Chinese private equity firm GSR Ventures closed on Fund VI – a new $400 million fund created to make early stage investments in tech startups.
The fund, which will be in U.S. dollars, will focus its capital mainly on Seed and Series A rounds, with an occasional Series B round.
Founded in 2004, GSR currently manages approximately $2 billion in a mixture of U.S. dollar and RMB-denominated funds, and concentrates its investments in companies active in modern agriculture, biotechnology, internet finance, clean energy, and wireless technologies, among others.
James Ding, managing director at GSR Ventures, told Bloomberg that the fund’s launch coincides with a slowing of China’s economy, making circumstances a bit more difficult for venture capital amid heightened competition and government involvement. However Ding notes that having ample cash behind the Fund VI could help position GSR to invest in advanced technologies.
“I think AI is still on the top of our list,” Ding told Bloomberg TV, adding “we’re looking at different sectors, and getting particularly excited about more sectors that are getting mature…”
“I would just say it’s back to cooler weather from ‘too hot,’” said Ding. “Since we’re just exiting summer, it’s about time we cooled down a bit, which is good for the industry.”
“We should focus on how the capital, and the investors, together with the entrepreneurs, can join hands to create value,” continued Ding. “And then, I always believe that profit and wealth are always a by-product when you create value for society.”
Tech Tiger
China’s economy might be slowing, but it is also one of the countries where growth in agricultural production is critical in keeping pace with its massive population – and Beijing recognizes that agtech will be a key driver to food security.
China is home to 1.3 billion people, however it is also home to only 7 percent of the world’s arable land. And of this land, 40 percent is negatively affected by moderate to severe degradation brought on by excessive use of fertilizers and other non-sustainable production practices, reports Time. Compounding this problem is rampant urbanization, and the expectation that over the next 30 years, 300 million Chinese people will leave agriculture for cities – all while consumption rates continue to climb.
In response, China’s government has been allocating capital to agtech developments.
In 2016, The Agricultural Development Bank of China agreed to finance up to $450 billion by 2020 for the advancement and modernization of farming in the country; and in June of this year, China began a seven-year pilot program for the development of autonomous agriculture technologies and robotics as an initiative to update and modernize outdated farming operations.
The existing landscape of a growing population, shrinking arable land bank, growing food demand, urbanization, and aging farmers, together with a great need for the introduction of technological improvements to its farming industry has also attracted foreign agtech companies to China.
One of the most notable and recent such expansions was announced by indoor vertical farming powerhouse Plenty, which in January of this year stated that it was adding to its team on the ground in China, and is scouting out locations and distributors in Beijing, Shanghai, and Shenzhen for up to 300 of its vertical indoor farms across the country.
Food safety is also a main driver in the advancement of ag and food tech in China. A decade ago China’s presence in the food e-commerce sphere was nearly zero, notes Anthony Chan and Greg Park of Isola Capital in the soon-to-be-released GAI Gazette piece, Food Safety Drives Disruption in China’s E-Commerce Market. Today, China’s e-commerce market is the largest in the world, accounting for 40 percent of global transactions. Of this activity, fresh foods represent only two percent of the total market, however, over the past five years, the segment has seen annual growth of 82 percent.
This overarching need for technological modernization of its agriculture sector, together with an explosive middle class, and a rapidly savvy consumer pool, mean China offers massive opportunity for agtech startups and their backers.
~ Lynda Kiernan