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Granite Asia Pioneers Private Debt Investment Post US-Split

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Benjamin Hughes

March 29, 2024 - 22:22 pm

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GGV Capital's Asia Business Steers Into Private Debt Investment

In a bold move delineating its growth strategy, the venture-capital titan GGV Capital's Asia division is mulling over new ventures into the realms of private debt investment. This would mark the first time the investment behemoth delves into this burgeoning asset class, a decision triggered post its strategic uncoupling from its US counterpart.

According to insiders privy to GGV Capital's future endeavours, the Asia business—fresh from its split—is in the early stages of deliberating the establishment of a team dedicated to private credit investment. This new direction targets a launch in the latter half of the current year, though the sources stipulated anonymity given the confidentiality of the discussions.

Jenny Lee, managing partner of GGV Capital.

GGV's New Chapter in Asia: Embracing Independence

For decades, GGV Capital has remained a global tech investment powerhouse, with unparalleled foresight that led to early investments in titans of the Chinese technology industry like Alibaba Group Holding Ltd., ByteDance Ltd., and Xiaomi Corp. The firm's prowess is not limited to Asia, as its portfolio boasts of preeminent investments in Western icons like Airbnb Inc. and Slack prior to its acquisition by Salesforce Inc.

In its recent revelation, GGV unveiled the completion of its operational bifurcation into two independent partnerships, an echo of the strategies implemented by larger counterparts like Sequoia Capital amidst rising geopolitical tensions. The separation has spawned two distinct entities, with GGV Capital splitting its assets of $9.2 billion, as announced the previous year.

Granite Asia: Carving a Focused Regional Strategy

The newly minted Asian arm, coined Granite Asia, is helmed by Jenny Lee and Jixun Foo from its Singapore headquarters. This rebranded entity embarks with $5 billion under its investment purview, honing in on expansive markets such as China, Japan, South Asia, Australia, and Southeast Asia. The chosen moniker "Granite Asia" is a tribute, derived from the firm's original name Granite Global Ventures, conceived at its inception in 2000.

Granite Asia's statement, disseminated on X, the platform formerly recognized as Twitter, animatedly speaks of broadening its horizons into various asset classes and markets, though intricate details remain forthcoming. The statement signifies an adaptable approach catering to "the evolving needs of businesses and investors."

Expert Advice to Guide Expansion

Thomas Ng, a founder of GGV, along with Teh Kok Peng, the erstwhile GIC Special Investments president, and Teo Ming Kian, the ex-chairman of Singapore's National Science and Technology Board, constitute the crux of an advisory council. Their acumen is poised to steward Granite Asia through this phase of geographic and strategic expansion.

Despite the turn towards private debt, Granite Asia conveys a staunch commitment to continue its conventional trajectory of securing stakes in burgeoning technology startups across the region. Additionally, the firm is reportedly investigating hybrid private funding approaches, amalgamating both equity and debt components.

A Calculated Hiatus Before the Next Venture-Capital Fundraise

With its sight on steady growth, insiders indicate that Granite Asia may adopt a calculative pause, possibly spanning one to two years before initiating another substantial venture-capital fundraising effort. This follows the formidable 2021 round, wherein GGV mobilized a colossal $2.52 billion across four dedicated funds.

Notable Capital: GGV's US Arm Embarks on Western Focus

Parallel to the developments in Asia, GGV's US operations have adopted the title Notable Capital. The US firm, governed by managing partners including Glenn Solomon and Hans Tung, articulates a strategic focus primarily on the US and European markets.

The Impetus Behind GGV's Organizational Schism

The inception of GGV's split traces back to a probe by a US congressional committee. The investigation inspected GGV's investments in Chinese semiconductor firms and AI developers, including Megvii Technology Ltd., amid concerns about the fusion of economic pursuits with sensitive technology. Sequoia Capital's preceding division into specialized entities focusing on China, India, Southeast Asia, and the US and Europe served as a precursor to GGV's recent demarcation.

