(Yicai Global) July 13 -- GGV Capital should be categorized as a prudent investor on risk assessment tables. In the venture capital world, groups of this kind are the minority. They typically keep calm in the face of hordes of seemingly attractive technologies, they are not averse to tailwinds and rarely plow money into them in public view.

Jenny Lee is one of six managing partners at GGV. She is frequently listed as one of the world's top female investors. Lee joined GGV in 2005 and has been engaged in investments in China since then.

Lee recently spoke about GGV's investment style in an exclusive interview with Yicai Global.

Automated Driving

Yicai Global: What is the idea behind GGV's master plan for cutting-edge scientific and technological fields?

Lee: We build upon three major sectors. The first sector is related to intelligent transportation, in several focus areas -- first, electrification. We invested in Xiaoniu Electromobile and Immotor. Judging by the trip distance, different investment layouts are deployed. Second, smart driving. Regarding this aspect, we will focus on the infrastructure, for instance, the future development direction of base-level motion sensors and other fields such as the unmanned aerial vehicle (UAV). In short, we hope to initiate a fundamental shift in transportation.

The second sector lies in robots, including robots for home use, services and industrial activities. In the next five years China will be the largest purchaser of industrial robots in the world.

The commercialization of artificial intelligence is the third sector. To be specific, the collection of data and using deep learning solutions to make processes more intelligent and replace humans.

Yicai Global: In terms of intelligent transportation, it is known that GGV has just stridden into a US start-up Drive.ai. Is this the first time you took a bet on a driverless vehicle project? And how did the investment proceed?

Lee: We have been paying close attention to the autonomous driving market for the past two to three years. At the beginning of last year, General Motors purchased Cruise Automation (a start-up in autonomous driving). In fact, we negotiated with Cruise two and a half years ago, when the start-up strove for financing in the first place, but who would have thought that at the end of the day, GM would acquire it for USD1 billion. At that time, our starting point for consideration was whether Cruise could replace Uber. Uber's commercial model involves nothing but information matching, instead of being subversive, while Cruise's technology idea is to remove itself from manual work. We learned a lot from that.

From then on, we started to keep a watch on the autonomous driving sector. Upon an observation of almost all enterprises related to autonomous driving in the US and many in China, we sensed that investment in this sector would pose the greatest difficulty. Early this year, meetings were arranged with representatives from Drive.ai before we conducted due diligence for six months with all aspects taken into account. This was because we also needed time to cotton on the whole ecological chain. At the last, we determined that Drive.ai could offer the best chance of success, so, we decided to step into it.

Yicai Global: How is it different from Chinese counterparts?

Lee: Its technical route. The primary technical route of Drive.ai relies on the means of deep learning, in a bid to be less dependent on high definition (HD) maps. Schemes, whether from Google or Baidu, hinge on supporting devices for sensors, which is why they cost a lot.

With deep learning, a machine has the ability to advance while blazing a new trail and does not need to depend on data collected over years on roads. From my perspective, the future L4-level autonomous driving technology will move toward deep learning, which could prove to be most effective.

Yicai Global: Now that the deep learning project established by Andrew Ng just deals with deep learning, why didn't GGV invest in it?

Lee: Many members of our drive team are students of Ng. A renowned teacher is important indeed, but an investor focuses more on factors like the business model and technological maturity. Ng now still has no intentions of commercializing this project, which is more like a research and development endeavor.

Yicai Global: How do you view the gap between China's and the US's unmanned driving technologies?

Lee: The gap is not so significant. China does better in scenarios and marketization, while the US is better at the technologies that focus more on software algorithms rather than hardware.

Yicai Global: But you did not invest in relevant projects in China.

Lee: We are now following up some teams, for we hope our favored teams feature considerable comprehensive competence, including the competence of scenario-based R&D, and the competence to create software and algorithms.

Internet Giants

Yicai Global: For investments in in-depth technologies like unmanned driving, when a dispute between your favored startup and giants comes out, will you still choose the startup?

Lee: Though many giants do some R&D themselves, the success rate is not satisfactory due to the fact that major companies have their own genes, while new business models are in a state of genetic transition. So, each party needs to adjust accordingly. For instance, it took at least five to six years for Facebook to move from PC to mobile phones.

