Last week, a Hong Kong family office called Blue Pool Capital invested $20 million in a New York City e-commerce startup called Rent the Runway. OK, that’s not a huge amount of money, compared with the tremendous amounts going into venture funding these days.
And, OK as well, when it comes to venture financing China is currently one of the hottest markets in the world, which begs the question: why does Chinese private capital need to go abroad? But the Blue Pool move shows Chinese family offices are increasingly willing to make investment bets internationally and that such a trend is probably going to accelerate in the years ahead, especially when it comes to investing in private businesses. That’s good news for startups and private businesses around the world in general.
Blue Pool is the private investment vehicle of Joe Tsai, the co-founder of the Alibaba Group. Jack Ma, the other founder of Alibaba is also linked to Blue Pool, and, indeed, the Rent the Runway deal listed Ma’s name as one of the investors. Blue Pool has invested in three other startups abroad, including as a lead investor last year in a $60 million investment in a Californian virtual reality developer called Lytro. Blue Pool led the deal with many institutional investors, including Silicon Valley-based high-profile fund, Andreessen Horowitz, joining in.
Ma and Tsai’s private investment office might be gaining the biggest profile of all of China’s burgeoning family offices, but others are also getting noticed beyond their home country, like Beijing-based Wu Capital.
Set up in 2013, Wu Capital claims to be one of the first single-family offices in China, which shows how young the sector is in the second biggest economy in the world. It’s the family office of Yajun Wu, the chairwoman of Longfor Properties, one of China’s biggest property companies. Wu Capital is big, according to sources it managers around $10 billion of the family’s fortune, which includes direct investments in numerous companies in China, and considerable indirect investments across the world. It has a US subsidiary - Wu Capital USA - which specializes in healthcare investments, both direct and indirect.
Wu Capital through both its US subsidiary and its Beijing business has been active in backing various international venture funds. Indeed, sources say it has backed some big venture funds either through sizable limited partner contributions or coming in as a co-investor/general partner. These links include Atomico, the venture fund started by Niklas Zennström, the co-founder of Skype, and DCM Ventures, co-founded by David Chao, who has extensive ties to venture groups in China and Silicon Valley.
Another China-based family office making a mark abroad is Junson Capital, the family office of property tycoon, Cai Kui. Junson has been big buyers of international property and recently, according to reports, bought a portfolio of US hotels from MassMutual's Barings subsidiary for a staggering $800 million. In 2016, Hong Kong-based Junson also bought a hotel in London, and in the same year, co-invested in a US-based biotech company called AccuraGen Holdings.
Of course, three China-based family offices doing deals abroad doesn’t mean there is a huge wall of private capital entering Western markets from the country’s family offices. And, indeed, if anything, the family office sector in China is still very weak compared with what is going on in the West. Also, another dampener to the activities of local family abroad has been the Chinese authorities, under the increasingly dominant leadership of the Communist Party's Xi Jinping, discouraging local entrepreneurs from investing abroad.
Nevertheless, family offices like Blue Pool and Wu Capital are most likely blazing a trail for others to follow. It might take a few years to really to get going, but that trail is likely to become much more crowded in the future.