Forbes Midas Lister JP Gan Still Upbeat On China’s Consumption Growth Amid Politics, Taste Changes

JP Gan has earned his stripes in venture capital by investing in companies that cater to Chinese consumers. Strong returns helped place Gan 24th on the Forbes Midas 2021 list, for the sixth year in a row he has been named one of the world’s best venture capitalists. The long-standing success of Qiming Ventures led the graduate of the University of Chicago’s Booth School of Business to co-found INCE Capital in 2019. INCE started with $ 352 million in capital from investors such as Duke University, Carnegie Mellon University and CV Starr; it is focused on businesses in the start-up or expansion phase.

The world has changed a lot since 2019. Although China has recovered from the worst of the pandemic, economic growth slows in the fourth quarter amid increasing cases of delta and power shortages (see related article here) . China, the world’s second-largest economy, recently cracked down on celebrity craziness, effeminate men and large internet platform companies, challenging consumer-centric businesses.

Still, Gan doesn’t change his game plan. “We continue to invest in consumers,” he said in a recent interview in the Lujiazui financial district in Shanghai. “The younger generation has different tastes. The overall consumer power is still there, especially in big cities and with families in the top quartile.

And yet, alongside that optimism, there have been sharp drops in inventory at retailers and brands that have not kept pace. Shanghai Metersbonwe, a Shanghai-listed clothing retailer, has lost 40% of its value in the past five years, Zhejiang Semir Garment has lost 25% and C. Banner, a shoe chain, has lost 84% over the past five years. last five years. Successful clothing brand JNBY was the subject of controversy in September after it launched a children’s shirt bearing the English phrase “welcome to hell”. Its Hong Kong-traded shares lost as much as a third thereafter.

Gan, 49, is looking for younger brands that are nimble in their approach to marketing in today’s changing environment. “If KOLs (key opinion leaders) and celebrities are no longer able to represent these brands, then they will look to more ordinary people,” Gan said. “The companies in which we invest will always find the best price-performance marketing. If a real celebrity can’t do it, she’ll find something else. It is constantly changing, given the supply and demand for different resources.

Sources of influencers that can be overlooked include social media platforms like TikTok, Gan said. And while Chinese consumers are interested in celebrities, it’s not so much their name as the traits associated with them, he said. These traits, according to Gan, can often be found beyond the biggest names.

Among recent investments by INCE was a first round of financing with others in September of more than 200 million yuan in the clothing brand Beaster. INCE led the round in the Chinese version of “Off-White” and was joined by Meridian Capital and Belle Consumer Fund. Beaster is targeting 1 billion yuan in sales by 2021. Earlier this year, INCE also invested in collectible toy brand ToyCity, as well as China-based PETKIT, which has 1,500 signed retail stores in the country that sell its “smart pet” products. including water dispensers. INCE also invested this year in Ponhu Luxury, a luxury goods platform that has also attracted capital from Focustar Capital, ATM Capital and Before Capital.

Going alone did not end Gan’s collaboration with Qiming, he noted: the two were among the investors in PETKIT’s last round.

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@rflannerychina


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