China's GSR Aims Big for Overseas Tech Deals

Chinese venture capital is going global and aiming big.

GSR Ventures, an experienced Chinese venture firm, is setting up a new $5 billion fund called the GSR Global M&A Fund focused on technology assets overseas. But in an interview with The Wall Street Journal, GSR Ventures co-founder Sonny Wu says the firm, which was set up over a decade ago, could buy assets worth double that.

The new fund will look to follow a template GSR established in March when it led the purchase of 80% of Philips NV's lighting components and automotive-lighting operations valuing the company at $3.3 billion. That template involved buying a company where China growth would be key to its future. GSR Ventures also was an early investor in Chinese ride-hailing app Didi Dache, which was valued at $15 billion in its latest fundraising.

Mr. Wu spoke with The Journal about China's growing ambitions overseas and the type of deals the GSR Global M&A Fund will target.

WSJ: What are your potential acquisition targets?

Mr. Wu: We could make a single investment in the range of $2 billion to $10 billion—that's our sweet spot. We're targeting category leaders, those No. 1 or No. 2 [in their industry]: mature companies that are slow growing. But with our [abilities to add value], they can grow faster in China.

WSJ: Are there funds available in China to do deals?

Mr. Wu: In China today, there is a lot of money available to do deals. It's not just strategic money coming from companies or the government, but also bank money sitting around. They're sitting there, in my view, saying they can't do this or that because they're constrained by the product type. What we can give them is reasonable return and capture some upside for ourselves.

WSJ: What is the impact of China's recent stock market decline on raising your $5 billion fund?

Mr. Wu: I think what happened in [the stock market] the last four or five weeks helped us.If a month ago I told you we're going to do an industrial investment fund, people would think I'm crazy. Why would I do that when I can make two times my money in two months in the bubbly market? I think now there's some sanity and (a view that) we need to focus on the fundamentals.

WSJ: Why are global buyouts more interesting nowadays than venture capital?

Mr. Wu: The venture capital market is fiercely competitive, much more than 10 years ago; every uncle and aunt is an angel investor. You also have [companies like] Baidu, Alibaba, and Tencent, who are dominant [in the venture world today]. We've been the most focused investor [on that opportunity] in the last 10 years, but innovations locally are very lumpy. You don't get a Didi Dache every year.

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