US venture firm GGV Capital to separate China business

© Reuters.

By Kane Wu and Roxanne Liu

(Reuters) -U.S. venture capital firm GGV Capital said on Thursday it plans to split its business into two, with one focused on Asia and the other on the United States, as political pressure mounts on American companies to limit investments in Chinese technology.

GGV said in a statement on social media X its U.S. partnership will invest primarily in North America, Latin America, Israel, Europe, India, and U.S. cross-border deals from offices in Silicon Valley and New York.

Its Asia partnership, headquartered in Singapore, will focus on China, Southeast Asia and South Asia, the firm said.

GGV's yuan-denominated funds will continue to be managed independently under its Chinese brand Jiyuan Capital, it added.

The separation will be completed by the end of the first quarter of 2024, GGV said.

GGV's move follows a similar one by Sequoia Capital, which in June said it is splitting its China and India/Southeast Asia businesses into two independent firms.

Economic challenges and geopolitical tensions have made fundraising and investment difficult in the world's second-largest economy, and eaten into global venture funds' returns.

GGV said in the statement it is evolving against "highly complex" operating environment.

The firm was put under review by a U.S. congressional committee in July that aimed to investigate American firms over their funding of Chinese technology companies. GSR Ventures, Walden International and Qualcomm (NASDAQ:QCOM) Ventures were among the other names under review.

"GGV's move is not surprising and I think it is a correct decision," said James Huang, founder of Panacea Venture, a China-focused venture firm managing funds denominated in yuan and U.S. dollars separately.

Global investors' opinions on whether to invest in Chinese startups are varied amid growing geopolitical tensions, and dividing businesses with focuses on different regions could help GGV attract investors with different views on China risks, Huang said.

"I think investors who still feel confident about the Chinese market can contribute capital to GGV's funds that cover China, while those who feel cautious about China now have the option to work with GGV's U.S. and Europe-focused business," Huang said.

GGV Capital, which has around $9 billion in assets under management, has backed companies such as Airbnb, ByteDance, and Alibaba (HK:9988) to establish itself as a cross-border venture capital company.

It has over 75 portfolio companies in China, its website shows, including mobile phone maker Xiaomi (OTC:XIACF), social media platform Xiaohongshu and ride hailing champion Didi.

China-focused investment firms, including venture capital, growth and buyout funds, only raised $5.6 billion in U.S. dollar-denominated funding this year, compared to $20.6 billion in all of 2022.

GGV in February filed to the U.S. Securities and Exchange Commission, targeting to raise $2.5 billion in a series of new funds, according to public disclosures.

GGV in 2021 said it raised $2.52 billion in total from four funds, to be run by three Asia-based and three U.S.-based managing partners.

The firm in the same year also raised an approximately 3.4 billion yuan-denominated fund.

It is not immediately clear how the existing dollar-denominated funds will be managed after the separation.

GGV representatives in Asia did not immediately respond to a Reuters request for comment.