As a venture capital firm, we do not fear what giants are going to do. Generally, giants put a lot into training many gifted people, and whether this will bring results depends on if they can retain these talents. Nine years after Google took up autonomous driving, its business was separated from Google's system. Looking back, we notice that provided this business was still within Google's system, many people there would be likely to leave this business for entrepreneurship, for they demand practical returns.

After encountering giants, we will watch to see which business models are open.

Yicai Global: Are Chinese giants more powerful? Baidu previously unveiled its AI developments and announced its cooperation with several auto manufacturers.

Lee: Many Chinese auto factories are conservative. Their core capacity still lies in auto production. Besides, the technological R&D centers of many joint-venture manufacturers are not in China, so it is hard for them to cooperate with an open platform. If they choose Baidu's platform, they will need to and integrator to link them with Baidu's software and hardware schemes. Integration is not auto factories' strong suit. How to analyze and apply data it to operations is still an open question. As auto factories still haven't turned internet-based so far, it is hard for them to deal with this issue.

After these Chinese auto factories mature, their internet departments will all be able to function as R&D agencies, integrators and analysts for subsequent issues. Open platforms are not enough.

Given Baidu's conditions, their system also needs to collect data in different scenarios. Will factories allow Baidu to access these scenarios for learning?

Yicai Global: If you have a great fortune, will you invest in Leshi's vehicles?

Lee: I cannot give an answer, for firstly I am not acquainted with Jia Yueting, and secondly, I never heard about his plan for their vehicles. I think there is a market for entirely-electric vehicles in China, but no market for Leshi's vehicles. So, I cannot say conclusively.

Yicai Global: If you are going to invest in an entirely-electric vehicle manufacturer, which aspects will you focus on?

Lee: Currently, as making entirely-electric vehicles is not technologically difficult, I would take the following issues into account -- first, the orientation of the vehicle. Second, the target consumer. Third, how the company convinces consumers about the safety of its cars. Fourth, how to cars will be maintained after being purchased. The difficulty of entirely-electric vehicles lies in the above issues rather than technologies.

Yicai Global: Will new energy-vehicles and unmanned vehicles really subvert the current auto industrial chain?

Lee: Subversion will start with small ways. Substantial subversion may encounter bottlenecks in terms of laws, regulations, as well as roads. How can rational unmanned vehicles be made so that they are compatible with emotional human beings? All these are problems.

Yicai Global: If there is subversion, who has more of an opportunity to succeed JD.com, Uber or a traditional car maker?

Lee: Personally, I think the first. It may take time for auto manufacturers to wait and build trust with users.

Bike Sharing

Yicai Global: GGV has been investing in China for more than 10 years. You've invested in some popular areas such as social networking, livestreaming and vertical e-commerce, but did not invest in areas like power packs. What was your basis for the decision?

Lee: What we care about is the trend of change and direction in users and industry. For to-customer, we want to invest in the needs and changes of basic life necessities in the new Internet environment; for to-business, we are concerned about efficiency improvement and process changes that new products, services and technologies can bring to business. For transformative technologies, we hope they have forward-looking insights to support new products and new experiences.

After 17 years of investing in China, we believe that manufacturing to IT, IT internetization, internet evolution, mobile content, and service internetization are the largest areas for venture capital investment, followed by the making the data industry intelligent and automating it.

Yicai Global: How do you see such venture capital investment?

Lee: Investing involves playing the long game, to which the important thing is to capitalize on big trends. It is just speculation to invest in small risky areas. Investing in big trends poses great challenges to entrepreneurs as it puts them in the center of all eyes. Everyone knows, it is easy to open a shop but hard to keep it open. Many years later, entrepreneurs will find that it is not the timing of entry, but keeping business alive that is important. The growth of companies like Google, Alibaba and Tencent is not because they capitalized on big trends.

Yicai Global: GGV has also invested in shared-bicycles, and Alibaba and Tencent each backed a firm in the industry. Isn't that good news for other bike-sharing investors?

Lee: You can imagine that Alibaba and Tencent will not join only back one bike-sharing company.

Yicai Global: Is GGV willing to become an ally of any of the BAT (Baidu-Alibaba-Tencent) firms?

Lee: We've worked with a lot of funds, more than 200, over the past 17 years. We are still more concerned about the quality of cases. Portfolios are important, but not the most important. 

Current Risks

Yicai Global: What experience in cross-border investment can GGV share?

Lee: Cross-border investment is difficult, and GGV has engaged in this field for 17 years. It takes time to invest in a good cross-border project. We should compare Chinese and US enterprises by the same standard. The appraisal standards for Chinese and US are consistent, especially in the field of cutting-edge technology.

