Yao returned to NGP Capital from Atlas Capital, where she was a founding partner. Yao has more than ten years of experience in venture investing and corporate strategy. She has prior experience as a managing director with Nanshan Capital and as a consultant with McKinsey & Company. Yao began her investment career with NGP Capital in 2011, where she was instrumental in sourcing numerous high-profile companies in China.
David Tang, Managing Partner of NGP Capital stated, "We are very pleased about Yao re-joining us. In 2019, we will continue to increase our investment efforts in digital health & education, smart mobility and IoT sectors, as well as rural market opportunities. I am confident that with Yao's years of experience in VC industry, she will be a strong plus to our China strategy and business development."
Yao, welcome back home! Why did you decide rejoin NGP Capital?
Thank you, happy to be back! The opportunity to join a large, global platform with over $1B under management attracted me back to NGP Capital. Also, at NGP Capital the culture is one of true partnership, and I feel that provides more room to attract good companies.
"NGP Capital the culture is one of true partnership, and I feel that provides more room to attract good companies."
The level of trust among the partners is very strong, and the whole team has years of experience to share. It made choosing NGP Capital a simple decision.
You are based in Shanghai, why?
Shanghai is centrally located in the southern part of China – close to the headquarters of Alibaba, the China trade, and manufacturing centers. The startup environment in China is looser, and government policies for startups are more open, which is good. Still, while I live in Shanghai, I spend more than half of my time traveling across China, as well as traveling in the US and Europe a few times a year.
What kind of an investor are you?
I’m curious and principled. For me, venture capital is the frontier. The essence of investing is to keep exploring new fields and their boundaries, to take risks, and to be constantly acquiring new knowledge.
My previous investments have concentrated on consumer-facing services – social apps, entertainment, retail, and new technologies. I spend a lot of time experiencing new technologies, especially user-heavy apps.
What do you see in the China market at the moment that is interesting?
I’ve been looking closely at the consumer market in China. Mobile Internet penetration is increasing. Many of the entrepreneurs offering new solutions, such as e-commerce platform provider Pinduoduo (PDD), are going from startup to IPO very quickly, in two years or less. There is a lot of potential in this market caused by urbanization throughout China and rapidly growing opportunities in lower-tier cities.
"There is a lot of potential in this market caused by urbanization throughout China and rapidly growing opportunities in lower-tier cities."
In addition, the Internet has begun to really disrupt the supply side of things with innovations in smart mobility.
Finally, people born after 1990 – Generation Z, which is the first generation of people who grew up on the Internet – are becoming the center of the Chinese market. These young people use social service apps constantly and are much more attuned to the consumer service side of the offerings than prior generations.
How should an investor prepare for the future?
China’s VC scene has been very active. According to Goldman Sachs, Chinese companies outpaced their American counterparts in venture-capital funding for the first time during the second quarter of 2018.*
Last April, a new policy in China had a lot of impact, with more partner money going into VC funds and funds of funds. However, most of this money came from banks, so the investment pace there is going to slow, and valuations for companies will go down, which I think is a good thing.
"The investment pace there is going to slow, and valuations for companies will go down, which I think is a good thing."
In key areas of the ecosystem, investors need to consider the impact of these big companies as they get involved in different parts of the technology ecosystem. Since Chinese tech giants such as Alibaba and Baidu are creating ecosystems that bring a lot of competition into the Chinese investment market, VCs who invest in this industry need to have a very clear eye on what these Internet giants are doing.
“On average, a startup in China reaches unicorn status about 18 months quicker than its U.S. equivalent,” according to Pitchbook, an industry data provider. Why is that?
Pinduoduo (PDD) became a unicorn in less than 24 months. It took only 18 months for Qutoutiao (QTT), a Chinese mobile content aggregator. In China, the market population is bigger, the penetration of Internet-connected people is peaking, use of mobile payments is accelerating, the infrastructure side is ready, and models for targeting different populations have emerged very quickly.
The ability to quickly acquire a huge user base accelerates a startup’s ability to reach unicorn status. For example, Internet giants like Alibaba, Baidu, and Meituan-Dianping are investing heavily into the ecosystem with new ride-hailing platforms. Alibaba is successfully competing for mobile payment and ride sharing services, with one of the biggest and fastest-growing user bases.
What do you expect from 2019 and the Year of the Pig?
Although some industries are suffering from a capital winter here in China, we will still see good opportunities to invest. Coming back into the NGP Capital family, I’m confident that we will find amazing founders with great ideas. As we say in China, it’s a big ocean, and there are a lot of big fish.