Tough-to-Impress Harvard Grad Molds Fortunes of China’s Richest

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In a market where billions slosh around in search of the next big thing, Tony Zhang’s decade of wagering on Chinese startups has made him cautious.

That’s how he approached his first meeting with Neo Wang, the 30-year-old who channeled his personal struggle with weight into Chinese fitness and workout sensation Keep. With 40 million monthly subscribers on his app and the backing ofTencent Holdings Ltd. and Goldman Sachs Group Inc., Wang had grown accustomed to fawning investors, but Zhang proved hard to impress.





He grilled Wang for hours on Keep’s growth and on the units he’d cut in a downturn, drawing from consumer surveys he’d commissioned to poke holes in the pitch.

“I’d just never met an investor like Tony before. He kept challenging me like he was running a stress test,” said Wang, who was struck by how thoroughly Zhang had prepared. “I felt both vexed and stimulated.”

After eight months of back-and-forth, Zhang was finally on board. In May, his firm Jeneration Group put in $60 million, one of its biggest investments, big enough to help turn the fitness platform into a unicorn worth more than $1 billion. Zhang says he’s wagering Keep will eventually surpassNasdaq-listed home fitness companyPeloton Interactive Inc.’s $19 billion valuation.

That could mean a handsome payout for the families and institutions whose money Jeneration oversees. The asset manager is the brainchild of Zhang, previously Asia head of technology fundCoatue Management LLC and Jason Tan and Jimmy Chang, veterans ofTiger Global Management and Silver Lake, respectively.

The trio turned what began as a small family office into a unique force in the opaque world of managing Chinese wealth, combining startup investing with private banking for a clutch of families whose names they, like most of their competitors in this niche corner of finance, won’t disclose. Jeneration targets cash from billionaires, mostly in China and particularly in technology.

It takes its name from the notion that it is bridging the first cohort of Chinese entrepreneurial successes and those of the next generation.

“What we offer them is a front-row seat to getting in on the next generation of startups and an exclusive network,” Zhang, 39, said from Jeneration’s office overlooking Hong Kong’s Victoria Harbor. “Chinese tech billionaires want better control of their money, not just bond and equity advice.”

Zhang, Chang and Tan styled the firm after San Francisco-basedIconiq Capital LLC, which invests for Mark Zuckerberg and other Silicon Valley titans.

In 2017, Jeneration pooled $1.6 billion from a dozen families. It’s since delivered annual returns of about 20%, according to one early investor, Zhao Dong, co-founder of Kuaidi, which was rolled into what’s today the world’s largest ride-hailing serviceDidi Chuxing.

Jeneration took in a further $622 million this February, adding institutional money from the Middle East, U.S., and Asia. It now manages more than $2.5 billion.

Good Networker

The bookish and bespectacled Zhang, who taught himself English growing up in northern China and went on to earn aHarvard Business School degree, returned to his roots in 2009. Eschewing Wall Street, he joined U.S. venture fundDCM’s Beijing office at a time when China was entering a golden era of technology investing.

Funds such as Sequoia Capital, IDG Capital and Silver Lake would pour billions into the likes of Didi, shopping appPinduoduo Inc., and TikTok ownerByteDance Ltd., as the rise of the smartphone launched hundreds of thousands of apps and carried China’s billion-plus consumers into the internet age.

Zhang immersed himself in Beijing’s thriving entrepreneur scene, centered around the Zhongguancun neighborhood, where young people drafted startup ideas on coffee shop napkins and pedestrian precincts were rebranded Innoway overnight. He helped DCM score wins with investments in Vipshop Holdings Ltd. and 58.com, which today have a combined market capitalization of $24 billion.

“This guy was very impressive,” said DCM co-founder David Chao. “He was a good networker.”

During these years, Zhang befriended Tan, who covered Asia for Boston-based private equity firmSummit Partners LP and would later move to Hong Kong for Tiger Global. Chang, meanwhile, became another familiar face: He was part of Morgan Stanley’s tech investment banking team in Hong Kong, and after a spell at Silver Lake ventured out on his own in 2015 to manage money for family and friends — creating Jeneration.