In many foundations specializing in cross-border investment, the US team takes charge of US cases while the Chinese team takes charge of Chinese cases. Their sharing is insufficient. We are different from them. We evaluate projects in both countries with the same team. Capital internationalization has begun. From financing to subsequent acquisitions and mergers, investors who can facilitate transactions can seize the investment opportunity. This is one thing that GGV can do frequently. We look for financing from both countries.

Yicai Global: What are the difficulties?

Lee: Many investors spend 90 percent or their time in China, and find a project in the western United States occasionally and then decide to invest in it. In my opinion, it depends on overall situations, and competition. Last year, I took roughly 10 business trips to the US and stayed for one or two weeks or longer each time to investigate projects. 

Yicai Global: What is the average due diligence period of GGV?

Lee: The periods of foundations in each stage are different. The early foundation mainly aims at a specific person, and due diligence can be finished in two or three weeks. A longer time will be spent for projects in the growth stage. We may wait for the next round if technology of a certain project is immature. In one of my cases in the US, I contacted them for three years before investing. It was a company specializing in cold chain technology. Their research period was very long, about six years.

Yicai Global: Did its estimated value become very high three years later?

Lee: Actually, the cost performance of investment now is better than that three years ago, because it was still in the research and development stage three years ago, and now they can go to market.

Yicai Global: You may investigate for a longer time when commercialization is not obvious?

Lee: We clearly know what risks we may undertake in an investment. Three years ago, we did not want to assume its risks on research, development and technology. Now, we invested in it and only need to assume market risks. Technical risks and risks concerning the product have passed, and we are able to undertake the market risks. Of course, we are willing to share technical risks for some technologies, such as AI.

Subverting Traditional Education

Yicai Global: You also invest in many online education companies. Does the investment focus on technology as well?

Lee: Most education companies we invest in are 2.0 and 3.0 companies -- 2.0 companies adopt live video streaming models and provide online courses; 3.0 companies more closely relate to technologies. For instance, Liulishuo aims to overturn teachers with natural language learning technology. In 2.0 companies, technology supports traditional education, while in 3.0 companies, technology is subverting education. We are more optimistic for education 3.0. This model can aid the shift from traditional education to other ways to learn. Learning should be a long process. You can learn anytime anywhere by paying for it, and anyone who is competent can be a teacher.

Yicau Global: Why didn't GGV back the US's educational firms?

Lee: A comparison between China and US told us that China's entrepreneurs are more innovative. In China, we have decanted capitals into English Liulishuo and Zuoyebang, while no similar models have been found in America, where the pattern is to digitize content and move it online. On the contrary, China's online education leans closer to the market, which also has a bearing on its stress on education. Nevertheless, the pattern of Liulishuo could be duplicated in the US, while that of Zuoyebang requires a homework archive.

Yicai Global: Is it true that the technology could phase out teachers? At a time when AI could develop to a certain stage, how can machines and humans coexist with each other? And how should we balance between the notion to totally believe in machines and the thought to hold reservations about them?

Lee: Today humans are surrounded by an automation-free world where we view the whole world from the standpoint of our established principles. However, after 20 years, or 30 years, new consumer groups will emerge and the innovations by then will be highly acceptable to them. In other words, upon the age of 20 or 30, the current children will be completely different from our generation with respect to acceptance of AI. When that day comes, they may feel it is strange to see someone driving, like us seeing carriages in the old days. After all, human beings are always experiencing evolution.

Yicai Global: With more and more industrial capital frims making forays into the field of education, would they end up having the last say in that field, like Baidu, Alibaba and Tencent, collectively known as BAT, did in their field?

Lee: Now, BAT and countless venture capital firms did well on the Chinese market. As a matter of fact, new initiatives void of investments from venture capitals might be unlikely to stimulate or trigger BAT's sense of crisis, which serves as an encouragement for them to continually innovate. And this is how the industrial ecological chains count on each other. However, the market cap of today's education firms in China is still insufficient to be comparable to that of BAT, which explains the impossibility of 'buy out' innovation by piggybacking on capital powers.

Yicai Global: If a sentence can be used to conclude your tips from over one decade investing, what do you think is the most important?

Lee: Be certain about the directions (team, pattern and market), be persistent, remember that survival is hope, and never give up until success is achieved.