B Capital Group, the six-year-old enterprise capital fund shaped by Facebook co-founder Eduardo Saverin and Bain Capital veteran Raj Ganguly, is doubling down on China because it appears to be like to allocate $500 million to $1 billion of its fund into Chinese tech firms over the subsequent few years.
With $1.9 billion belongings below administration, B Capital goes after enterprise software program suppliers in China, an space that has seen “explosive growth” however continues to be solely a “fraction the size of the U.S. SaaS market,” Ganguly mentioned in an interview with TechCrunch.
The concept that Chinese firms are reluctant to shell out for software program is “very backward-looking thinking”, he added.
One power fueling the growth of B2B firms in China is surging labor prices. As such, B Capital is searching down software program that would make labor and enterprise operations extra productive, and subsequently, give firms a aggressive edge. Covid-19 accelerated the shift, as well-digitized firms had confirmed way more resilient to disruptions brought on by the pandemic.
B Capital is ready to discern what enterprises want due to its shut partnership with Boston Consulting Group, which has a raft of consumers starting from healthcare, finance to transportation trying to digitize.
These massive companies “understand that their internal technology can’t be the only solution and they have to look to the outside and be willing to partner with early-stage, high-growth, or late-stage tech companies,” Ganguly instructed. They are additionally extra keen to pay for software program in comparison with scrappy, cash-strapped startups.
B Capital started deploying capital in China early this 12 months and has already closed three offers. It’s stage-agnostic — although growth-stage startups are the main target — and plans to again 15-20 tasks in China over the subsequent few years. About 15 of its funding and working staff are based mostly out of Hong Kong and Beijing. It has round 110 workers worldwide.
Ganguly declined to reveal the names of its Chinese investees at this stage however mentioned they embrace a biotech firm, an automotive components enterprise, and an e-commerce enabler. Leveraging BCG’s experience, the biotech firm is studying the way it can carry precise medicine to market sooner. And the automotive enterprise is equally working with BCG to determine its pricing and go-to-market technique.
Going world
Overall, B Capital appears to be like for alternatives in healthcare, fintech, industrial digitalization, and different horizontal enterprise companies. Chinese startups that curiosity B Capital most are additionally these with the intention and skill to cross borders.
“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 mentioned. B Capital has backed one biotech startup with workplaces in each Shanghai and Cambridge, Massachusettes, and is on observe to shut a take care of one other that additionally straddles China and the U.S.
The different goal is e-commerce, which Ganguly described as “cross-border by its nature” as a result of a product is commonly sourced in a single nation, made in one other, after which offered in a 3rd market.
The investor is definitely proper in regards to the potential of cross-border e-commerce in China, the place customers have an enormous urge for food for imported items and producers search for new methods to promote globally.
China can be in place to export its enterprise software program, just like how Indian counterparts have succeeded abroad, mentioned Ganguly. The distinction is that few Indian companies are keen to pay massive bucks for software program, which forces B2B entrepreneurs to hunt market overseas, whereas China’s home firms have an rising demand for SaaS.
Despite ongoing geopolitical problems, Ganguly is optimistic that the world “is still moving towards globalization” over the long run.
“Certain innovation cycles have began in Silicon Valley and unfold to locations like China and Southeast Asia. But frankly, different…
