Another Major Venture Firm to Separate China Investment Partners Following U.S. Pressure
GGV Capital, a prominent venture capital firm managing $9.2 billion in assets, plans to separate its China and U.S. teams following scrutiny from lawmakers in Washington about the national security implications of the firm’s investments in Chinese artificial intelligence and semiconductor firms, according to a notice the firm sent to its investors on Thursday.
The move comes a few months after Sequoia Capital said it would separate its high-performing China affiliate from its U.S.-based operations and just weeks after President Biden issued an executive order restricting U.S. investments in China. GGV, known for its investments in Airbnb and Slack in the U.S. and Alibaba and Xiaomi in China, is one of several major VC firms that invest both in the U.S. and in China using capital raised from American pension funds, endowments and other institutional investors.
THE TAKEAWAY
- GGV is the second major VC firm after Sequoia Capital to split its U.S. and China teams as political pressure mounts.
GGV has told its backers that, after the split, one of the newly independent firms would focus on China and the rest of Asia while the other would focus on the U.S. and other geographies. After The Information reached out to GGV for comment, the company posted a statement to X announcing the planned split.
Three of GGV’s managing partners, Jixun Foo, Jenny Lee and Eric Xu, and several other members of its investment team are no longer listed on the GGV’s U.S. website. Foo, Lee and Xu have all worked on a number of China investments.
Founded in 2000, GGV has a long track record in China, where its past investments included e-commerce giant Alibaba, smartphone maker Xiaomi and ride-hailing app Didi Global. But over the past several years, the firm has reduced the percentage of Chinese investments in its overall portfolio by focusing more on the U.S., Southeast Asia and Latin America.
In July, the Congress’ Select Committee on China sent a letter to venture capital firms including GGV noting their “serious concern” with those firms' investments in Chinese artificial intelligence startups. The letter cited the firm’s investments in Megvii, as well as in semiconductor company Cygnus Semi, graphics processing unit maker Moore Threads and AI chipmaker Axera. U.S. concerns stem from the belief that such startups already do or would eventually sell products to the Chinese government.
In late July, after the committee made the letter public, GGV sent a letter to its limited partners saying that it was working with its advisors and “actively developing a response” to the committee. In GGV’s July letter, which was viewed by The Information, the firm didn’t mention any possibility of a split.
GGV also has been selling off its stake in ByteDance, the owner of TikTok, another firm U.S. lawmakers have raised concerns about. GGV acquired the stake after backing a startup that ByteDance acquired and incorporated into TikTok, The Information has reported.
Other VC firms that are facing similar pressure to separate their U.S. and China teams include DCM Ventures and GSR Ventures. Spokespeople for the firms didn’t immediately have a comment.