Venture Firms Navigate a Tenuous Geopolitical Terrain

The venture capital landscape is witnessing an increased challenge in managing cross-Pacific investments, a consequence of heightened scrutiny from regulators and policymakers in Washington and Beijing. The intricacies of cross-border tech investments have magnified, especially in the wake of Executive Orders from the US administration aimed at impeding Chinese firms from acquiring futuristic military and surveillance technologies perceived as national security risks.

Data Localization and Regulatory Compliance

In response to this scrutiny, GGV has taken measures to ensure stringent compliance with regional data policies. The Asia and US operations have localized data storage independently, with a view to align with government mandates across both territories.

GGV's Investment Legacy Continues

Amidst these structural shifts, GGV's legacy funds maintain operational continuity. The still-to-be-deployed capital from these funds is earmarked for further investments within the existing portfolio. In China, GGV's yuan-denominated funds persevere under the auspices of the Jiyuan Capital brand, under the leadership of Eric Xu.

Private Credit: A Gateway to Diverse Funding

The lure of private credit as an asset class is evident in its accelerated growth trajectory. This segment encompasses direct lending to a spectrum of companies, from tech startups to established real estate firms. Institutional investors and affluent individuals have escalated their allocations to private credit funds, which offer a diverse spectrum including secured or unsecured loans, investments in distressed debt, or bespoke debt configurations tailored for corporate entities.

These custom solutions prove critical for businesses that find traditional bank loans elusive or incompatible with their financial structures.

China's Property Turmoil Spotlights Private Credit's Role

To read more about the intersection of private credit and technology sectors, particularly amidst China's property market upheavals, visit this link.

The allure of private credit continues to gain traction as an alternative to traditional lending mechanisms, particularly in the context of tumultuous economic sectors like China's real estate market. These developments point towards a trend wherein private debt instruments could potentially provide a vital lifeline or strategic leverage in less predictable markets.

Conclusion

The metamorphosis of GGV Capital's Asia business into an independent entity known as Granite Asia, marks a pivotal turn in both its strategic direction and investment philosophy. Embracing the growing allure of private credit in the current economic climate, while cementing its foundation in the technology start-up ecosystem, the firm is paving a path towards diverse investment horizons.

The establishment of an advisory council, featuring esteemed industry leaders, further cements Granite Asia's commitment to navigating the complex interplay of a dynamic investment landscape and regulatory dynamism. It is a reflection of the firm's agility and readiness to adapt to the evolving demands of the businesses and investors it serves.

As the venture-capital scene continues to adapt to the geopolitical landscape and regulatory curtailments, firms like GGV Capital, through their distinct entities Granite Asia and Notable Capital, exemplify the strategic agility necessary to thrive. By maintaining operational adherence to localized regulations and pursuing innovative investment strategies, GGV Capital's legacy and its future trajectory remain deeply intertwined with the burgeoning sectors of technology and private credit investment.

Insightful observers of global finance will watch keenly as Granite Asia begins to architect its new chapter, and as entities across the world shift tactics in an ever-evolving geopolitical dance. The eyes of the industry, and those affected by its reverberations, will remain fixated on the moves of GGV Capital's Asian and US entities, as they navigate a future where adaptation and strategic foresight are paramount.

Additional Information

This news article incorporates information directly sourced from the BNN Bloomberg website.

The depiction provided in the article of Jenny Lee, managing partner of GGV Capital, serves as a visual representation in connection with this news piece. Jenny Lee's leadership is pivotal in steering Granite Asia's direction in the burgeoning Asian markets.

For a comprehensive understanding of GGV Capital's movements and their implications, perspectives on private credit, and detailed insights into the venture-capital firm's past achievements and future aspirations, readers are encouraged to consult the original sources and supplemental materials referenced throughout this article.

©2024 Bloomberg L.P. All rights reserved. This material has been published under license from Bloomberg L.P.