One evening in 2017, the three friends met for dinner at the Park Hyatt Beijing’s sky-high China Grill, a few blocks from the Forbidden City. Over a five-course medley of Peking duck and Western food, they mapped out a plan to expand the family office Chang had founded two years earlier.

Between them, they figured, they’d had a hand in creating at least 40 billionaires. Some, they reckoned, could become clients.

“We saw how Europe and the U.S. have gone through many generations of wealth exchange,” said Tan, 42. “It’s China’s turn, and we wanted to do it more efficiently.”

One of Jeneration’s first investments wasMeituan Dianping, a food delivery firm that’s now China’s third-largest listed internet company. Jeneration held about 0.6% of Meituan at the time of its public debut in 2018. The stock traded below its issue price for a large part of the first year, but Jeneration held on, eventually locking in about $300 million in returns. Meituan declined to comment.

Jeneration has bought stakes in about 20 private companies, including six startups in which it invested a portion of the funds raised this year. Among its biggestbets are grocery delivery startup MissFresh Inc. and Wang’s Keep.

Its focus on equity growth investments is rare in Asia, where firms that advise wealthy families are part of a nascent industry. Most family offices sink about 5% to 10% of their portfolios into startups and private companies, said Chi Man Kwan, chief executive officer and founder of Hong Kong-basedRaffles Family Office, which manages $1.8 billion.

“Some tend to outsource such investment to external asset managers, or work with private equity or venture capital funds, which have the expertise,” he said.

Jeneration has also moved in that direction, splitting off as Jeneration Heritage the family office that focuses on investing in public companies, mid-size private equity funds, and hedge funds in the Asian technology and real estate space. The unit is managed by Vincent Ho, an asset-management veteran who’s worked at Roc Partners and Macquarie Group Ltd.

Venture investing is managed by the trio under Jeneration Capital. The families that started off with Jeneration in 2017 mostly have money in both units, the firm said without giving details on how the funds are split.

Jeneration’s base in Hong Kong has so far put it in the flow of money moving into and out of China, but recently the city’s role as a financial hinge linking Asia’s largest economy to the world has been questioned. Beijing’s tightening grip on the hub has raised speculation about capital flight and tensions with the U.S. threaten to block the money trail that carries U.S. capital from endowment and pension funds to Chinese startups.

Souring relations with the U.S. inevitably cloud the outlook for money managers, said Beijing-based Andy Mok, an independent adviser for startups. “While American fund managers find China’s growth and innovation prospects irresistible,” he said, “U.S. government antagonism toward China may hurt their prospects.”

So far, these chill winds have yet to impact Jeneration’s world. In part, this is because of the relationships the partners forged over the years. “The founding team at Jeneration has been investing in China tech forever, and its track record has been stellar,” says Kuaidi’s Dong. “There is no tech founder or company they can’t get in touch with.”

Jeneration is careful to take nothing for granted. Before the virus struck, the firm’s partners hosted about 20 of its investors and startup founders at a boutique resort nestled in the ancient tea plantations of Jingmai Mountain in Yunnan in southwest China.

On long walks and over lavish tea ceremonies, startup advice was also served and new ideas debated. “It was secluded enough that they needed to stay on-site and engaged the whole time,” said Zhang, who presided over the two-day getaway.

The pressure to keep picking winners is relentless. That’s why he was so hard on Keep founder Wang when they met, Zhang said.

“I challenged him because for a young CEO, I am always concerned about their maturity,” he said. “The golden era for tech investment, when low-hanging fruit was abundant, is over, so investors need to hunt extra hard.”

As for Wang, if Keep succeeds long term and makes him rich, he may turn to Zhang someday. “You have to park your money somewhere,” he said. “You might as well give it to someone you know and trust.”

— With assistance by Michael Patterson

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