The Female Warren Buffett of China
WHY YOU SHOULD CARE
She’s holding the reins to the world’s biggest venture capital industry.
By Leslie Nguyen-Okwu
In a cream-colored Hillary Clinton-esque suit, Kathy Xu looks like she means business — billions of dollars’ worth. Her heavy perfume has a whiff of what we’d imagine sweet, cold cash smells like, and she wears her pearl necklace like a polished medal. Don’t get on her bad side, I’m told, because she swings like a sledgehammer.
They don’t call her Tie Niangzi, or the Iron Lady, for nothing. The Hong Kong-based venture capitalist is the founder and president of the Capital Today Group, one of the world’s leading investment firms. As one of China’s most respected investors, she is bankrolling the future of the country’s internet. To date, she has five IPOs, four acquisitions and $1.5 billion in assets under her belt, and she’s backed some of the biggest names in the booming Chinese internet sector. She earned a slot on Forbes’ list of Asia’s Power Businesswomen several years in a row and is slowly amassing her own fortune, hitting the $1 billion mark this year, according to the Hurun Report’s Midas Rich List of China. Her career comes at a time when China’s venture capital industry is booming — it grew 10 times between 2013 and 2015, and its $338 billion in assets under management outshines the United States’ slimmer $59.1 billion, according to the consultant firm Zero2IPO Group and the National Venture Capital Association, respectively.
So, what’s in her little black book of billionaire secrets? Xu doesn’t just throw millions of dollars into companies in hopes they’ll stay afloat. Instead, she dips a heavy hand into marketing and strategy, putting more TLC into her companies than the average investor. First and foremost, she’s a mama wolf— hand-holding when necessary but making sure to pick off weak employees who don’t perform, she says. In the early stages, it’s vital to “kill the chicken to scare the monkey,” or publicly fire bad employees to drive the rest. Her lips pursed, she calls this the “survival of the fittest.” Xu’s formula has worked magic on high-profile successes like JD.com, Amazon’s fastest-growing rival that gave Capital Today 150 times return on investment. “She has the instinct to pick good companies, so that’s why I bet on her,” says Francis Leung, the so-called Father of China Stock in Hong Kong. “She does the due diligence. She identifies good prospects and follows companies hawkishly.” Likewise, in the other 39 companies that Capital Today currently cultivates and prunes, Xu knows to “kill the mediocrity quickly.”
Xu’s staunch discipline may seem ironic to those who knew her growing up — she acted out as a child and was known as the bad seed in high school, she says. But her rebel days paid off. At her father’s state-owned factory in Sichuan, she eavesdropped on discussions of finance, quality assurance and corporate strategy while pouring tea for schmoozing businessmen and factory employees. “That was like an MBA for me,” she says. Her first job out of college was as a clerk at the Bank of China — her first official foray into finance. After landing a job at the prestigious consulting firm PricewaterhouseCoopers’ branch in Hong Kong, she built up her business acumen just in time for China’s shift from a communist-controlled economy toward more unfettered pseudo capitalism. Xu was one of the first to take advantage.
You might guess Xu is outnumbered in her chosen field; men normally dominate the venture capital scene worldwide. But in Asia, women are faring better in terms of representation and leadership in the region’s thriving venture capital scene — and we’re not talking assistant status here. You won’t find these women submissively pouring tea for the head honchos. Rather, female VC veterans are increasingly holding senior roles and swiftly running the whole show, including ZhenFund’s Anna Fang, GGV Capital’s Jenny Lee, TDF Capital’s Tina Ju and DCM China’s Ruby Lu — all are managing partners at top firms. They’re joined by the rest of Asia’s 11.8 percent of deal-making women who are at the top of the ladder, compared to 11 percent in the United States, according to London-based consulting firm Preqin. For Xu, being the only woman in the room gave her gravitas, says Kenneth Lam, her former boss at PricewaterhouseCoopers and a member of the Listing Committee of the Hong Kong Stock Exchange. From the start, Xu was energetic with a steely resolve and a bright presence. “Being a woman gave her a jump-start” because she was adding something different to the usual male mix, Lam says.
In some ways, though, it’s another part of her femininity that she says makes her tougher than most: The day before delivering her second baby, Xu was still running to banks and ensuring that $35 million in transfers to angel investors went through without a hitch. After all, having endured the pain of childbirth, she says she can conquer anything now: “I’ve been to hell, so I’m not afraid of hell.”
This is the fifth story in an OZY Special Series on “The Lady Bosses of China” resisting communist rule. Video by Melanie Ruiz.