Great time to be an entrepreneur, harder to be a VC: GGV Capital’s Jenny Lee

GGV Capital managing partner Jenny Lee at DealStreetAsia's inaugural Subscribers Special event on July 18 in Singapore.

As Southeast Asia attracts more venture capital investors, the region could get fairly competitive in terms of capital, GGV Capital managing partner Jenny Lee said.

Lee was speaking at DealStreetAsia’s first subscriber-exclusive event in Singapore on Thursday. We have previously reported that there are more than 35 VC funds with a complete or partial focus on Southeast Asia that are raising over $4.2 billion.

“It’s not just the independent VCs but the corporate VCs are jumping into this as well. I just came from a board meeting where we were talking about EDBI, so there’s also government-led capital wanting to enhance the innovation landscape.

“I think it’s [a] great [time] to be an entrepreneur, harder to be a VC because there’s more money coming in. But I think the opportunities [in the region] should kind of make up for this increased interest in the area,” she said.

GGV Capital set up an office in Singapore earlier this year, the firm’s fifth after Menlo Park, California, Shanghai and Beijing and the first in this region.

In Southeast Asia, where Lee spends about 25 per cent of her time, she said the VC firm is still in an exploration and discovery mode.

The new office in the city-state also serves as a gateway for GGV to keep tabs on India.

“India is in a very different stage today, compared to 15-20 years ago. Definitely, they’re going into the second round of serial entrepreneurship, so the quality and talent pool have grown over the years,” she said.

Edited excerpts:

Throughout your career, you have travelled from Singapore [where Lee is based] to the US and China and now you have an office here. How do you split your time across all these markets?

What we’ve seen is that Asia is an interesting and growing market for us. China is going into a stabilising growth stage and therefore, the chance of finding $100-billion outcomes is not as easy. However, the chance of finding a $10-billion outcome in China is still there. There are still opportunities for the next 5-10 years, at least. But because of this stabilising growth, we do see Asia as the next hub so when we talk about where the next billion users are going to come from, we’re looking at the 600-700 million users in Southeast Asia and 1.2 billion potential consumers coming out of India. That’s where the excitement is.

We see Chinese entrepreneurs coming down to this part of the world and replicating some of their business models here. And we see some of the local entrepreneurs here growing to be super unicorns as well. So I think in terms of where I’m spending my time, we go where the money is. Today with flight times getting shorter – it used to take me 27 hours to get to San Francisco from Singapore and now it’s 16 hours. I would say I spend 10-15 per cent of my time in the US and about 60 per cent in China. And the rest of the time is to explore what’s happening in Southeast Asia.

As fundraising in China slows, do you think it will affect how GGV Capital views Southeast Asia?

We believe in ecosystem building. Everybody’s fundraising [right now], Asia is pretty hot. But there are techniques to getting the right investor and there are techniques to growing the investor base as well. We see ourselves as part of the ecosystem and we want to play with the rest of the ecosystem.

Right now, definitely, we’re seeing quite a bit of new capital coming in – there are local VCs who have done very well, and we also have new venture capital, whether it’s from China or the US looking for the next growth wave.

So, the word of caution here is that I do believe this region is going to get pretty competitive in terms of capital. I just came from an offsite with one of the super unicorns in Vietnam last week and corporate VCs are becoming pretty active in the market. It’s not just the independent VCs but the corporate VCs are jumping into this as well. I just came from a board meeting where we were talking about EDBI, so there’s also government-led capital wanting to enhance the innovation landscape. So I think it’s [a] great [time] to be an entrepreneur, harder to be a VC because there’s more money coming in. But I think the opportunities [in the region] should kind of make up for this increased interest in the area.

You invested in Grab in its Series B and now it’s already raising Series H. With Grab and GOJEK competing in so many areas, do you think it’s a winner-takes-all market?

We feel that Southeast Asia is not starting from a zero base. It’s starting with a services explosion because the user experience on leveraging PC or mobile internet is very similar to what happened in the US and China. Whether it’s sharing economy, food delivery or payments, it’s following very closely what China went through in 2015-16, where we saw a huge explosion of online-offline services. In that regard, I do feel that this is a market where it’s all about what consumer wants, and consumers want convenient, good quality services. On top of that, they want things at a lower price.

