Shanghai-based venture capitalist JP Gan has picked enough winning companies over the years to be a repeat member of the Forbes Midas List, most recently in 2022. Past investments include Chinese online travel company Trip.com and video-sharing platform Bilibili.
After early positions at Carlyle and Qiming Venture Partners, Gan left Qiming in 2019 to set up his own shop, INCE Capital. INCE has backed more than 30 companies to date, including unicorns KK Group, Yuanxin Technology and EEO Group. Gan and INCE Capital raised $700 million in new capital for China investments in the second half of 2021 from international investors. The country’s growth has since lagged the preceding decade.
How does Gan size up China’s investment opportunities today? Falling costs tied to easing economic growth, market heft in the world’s second-largest economy, and global competitiveness among manufacturers are still opening up avenues for investment, he said in a recent interview.
“At the end of the day, China is still country with 1.4 billion people at $10,000 per capita GDP. It’s the second largest economy in the world, and people still have a lot of money,” Gan said. “Savings actually have increased in the last few years. With some stimulus and confidence boosts, people will spend and consume. I look forward to seeing the next batch of great consumer companies in the coming years.”
One industry with potential is pets, Gan said. “The pet industry is growing very rapidly in China with many young people choosing to have pets instead of children,” he noted. One company INCE has invested in is Petkit, a maker of intelligent pet machines such as automated feeders. “It’s done well in China and in the international market and on Amazon,” said Gan, the holder of a MBA from the University of Chicago Business School.
Like most fund management companies, INCE is also spending a lot of time on AI. Among the Chinese companies with large language models, it has invested in Baichuan, founded by the former CEO of Chinese search engine Sogo, Wang Xiaochuan. “In the next five to 10 years, all companies will need to embrace AI technology. If they don’t, they will lose their market position and become obsolete,” Gan said.
Although INCE’s mandate is to invest in China and Chinese entrepreneurs, it is increasingly seeing the country’s entrepreneurs looking abroad for growth. Among its larger successes, Gan said, is Temu, which advertised during the Super Bowl this year. “We’re seeing many opportunities in that space,” he said.
Besides Petkit, INCE has invested in iMile, a last mile e-commerce delivery company in the Middle East. “They are entering South and Central America markets such as Mexico and Brazil. We think this could be one of the leading last mile delivery companies in the world,” he said. INCE has also invested in moodytiger, a sports apparel similar to luluemon for children that is opening shops in Singapore, Thailand, and elsewhere in Southeast Asia.
Notably absent from the list of countries Gan was upbeat about: Japan. For venture capitalists, he said via WeChat from Japan, the country has “too small of a market, no growth and a declining population.”
Looking back over his career, 53-year-old Gan recalled: “I got into the business about 23 years ago when the first internet bubble just burst. I remember interviewing with the Carlyle Group in March 2000 when the Nasdaq was at a then all-time high. Then it crashed, but that gave us a lot of opportunities and it has risen tremendously since. A lot of great Chinese companies were built during that early period including Ctrip, Baidu and Tencent.”
“Since the Covid pandemic arrived,” he continued, “the market has definitely changed quite a bit. The overall economy slowed down, geopolitics has also had a big impact on the VC business, and the entrepreneurial spirit has come down. Right now it’s probably the worst time I have gone through in my 23-year career in the VC business.”
“But with that said, opportunities will come along. Costs have come down — the human resource costs, customer acquisition costs, and marketing costs. Right now, there’s a great opportunity for companies to perfect their products and hire good people. Hopefully we’ll go through this phase of the (business) cycle.”
—with Julie Lu
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