2021 Forbes Midas List’s Jing Hong

Jing Hong, the highest debuting China-based member of the newly released 2021 Forbes Midas List this month, traces the roots of her investment success to growing up as the only daughter of two electrical engineers in a home where everyone loved to read. “My mother was one of the earliest software engineers in China in the 80s,” she recalled in a Zoom interview this week. “I had the luxury to hang in out her computer lab when I was a kid, and it helped me to be intellectually curious and to have my own independent thinking.”   Hong entered prestigious Tsinghua University as an EE major, but switched to finance when the school opened a finance department.

That paved the way for a career that has provided a front-row seat to the transformation of China from a low-wage, low productivity economy to the dynamic juggernaut it is today with an abundance of tech talent and a big home market. Hong, the 47-year-old CEO of Gaocheng Capital, likens the investment landscape to two different time machines:  one in which established business models such as online search are brought in from leading Western companies (say, Google) where they have already been proven to succeed. The other is what Hong calls a “reverse time machine” – a China that is forward-looking and full of innovation. “What makes us more excited is the reverse time machine and innovation originally from China,” she said.

It’s the combination of the two, though investments in companies in like Youzan, an e-commerce platform, and Tuya, a cloud platform for Internet of Things software developers, that helped make Hong No. 39 on the latest Forbes ranking of the world’s top venture investors. Hong is one of 20 China-based members on the new list; four among the group made this year’s top 10 — Neil Shen, the Hong Kong-based founding partner of Sequoia Capital China (No. 2), Richard Liu, a founding partner at 5Y Capital (No. 4), and Zhen Zhang, a founding partner at Gaorong Capital (No. 8).  The growth of venture funding and talent in the country underscores the larger strides China has been making in technology businesses and the global economy in the past two decades. 

Beijing-based Hong got a taste of real-world business immediately after graduating from Tsinghua by landing a job at McKinsey, the global consultancy.  That later led to her to admission to Harvard Business School, where she received an MBA.  Hong then took on venture investment by working in China with General Atlantic, where she was impressed by its focus on software and enterprise service businesses. That was followed by a long stay at China-based Hillhouse, where she worked under the leadership of billionaire founder Zhang Lei and helped to grow its private equity business. Her winning picks over the years included China Internet heavyweight Alibaba Group and the country’s mobile ride-hailing leader Didi Chuxing.  By 2019, however, Hong decided she herself was ready to take the plunge as an entrepreneur, and founded Gaocheng Capital with a focus on software.    The company today has more than $700 million of assets under management.

With a record of success at different firms, what kind of qualities does Hong look for in a start-up entrepreneur when making an investment?

“We’re looking for entrepreneurs that have a very long-term vision, are patient about building up the organization, and creating a huge opportunity for their business,” Hong said. “Not just a quick win.” In addition, they should “have a high aspiration for themselves and how much they can create value for society.”  And yet, with all of those lofty qualities, a successful investor in China needs to be “down to earth” in order to face to the challenge of China’s brutally competitive economy.  

“China’s competition is cut-throat. People can’t just talk – they also have to have the

capability to inspire their team members and really get things done. You have to think high, but also have to get your hands dirty to get things done on a day-to-day basis.”

A notable example of strong entrepreneur leaders, she said, are Meituan founders Wang Xing, Mu Rongjun and Wang Huiwen; she invested in the business while at Hillhouse. The three fellow Tsinghua graduates — now all billionaires and leading one of the world’s largest food delivery platforms — “hadn’t worked in a large organization before. They were very passionate, using engineering thinking to analyze issues. They are always down to earth,” she said.

An example of a business in Hong’s “time machine” category that draws on Western experience is China Youzan, an e-commerce site partly inspired by Shopify. “I invested in 2014 when I was at Hillhouse” when Shopify was worth approximately $2 billion, Hong said, but started looking at its performance metrics again in 2019.  “They were almost identical” with Shopify’s in 2015 and 2016, and Guocheng – Hong’s own new business — purchased shares that year.   Youzan’s market cap is currently $7 billion compared with $140 billion for Shopify, and “there is still a very long runway in front of us,” she believes.

As for companies that fit the “reverse time machine” model, Hong cited Tuya, an Internet of Things cloud platform provider headquartered in the eastern China city of Hangzhou.  Prior to founding Tuya in 2014, CEO Jerry Wang worked as a senior director in China e-commerce heavyweight Alibaba, launching product innovations for Alibaba Cloud and Alipay that included Alibaba’s QR code payment system. In 2012, Wang was a member of Forbes China’s 30 Under 30 list.

This year, Tuya raised $915.4 million in a U.S. IPO. Board members include former GE CEO Jeff Immelt; besides Gaocheng, its investors include Tencent Holdings, which has a 10% stake. Tuya’s platform brings together developers from more than

200 countries; some 80% of revenue comes from outside of China, Hong said.

“Those two time machines make us feel so excited – not only by business models that already been successful around the world, but ones that really create next-generation solutions.” especially for mobile, AI and the Internet of Things, Hong said.

There’s more to come from China in the future, even amid geopolitical tensions with the United States, she believes. “I’m still quite optimistic about China’s growth potential. It’s such a huge country, and people still have the dream about changing their fate in one generation,” Hong said. Government planners are organized, with “not just a five- or 10-year plan but also a 50- and 70-year plan, she noted. A national college entrance exam provides social mobility in a country where more than a third of the population lives in rural areas. “You’ve heard stories of people from a rural area can make a difference with their own hands,” she said. “This is a very strong fundamental driver.”  Not to mention another key resource: China’s five million college graduates that hold a STEM (science, technology, engineering or math) degree every year, Hong added.  

China has little choice but to use those strengths, she said. “China has to shift from labor-driven and capital-driven economic growth to an innovation and productivity-driven economy.”

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