B Capital Group, the venture capital fund formed by Facebook co-founder Eduardo Saverin and former Bain Capital executive Raj Ganguly, is venturing into the Chinese market as it aims to invest $500m to $1bn of its fund into the country’s tech industry over the next few years.
With $1.9bn assets under its belt, B Capital is going after enterprise software providers in China, a rapidly growing sector. However, this is still only a fraction of the US market size for software as a service (SaaS), Ganguly told TechCrunch.
One force fuelling the proliferation of B2B companies in China is the surge in labour costs. B Capital is therefore hunting down software that could make labour and business operations more productive to give companies a competitive edge. Covid-19 has accelerated this move, as well-digitised companies have proven to be more resilient to disruptions caused by the pandemic.
B Capital began investing in China earlier this year and has already closed several deals, according to TechCrunch. Last month, the company revealed that it might allocate as much as 40% of its global fund to China.
Ganguly declined to disclose the names of its Chinese investees but said they include a biotech company, an automotive parts business and an ecommerce enabler. Overall, B Capital said it was looking for opportunities in healthcare, fintech, industrial digitalisation and other horizontal enterprise services.
In recent years, Chinese tech companies and car manufacturers have joined forces to accelerate the country’s domestic automotive industry. Big names such as Huawei have made advances to enter the car industry.
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Chinese companies have equally been betting on the biotech industry. Earlier this month, Baidu co-founder Robin Li announced that his company BioMap will enter into the field of AI-enabled structure-based drug discovery (SBDD).
“Biotech is the area that we’ve been the most impressed by what’s happening in China and how that technology can be exported to other countries,” Ganguly said. B Capital has backed one biotech start-up with offices in Shanghai and Cambridge, Massachusetts, and is on track to close a deal with another that also has ties to China and the US, he told TechCrunch in an interview.
Another sector targeted by B Capital is ecommerce. Ganguly points out that ecommerce is cross-border by nature, as it is often sourced in one country, made in another and then sold in a third.
China is indeed well-positioned for cross-border ecommerce, as consumers have a big appetite for imported goods while manufacturers are looking for new ways to sell globally.
Despite ongoing political tensions, Ganguly said that he was still optimistic that the world is moving towards globalisation over the long term.
“I think that there are aspects of globalisation that have become very politicised, and I think that’s unfortunate but understandable. Our belief is that businesses that we invest in have the ability to cross borders. Sometimes that means going from China to South and Southeast Asia, and sometimes that means extending to the US. Sometimes it just means the ability to import or export their products or software, and even staying in China where they can sell their technologies overseas,” he added.
According to GlobalData’s deals database, the US currently accounts for 62% of B Capital’s global investments, followed by India with 19%. The company’s latest move will likely see China overtake India as B Capital’s second-largest target market.