In search for next tech winner, China equals Silicon Valley for attention from Singapore fund

Singapore’s sovereign wealth fund GIC invested in Alibaba before its 2014 IPO and also backs smartphone maker Xiaomi

PUBLISHED : Friday, 23 March, 2018, 12:31pm
UPDATED : Friday, 23 March, 2018, 12:31pm

After hitting pay dirt with investments in Alibaba Group Holding and Xiaomi, Singapore sovereign wealth fund GIC Pte is giving China as much attention as it does Silicon Valley in the search for the next big thing in tech.

Valuations for some tech companies globally may be too high, and what differentiates a good investor from an average one is the ability to identify the game changers worth betting on, Chief Executive Officer Lim Chow Kiat said in an interview. GIC invested in Alibaba before its 2014 IPO -- the stock has since almost tripled -- and also backs smartphone maker Xiaomi, which plans to go public this year with a valuation of as much as $100 billion.

“It’s so impressive in China that we give it equal attention in terms of our team,” Jeremy Kranz, head of the technology investment group at GIC, said in the same interview on Tuesday. In recent years, GIC’s investment in growth-stage tech startups range from“on one extreme single-digit millions and on the other extreme, single-digit billions,” he said.

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As the value of GIC’s technology assets grow, it is also seeking insight into disruptive innovations that may shape the future. The fund’s investments in technology, media and telecommunications rose to 20 percent of all equity investments last year from 3 percent in 2009, data from the London-based Sovereign Wealth Center show.

“In recent years, a lot of these new companies have changed the world,’’ Lim said. “Not all companies are able to do that.“

Kranz’s team -- located in Silicon Valley, China and India -- has holdings in over 50 companies across eight countries. While GIC doesn’t often invest directly in startups at an early stage, its “long history” of being limited partners in venture funds in Silicon Valley and Asia allows it to tap promising companies, Kranz said.

“Our objective is to have lifetime relationships with the most important companies that are emerging in every business cycle,’’ he said. “We think that post-IPO, the returns continue to compound. We have the flexibility to hold the stock long-term.”

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Kranz, based in San Francisco, is responsible for GIC’s investments in tech funds and private and public companies such as Affirm Inc., DoorDash Inc. and Flipkart Online Services Pvt. Before joining GIC in 2004, he was strategic investment manager at Intel Capital and once worked as a process innovation analyst at Harley Davidson.

The fund’s investment in Xiaomi illustrates GIC’s approach to identifying new trends. Through its relationship with Xiaomi, GIC observed that China had become one of the best innovation centers for building consumer products that optimize hardware, software and a complex supply chain. That, in turn, allows companies to deliver high quality products at a lower cost, said Kranz.

“We saw this for the first time at scale with Xiaomi,’’ he said. “Today, it’s in your interest to do that in Shenzhen rather than in Palo Alto.”

That observation led GIC to back Chinese consumer drone maker DJI, as well as electric unicycle maker Ninebot and electric carmaker NIO, formerly known as NextEV.

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“China is becoming one of the most relevant ecosystems in the tech space,” said Jess Delaney, head of data and research at the Sovereign Wealth Center. “GIC has spotted that early on and is one of the biggest investors there among sovereign wealth funds.”

The Singapore fund also has stakes in some of China’s next-in-line leaders such as Meituan Dianping, which delivers food and sells groceries and movie tickets, and news aggregator Toutiao.

GIC manages a mix of government surpluses and inflows from the Central Provident Fund, a government savings plan that provides retirement income for Singaporeans. GIC doesn’t disclose the size of its assets under management, saying only that it manages “well over” $100 billion. The Sovereign Wealth Center puts its total holdings at $398 billion, making it the world’s fifth-biggest state fund.

Alibaba owns the South China Morning Post.