China's biggest angel fund bets on boom led by young consumers

HONG KONG (Reuters) - ZhenFund, China’s largest angel investment fund, is betting rising spending by young consumers in the country on everything from fitness products and healthy food to designer furniture will create good investment opportunities amid a broader economic slowdown.

Bob Xu Xiaoping (R), Chinese delegation head and founder of the ZhenFund seed fund and New Oriental Education & Technology Group, listens to Israeli high-tech firm ironSource's CEO Tomer Bar Zeev during a presentation at the company's offices in Tel Aviv April 28, 2014. REUTERS/Nir Elias/File Photo

The fund, which invests in early stage startups in the country, also sees digital entertainment, including live video streaming and virtual reality, as good growth areas, Chief Executive Anna Fang told Reuters.

Beijing-based ZhenFund raised $300 million, including 900 million yuan ($136.78 million), from investors earlier this year. It has invested in more than 300 companies, including online retailer LightInTheBox Holding Co Ltd, online beauty products retailer Jumei International Holding Ltd and dating service, which delisted from the Nasdaq this year.

Fang’s comments show investors still see pockets of value in China amid wider concerns about funding drying up for startups as growth in the world’s second-largest economy cools.

“The theme of consumer upgrade, upgrading your lifestyle is hot,” Fang said on the sidelines of the RISE technology conference in Hong Kong.

“Younger people, new consumers in China post 1985, this new generation...they’re buying new things, they’re doing new things like fitness. The things they’re eating or the furniture they’re buying” are interesting sectors to follow, she said.

Spending by Chinese consumers aged 35 and younger is growing at 14 percent a year, double the rate of older consumers, according to research from The Boston Consulting Group and AliResearch, the research arm of Chinese e-commerce firm Alibaba Group Holding Ltd. The research says young consumers will account for 53 percent of China’s total consumption by 2020, up from 45 percent in 2015.

ZhenFund, founded by Bob Xiaoping and Victor Qiang in 2011, is bullish on live video streaming similar to Twitter Inc’s Periscope app, Fang said.

“This phenomenon is not just for social media, it’s really like using live broadcasting for shopping. It’s a really interesting sector that is making a lot of money. This is one innovation specifically to China that I think is quite interesting,” she said.

Another area ZhenFund is looking to invest is in companies developing technology for the agriculture sector in China, Fang added.

“A lot of funds are looking at the agriculture industry for many opportunities. That’s very specific to China also,” Fang added. “More like drones spreading seeds, technology to farms, leasing of equipment and farm-to-table restaurant companies.”

(Corrects amount raised in paragraph 3 to say the $300 mln included yuan funds and corrects name in paragraphs 8,9 to Fang, not Wang.)

Reporting by Elzio Barreto; Editing by Muralikumar Anantharaman