Top China venture capitalist sees flood of money into 5G-related areas in next 36 months

VC funding to shift from AI, robotics and data science to 5G, says GGV Capital managing partner Jixun Foo
Investment opportunities in Southeast Asia include insurance, education, travel, health care and logistics

Chua Kong Ho

Published: 8:00am, 16 Jul 2019

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Venture capital investments are likely to pour into 5G-related areas in China in the next two to three years, as the next-generation mobile technology enables new businesses to emerge, according to Jixun Foo, managing partner at GGV Capital.

It pays to understand how technology leaps unleash innovation, said Foo, who is consistently recognised as one of the top venture capitalists in China. He has invested in various unicorns – private companies valued at more than US$1 billion – including Didi Chuxing, Megvii, Yumanman, Tujia and Xpeng Motors.

When China underwent a transition from desktop personal computer-based internet to mobile internet, it helped drive innovation in media, e-commerce, content and other consumer-facing businesses, helping create some of today’s internet giants, according to Foo.

He said the subsequent shift from 3G to 4G reshaped the face of entertainment by making live streaming and short-form video apps possible, as the costs of production were reduced.

Investments have also moved from consumer-facing businesses to today’s tech-driven areas, including artificial intelligence, robotics and data science. This will shift to 5G-related areas in the next 36 months, Foo said.

With peak data rates up to 100 times faster than what current 4G networks provide, 5G has been held out as “the connective tissue” for the Internet of Things, autonomous cars, smart cities and other new mobile applications, establishing the backbone for the industrial internet.

5G is also coming at a time when China is moving from an export-driven economy to one powered by domestic consumption, and with wages going up, the ultra-fast mobile networks will give new impetus to cloud businesses, such as software-as-a-service, that will help companies cut costs and raise productivity, Foo said.

“Technology reduces friction,” Foo said. “With 5G, the reduction in latency will drive everything from AR/VR [augmented and virtual reality], smart buildings, smart cities and autonomous vehicles.”

In terms of investments, GGV will look at companies that have compelling “use cases” or business models to apply the technology, rather than invest in the underlying technology, he said.

Large segments of the population across the rest of the Asia-Pacific – specifically, in Southeast Asia – are still in the process of moving from personal computer to mobile internet, and one can expect a similar development trajectory as China’s a few years ago, Foo said.

New mega-unicorns will emerge from this region in the next few years, said Foo, who has invested in Grab, the Singapore-based ride-hailing company that is trying to build a plethora of services to become an “everyday app” for regional users.

Trade war prompts venture capitalist GGV to seek fresh opportunities outside China, US

The opportunities in Southeast Asia lie in “low frequency, high value” sectors – such as insurance, logistics, education, travel and health care – that are “ripe for disruption,” said Foo, rather than “high frequency, low value” businesses like ride-hailing and meal delivery.

It is in India, though, where development may differ from that of its billion-population neighbour, China.

With a lower GDP per capita and without the same infrastructure buildout seen in China, India is at a different starting point, which ironically gives it the opportunity to leapfrog various stages of development, Foo said.

In terms of retail, instead of online commerce disrupting shopping malls like they did in China and then integrating them in what has been termed “new retail”, India could very well go straight to “new retail” where the family-run shops integrate some online commerce, Foo said.

As for US-China trade tensions and whether these has influenced the way he invests, Foo acknowledged that geopolitics can affect perception. But over the long term, investors know that it pays to look at the opportunities thrown up by technological disruptions, he said.

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