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The under-the-radar VC firm that invested in Alibaba before Yahoo

GGV Capital isn’t a household name in the venture capital world. It wasn’t involved in the most high-profile startups of recent years, like Facebook or Groupon. Yet GGV saw the potential in the Chinese Internet scene before most of its peers, and one of its biggest payoffs could come soon in the form of the IPO of the Alibaba Group, China’s largest e-commerce company.

GGV invested in Alibaba in 2003, when the company was four years old and had about $20 million in revenue. That was well before Yahoo acquired a stake in Alibaba in 2005. Fast forward to 2013, when Alibaba’s revenue jumped 71%, to almost $1.4 billion, in only one quarter. The company is predicted to have an IPO valuation of as much as $100 billion.

Other VC firms have China-focused funds or a designated team to work on Chinese investments. But it’s rare to have a US-based VC firm that organically incorporates partners both US and China into a single team. The firm has joint management meetings every Monday evening in San Francisco, which is Tuesday morning in China. The co-workers communicate with each other through WeChat, the instant messaging and social networking service of Tencent, one of China’s largest Internet companies.

Last year, GGV raised a $625 million fund and has a total of about $1.6 billion in its coffers, with the investments split evenly between the US and China. GGV only makes about 10 investments a year, so it’s more picky than other VCs. That means it may lose out on some buzzy startups, but it also avoids run-ups in valuations for coveted companies. The firm has invested in some well known US companies, like Internet radio firm Pandora and online payments company Square.

“We haven’t really done those marquee name deals, and that’s the biggest and hardest lesson you learn: how to say no when everyone else is saying yes,” said Jeff Richards, one of GGV’s partners. “In the end, that strategy has paid off for us.”

Because GGV has a history of working with Chinese Internet startups, the firm has relationships with China’s top entrepreneurs, like Lei Jun, founder of Chinese mobile phone company Xiaomi. That helps when pitching GGV to new Chinese companies. GGV portfolio companies also have gone public on exchanges in the US, Europe, and China. For example, online gaming company YY.com went public last year on the Nasdaq. At the time, YY shares priced at $10.50, and are now trading around $39. Other GGV portfolio companies have been sold, like Chinese online video firm Tudou.

“Before, in China, everyone was a newbie. But today, we are seeing serial entrepreneurs who have already gone through a few startups, so the quality of them has gone up,” said GGV partner Jenny Lee, who is based in Shanghai. “We’re like old women and old men in the world of China venture. And you know elders are respected here.”

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