge outcome.

Hans Tung: Both of us have been in this business for a long time, and when we see young VCs trying to break into this industry, fight over every deal and get worried the deal is rejected from IC and didn’t get approval, and sometimes they worry about price, or don’t want to pay the price to get into a deal.

What advice can you give them how to be patient and move methodically or thematically, one category at a time? So you look at what GGV has done in e-commerce versus retail with initial investments, and Alibaba now has close to 20 investments in e-commerce space on your retail space and both U.S. and China. Look at auto or transportation space and include travel in there, with Qunar, and also we did Airbnb in the U.S. with auto investments and sharing investments that you made. And then look at frontier tech with Jenny. A sector overtime gets quite well covered with key strategic investments. What kind of advice can you give to young VC to think before they act, and not just always crave on the next interesting thing, like blockchain, cryptocurrency. You’re old, you don’t get it, you’re going to be useless.

Jixun Foo: Well there’s always new stuff. Well, that’s really the opportunity for young people, new ideas, innovation, providing new drivers for growth or drivers for disruption. So that’s great. Now the thing here is that with ideas, if you look back, Amazon, 2000 raised a ton of money, and at some point people thought that Amazon was crazy. and today, Amazon is a ginormous company. First you have to appreciate and take time to appreciate the fundamentals of what you believe in and get the opportunity. And I’m sure that GGV and many other firms will give you the opportunity to invest and deep dive and spend time. But you have to understand the fundamentals over time. Because a lot of the stuff that we talk about, in my view, when people talk about things it tends to be at a very high level, very superficial, momentums, what it can be, but there are a lot of things that can go wrong. And when things go wrong, is it really going wrong or is it just momentarily? So if you can understand, you could then make the best of it and capitalize on the opportunity.

So I think you know, from my early investments in Baidu, I want to say that for the first three years, I just don’t know where the light is. You don’t know if this company can be great, because whatever they do, whatever they make, it’s still tiny. It’s still small and people don’t talk about it. You don’t know.

So after the Alibaba buzz, things seemed to fall into a black hole. so you have to believe that search will become big at some point. It’s just how does it get there? We don’t know. It takes time. So likewise I think whether it’s with ride sharing, with cryptocurrency, with AR, with VR, with AI, with all the later stuff that you can imagine, it will come. That question is where is the application that will give it that power to explode, that explosive growth.

Zara Zhang: We’re going to move on to the last part of this show which is a round a quickfire questions. First is, who is the entrepreneur you admire the most, and why?

Jixun Foo: There’s always a tough question. I admire a lot of the entrepreneurs I work with, and they all have different traits. Whether it’s Robin Li from Baidu, or CC Zhuang from Qunar, or Xiaopeng becoming a serial, I respect entrepreneurs for their drive and passion. And for some of them, the passion goes beyond I want to make money. The passion goes to making things possible, making a change possible.

But you know for Xiaopeng, to be fair, he could retire on a boat or a plane or whatever. He sold UCWeb for a couple billion dollars. So one thing to have that and now drive to go start something. Now he’s having eight meetings a day, ten meetings a day, and working through weekends. It goes beyond money. It is that passion. So I respect that passion. And so many entrepreneurs that I respect. So it’s not one person.

Zara Zhang: What do you do for fun?

Jixun Foo: What do I do for fun? Actually I love sports. I broke my left Achilles tendon recently. I broke my right Achilles tendon six or seven years ago.

Hans Tung: Both from badminton.

Jixun Foo: Both from badminton. I love to play sports. I love to challenge myself. I love team sports as well, because it’s a good way to socialize. My wife is now telling me maybe you shouldn’t ski anymore; you shouldn’t play badminton any more. I don’t know if I can stop. I started skiing only–I’m not a great skier. But I love the challenge, despite all the falls. But I started skiing on the good grace year. I love the challenge of you know going through that process and you know eventually being able to ski better and better, better. So I love to challenge myself. And I love to do sports.

Zara Zhang: Well thank you for your time.

Jixun Foo: Thank you.

Hans Tung: Thank you.

Thanks for listening to this episode of 996. By the way we also produce a weekly e-mail newsletter in English also called 996 which has a roundup of the week’s most important happenings in tech in China. Subscribers have told us it is informative and fun to read. The newsletter also features original content and analysis from Zara and me. Subscribe at 996.GGVC.com.

GGVC is a multistage venture capital firm based in Silicon Valley, Shanghai and Beijing. We have been partnering with leading technology entrepreneurs for the past 18 years, from seed to pre-IPO, with $3.8 billion in capital under management across eight funds. GGV invests in globally minded entrepreneurs in consumer new retail, social Internet, enterprise cloud, and frontier tech. CGV has invested in over 290 companies, with more than 45 companies valued at over a billion dollars. Portfolio companies include Airbnb, Alibaba, Ctrip, Didi, Domo, HashiCorp, Hellobike, Houzz, Keep, Slack, Square, Toutiao, Wish, Xiaohongshu, YY and others. Find out more at GGVC.com. We also highly recommend joining our listeners WeChat group and Slack channel, where we regularly share insights, events and job opportunities related to tech in China. Join these groups at 996.GGVC.com/community.

Hans Tung: If you have any feedback on this podcast or would like to recommend a guest, please email us at 996@GGVC.com.