Chinese startups with global ambitions remain attractive investment targets, according to the founder of Shanghai-based venture capital firm 01VC, which is preparing to invest $2 million to $3 million each in up to 10 companies over the next two years.
Despite challenges ranging from an economic slowdown to a long-term slump in property prices, China’s economy grew 5.2 percent last year, it accounts for 30 percent of the world’s manufacturing and Chinese companies are well positioned to expand globally, Ian Goh, a founding partner at 01VC, said in an interview.
“In recent years, we’ve seen an increasingly prominent trend of Chinese companies expanding overseas,” he said. “Onshoring, where Chinese companies are building factories in places like Vietnam and Mexico, bringing in their automation technology and selling their products in those countries, is creating huge opportunities for investors like us.”
The venture capital firm, which focuses on robotics, consumer electronics and B2B products and platforms, is looking to invest in around 10 companies over the next two years with a $65 million fund that closed at the end of 2023, he said, adding that 01VC’s average investment size is between $2 million and $3 million.
Goh said low valuations of Chinese companies combined with changing caution among global investors was creating a “buyer’s market” for fund managers.
“Globally, venture capital has been overfunded over the last few years,” he said, “but now we’re seeing a shift away from investing capital in growth at the expense of fundamentals, creating a great opportunity for us to acquire and invest.”
01VC has traditionally backed early-stage companies that weren’t yet revenue-generating, but as valuations in China have fallen from five to eight times sales to one to two times, it’s increasingly investing in companies that are generating solid cash flow. Goh said the firm now invests in rounds ranging from pre-A to Series B.
“This is the environment we live in,” he said. “It takes courage to be contrarian, but we’re still putting money into it, so we’re being contrarian.”
Goh said 01VC runs four US dollar-denominated funds and one RMB-denominated fund with total assets under management of $300 million, adding that the firm is in the planning stages of a further RMB-denominated fund.
The dollar fund is backed by institutional investors such as family offices, funds of funds and foundations, mainly from Asia and the United States, he said.
Tymo, a startup specializing in beauty appliances and fashion retail, and Hezhong Enterprise Cloud, a company focused on cloud computing and database solutions, are 01VC’s latest investments, according to Crunchbase.