So what that means is that there will never be one competitor or one player in the market, right? Because when there’s a constant tug-of-war between pricing and delivery of service in all aspects and in this case, in Southeast Asia, whether it is ride-sharing, bicycle-sharing, car-sharing, and then down to food delivery, that competition will never end. Because when it does end, whether it’s with a merger between two large players, it will open the market up for competition from another player. This other player will decide that this market is too big to be left alone and therefore, they will come in. We’ve seen this play out in China where Didi merged with Kuaidi – we thought that was it and there will be only one player in China that will do ride-sharing but then Uber came along. So after $2 billion spent to subsidise consumers and drivers in China, it became one player again [when Didi acquired Uber China]. But then you see Baidu is getting into the mix and Meituan, which does food delivery, also wants to do car-sharing.

So again, the market is big, it’s too big. In this case, it’s unlikely to be an end battle where you have one guy standing. I think that that number one position will always be up for competition. It may be a matter of one player having 60 per cent of the market, another player having 40 per cent. I think that’s how we see this battle growing.

Asia itself is not one homogeneous country; it’s many different countries, different regulations, different local customs as well. I think that we may even see more than two players in this case. I’d like to say one, given our interest, but in reality, I think the world is fair in that sense.

Your portfolio companies Grab and Xiaomi have their own venture arms. How do you view these changing dynamics? Are your portfolio companies now your competitors as well?

I don’t see that as competition. I think a company wins and gets to unicorn status not because of just one investor, board member or VC. Capital definitely can be a kingmaker but companies win because they can play with the ecosystem and not because they take every cent on the table. It’s because at different times of their development and growth, they’re willing to share those coins with the players in the industry. I was at a Grab internal offsite, the first thing I said there was “remember not to eat everything.”

It’s important to leave some economics on the table because you need an ecosystem to grow with you. I think that’s how we think about competition as well.

Many VCs are looking at India now and we understand that it is on your radar as well. What are your views on the market?

When we think about the next billion, we go after the larger markets. So, we look at Southeast Asia along with India. I think that India is in a very different stage today, compared to 15-20 years ago. Definitely, they’re going into the second round of serial entrepreneurship, so the quality and talent pool have grown over the years. Many of them have had quite a tough time in the last 5-10 years. So now they understand the value of money, they understand the value of depending on the business model, so the talent pool has gotten that much better.

Number two, the infrastructure exchange. I still remember, many years ago, when I was at a conference, I talked to Indian entrepreneurs in the gaming business. My first question was ‘how much do you have to pay for bandwidth?’ And he said the reason the company was not growing was that the cost of internet is too high. But today, bandwidth is very cheap. What that means is when you have an internet highway with six lanes, you need content and better services. Hence, we do see a new wave of business models that would not have taken off [years ago] without a stable, good quality network, areas like education. Online education is huge in China and the US, so we believe in India, it’s a category that will grow as well.

You have been an investor for almost two decades. What is the most important lesson you’ve learnt?

I think my most important lesson is this – we are always partners with our entrepreneurs. Having the right empathy and understanding what CEOs are going through actually helps us – helps me actually – to make the right decisions.

And many entrepreneurs feel [the difference]. Many of my entrepreneurs have said: “You’re the first investor and the last investor who is still here on the board.” That’s because the other investors have either moved on to a different fund or no longer come to the board meeting and just send their associates. And for that, the CEO is always going to remember me. If he has an extra $1 that he can extract from an exit, it’s coming to us because he feels that he owes GGV for being there with him every day until the end. And when he starts a new company, we’ll be the first ones he calls.

Our business is not just about one deal. It’s about the second, third and fourth deal. So as an investor, have patience and empathy, and be willing to go through tough times and fight the battle with the entrepreneurs. The best VCs are entrepreneurial, not boss-like VCs – that’s something I remind myself and my team every day.