*Reported by | PEdaily Yang Jiyun, Zhou Jiali

In August 2021, leading Chinese consumer-focused PE firm Harvest Capital officially announced the introduction of nearly 800 million RMB in strategic investment from GLP and Sequoia Capital China. Notably, this was not an investment as LPs into Harvest Capital's sub-funds, but rather a rare move to become shareholders of Harvest Capital itself.

Investment Community has learned exclusively that the three parties engaged in intensive discussions for nearly a year leading up to this financing round, completing the transaction last month. GLP acted as the lead investor, with Sequoia Capital China participating as a co-investor. This marks another significant strategic move for Harvest Capital since receiving a 480 million RMB investment from Hongtai Hengye, a subsidiary of Taikang Insurance Group, in 2018.

This transaction is considered rare within the venture capital circle. Investment Community secured an exclusive interview with Alan Song, Founding Partner and Chairman of Harvest Capital, to discuss the rationale behind this investment.

GLP Leads Investment in Harvest Capital: A Rare Move

Exclusive Reconstruction of the Investment Details: How Did This Unusual Equity Investment Unfold?

As the largest warehouse logistics and real estate fund manager in China, GLP has long been hailed as the "KKR of China" and has developed its own strategic positioning within the consumer sector. In Alan Song's view, GLP is also a specialized player in the consumer arena, as its extended industrial downstream directly serves consumer services.

Interestingly, Alan Song and Ming Z. Mei, CEO of GLP, became acquainted through a debate. Two years ago, at a doctoral debate at Tsinghua University, Mei "lost" to Song. "Perhaps because his (Mei's) native language is English, his Chinese isn't as strong as his English," Alan Song joked. From that moment, both Alan Song and Harvest Capital left a deep impression on Ming Z. Mei, and the two parties began frequent exchanges.

As GLP deepened its understanding of Harvest Capital and the Chinese consumer landscape, it grew increasingly confident in the underlying logic and certainty of the rise of China's consumer service sector. This confidence was bolstered by Harvest Capital's impressive portfolio of well-known consumer companies, including **Qiaqia Food, Eastroc Beverage, Aimer, Laoxiangji, Easyhome, Wenheyou**, and others. Subsequently, GLP formally decided to become the lead investor in this round for Harvest Capital.

With this, Harvest Capital now boasts a formidable lineup of shareholders – GLP and Taikang Insurance Group stand as its second and third largest shareholders, respectively. Back in 2018, Taikang Insurance Group had already invested 480 million RMB through Hongtai Hengye to acquire a stake in Harvest Capital.

In reality, Harvest Capital was not short on funds. "Over the past 15 years since our founding, we have carried zero debt. The industry knows our style is conservative and steady, but our returns have actually been quite substantial," Alan Song revealed to Investment Community. The reason for opening up the firm's equity this time was to find like-minded partners who genuinely want to invest in the future of Chinese consumption.

Why Did They Invest in Harvest Capital?

It is rare for three independent venture capital institutions to come together, united by one key theme – Chinese consumption.

Harvest Capital's established position in China's consumer investment landscape is widely recognized. Founded in 2007, it is a specialized fund focused on the mega-consumer and modern service industries, with a history spanning nearly 15 years. Managing over 20 billion RMB, this veteran PE firm has quietly mapped out a distinctive ecosystem within China's vast consumer market, producing a series of classic investment cases.

Among these, *Eastroc Beverage* represents a major IPO success for Harvest Capital in 2021. In May of this year, Lin Muqin, a Chaozhou businessman, finally achieved his long-held ambition of ringing the bell at a Shanghai Stock Exchange IPO after over 30 years of entrepreneurial struggle, creating the "first functional beverage stock" on China's A-share market. The company's market capitalization now exceeds 80 billion RMB.

Throughout its journey, Eastroc Beverage rarely accepted investments from institutions. It was not until June 2017 that Harvest Capital strategically invested 350 million RMB in the company, becoming its second-largest shareholder and the sole external institutional investor.

Today, Harvest Capital has netted nearly 10 billion RMB in profit from this investment. "I am hopeful that it will become a 100-billion-RMB company in the future. This is about consistent, incremental progress – efforts are never wasted. Once you make the right choice and commit your heart to it, leave the rest to time. Time will reward you with the best value," Alan Song once summarized.

"Consumption will become the main engine and primary track for China's future economic growth," Alan Song asserts. He believes the rise of China's consumer service sector is a high-probability event, and the next 20 years will be a super-era for the ascent of China's consumer service industry, inevitably giving birth to a host of world-class consumer companies.

Looking back at the past 20 years of China's venture capital history, enthusiasm for the consumer sector among VCs/PEs has always existed but never reached such a widespread and intense fever pitch. In just a few short years, we have witnessed the rapid rise of a new generation of consumer brands like Pop Mart, Perfect Diary, Heytea, and Genki Forest.

As Alan Song puts it: "Consumption is not an industry with low barriers to entry. On the contrary, it is a sector that appears to have low entry thresholds but actually possesses very high competitive moats." With this convergence of like-minded partners, a new chapter in investing in China's consumer industry has begun.

A Benchmark Event in Venture Capital: The Emergence of "Hybrid" Investment Institutions

This is a rare scene in the history of Chinese venture capital.

A leading enterprise vertical in the logistics industry, an insurance company with long-term capital strength, a premier comprehensive VC firm, and a specialized, top-tier consumer PE – this 'dream team' for consumer investment is poised to create its own legends and stories.

Alan Song refers to this as "hybridization." In the past, an investment firm often revolved around a single visionary figure, creating a distinctive personality and a structure of "one superpower with multiple strong supporters," which could also be a weakness. "For Chinese investment institutions to become true century-old establishments and move towards institutionalization in the future, they will need 'grafting' and 'hybridization.'"

The investment in Harvest Capital exemplifies this hybridization process. In summary, Harvest Capital integrates the genes from its shareholders, creating a blend where each contains elements of the others. It fuses the genes of long-term capital, industrial investors, and the world's most exceptional strategic and financial investors. "This builds a combination of resource endowment advantages and first-mover advantages, creating a force that cannot be ignored in the market," Song explains.

The visionary leader of an investment firm is not omnipotent, but "hybridization" can generate cross-border appeal and advantages in genetic iteration, leveraging the respective professional strengths and governance advantages of each partner to enhance the firm's overall capabilities. With the strategic investment in Harvest Capital by institutions like GLP, "hybrid" investment institutions are beginning to take the historical stage.

In recent years, a consensus has formed within China's venture capital circle: in the future, only two types of venture capital institutions are likely to thrive. The first type possesses clear scale and influence advantages, allowing for a broader scope of opportunity capture. The second type comprises specialized vertical institutions, focused on specific sectors, with stronger capabilities for deep opportunity capture. Alan Song believes this constitutes a necessary precondition for cooperation. Through integration and collaborative development, the strengths of each institution can be synthesized, iterating towards more refined investment logic and styles.

Investment Community has learned that previously, Shenzhen Capital Group also invested in Tiantu Capital, another seasoned player in the consumer sector. While it has been common for leading institutions to act as LPs for vertical specialists, direct equity participation in another investment firm has been rare. Today, the mindset is becoming increasingly open, giving rise to more diverse types of investment institutions.

After all, China's venture capital industry is evolving. "We can't keep engaging in internal competition," Alan Song emphasized earnestly. "We should instead jointly increase our bets on Chinese consumption, jointly empower Chinese consumption. Being bullish on China isn't just a slogan; it's about resonating deeply with this era through our time, capital, and extraordinary commitment."