Back then, when I invested in Cha Ji, it only took seven days from the first meeting to signing the contract.

If we were to review China's venture capital landscape in recent years, XVC would be a crucial yet easily "misinterpreted" case.

It's crucial because their performance has been truly outstanding. According to the data published in XVC's "Letter to Investors 2024", as of September 30, 2024, XVC's total investment cost was 3.78 billion RMB, with a book value of 7.68 billion RMB and a gross internal rate of return of 25.02%. During the same period, Preqin, a globally renowned fund database, conducted a horizontal statistical analysis and found that XVC's main fund ranked first globally among VC funds established in 2019 (in the $250 - $499 million scale category).

It's easily "misinterpreted" because their investment cases are simply too remarkable. They were early investors in two phenomenal consumer brands, Ba Wang Cha Ji and Laifen, and have almost witnessed the entire growth curve of these two consumer companies. Especially when they invested in Ba Wang Cha Ji, all its stores were located in Yunnan, Guangxi, and Guizhou at that time, and the founder, Zhang Junjie, was an inexperienced "newcomer in entrepreneurship." During the two - hour first meeting with Hu Boyu, the founder of XVC, he mostly talked about his own story.

Such an experience, combined with their performance, is too easily interpreted as: how a consumer investment fund, in the sinking market, bet on a unicorn company that created a growth myth through an indescribable "philosophy of judging people."

However, in reality, XVC has never positioned itself as a "consumer fund." Their investment scope is clearly stated on their homepage, aiming to "seek great products created by leveraging technology and insights." XVC also rarely talks about the "philosophy of judging people." Hu Boyu, the founder, is a typical science and engineering major. He is full of "engineering thinking" and started a business in the school computer room in 1999. He once joked that "if he didn't love playing badminton, mushrooms might grow on his head."

More importantly, XVC is not a new - emerging fund. XVC was established in 2016. In the history of China's venture capital, this is a symbolically significant time point. Around this year, a large number of investors chose to independently establish their own funds, giving rise to a wave of entrepreneurship known as the "VC 2.0" era. Compared with the group of investors who started their businesses around 2005, this group was luckier. Their growth environment coincided with China's economic take - off. They are accustomed to the rapid pace of change and have witnessed numerous crazy ideas. Therefore, these funds usually have distinct insights, aesthetics, and ambitions, with an experimental undertone.

So, why was XVC able to invest in Ba Wang Cha Ji and become the "hottest GP in 2019"? This is actually a topic that needs to be discussed without focusing on the "Ba Wang Cha Ji" case. It was with such "confusion" that I invited Hu Boyu, the founding partner of XVC, hoping to find the "real answer" behind this excellent report card through a conversation.

Guest of this seminar: Hu Boyu, founding partner of XVC

We are a "research - oriented" fund, but we are "fast"

Pu Fan: Before we start the formal topic, I'd like to ask Boyu a question. Do you mind if people introduce you as the "investor of Zhang Junjie" or the "investor of Ba Wang Cha Ji" before mentioning XVC?

Hu Boyu: I don't mind. I think it's good that people call me that way, and it's also a fact. Currently, it's our first company to go public. It's very normal for people to have such an impression of us in the short term. But of course, I don't want people to still call me that way in ten or twenty years.

Pu Fan: So I've always thought it's particularly difficult to interview XVC because your star cases are too dazzling. Out of professional instinct, if I start with these popular cases, I'll definitely attract the most traffic. After all, in the current environment, people are generally anxious and insecure. They hope that a winner of the era can generously reveal the secrets of how they seized the opportunity at that time. This is the key to attracting traffic, as countless experiences have shown us.

Hu Boyu: That makes a lot of sense.

Pu Fan: But from a rational perspective, based on a large amount of research we've done in writing "The History of China's Venture Capital" over the past year or so, my experience tells me that in XVC's growth story, the most decisive moments are neither the investment process itself nor how they got in touch with these star projects. So I've decided to overcome my professional instinct and move the narrative timeline forward to talk about the moment when XVC was established.

The most direct historical materials available for researching XVC are the Zhihu columns you wrote around 2016 and 2017. That was the first one or two years after XVC was founded, right?

Hu Boyu: Yes.

Pu Fan: You were very active in sharing your entrepreneurial experiences at that time. Two points impressed me the most. The first one is that you precisely defined XVC as a "research - oriented fund," hoping to complete sniper - style investments through systematic scanning of the industry. There was a very specific case where you spent two overnight stays in a warehouse and a whole week to understand the catering supply chain track.

The second memorable point is the story of your investment in Kuaishou. You caught Su Hua and Cheng Yixiao in that unfinished apartment in Huaqing Jiayuan. The process was thrilling. You "cornered them in the meeting room," "stayed up until midnight," "had the meeting in a flash," and "grabbed" the project.

These two points seem contradictory to me. You independently started a fund and chose a slow "research - oriented" path, but the projects that made you famous were "grabbed." So I'm particularly curious why you chose an anti - conventional path at that time. How did LP investors evaluate this research - oriented positioning back then? Was it really an advantage for early - stage investors?

Hu Boyu: It's indeed a conflicting point. Let me clarify first. I invested in Kuaishou when I was at DCM, not as an XVC project. I invested in Meicai when I was at Blue Lake, also not an XVC project. (I wrote about these two cases because) when I wrote that article, XVC had just been established and didn't have many projects yet.

I don't think these two things are contradictory. XVC is a research - driven fund. At the same time, for many projects we've invested in at XVC, the decision - making speed has been very fast. For example, when we invested in Ba Wang Cha Ji, it only took seven days from the first meeting with the founder to signing the agreement. There were two days in between when my colleague went for research, and I met the founder two days later. So it might only have taken four or five days from my meeting with the founder to the final decision.

Pu Fan: That's really fast.

Hu Boyu: Yes, it's the same for many other projects. For example, when we invested in Weee!, it might have only taken about two weeks. When we invested in He Tao Programming, it might have taken about one and a half to two weeks. There was even a project where we made the decision in one day. For example, when we invested in Yidui, I met the founder on the first day, gave the letter of intent on the second day, and transferred the money on the third day.

The primary market is different from the secondary market. The time from the emergence to the disappearance of trading opportunities is usually very short. Good trading opportunities may last for two or three weeks at most. In extreme cases, they only last for one, two, or three days. So in this industry, if you want to avoid adverse selection - that is, "investing in projects that no one else wants" - you must ensure a fast speed and quick actions.

But why isn't this contradictory to being research - driven? Actually, research work can be done in advance. You can conduct a lot of research on the social media industry until one day you come across Kuaishou. You can do a lot of research on the catering, food, and beverage industry until one day you see Ba Wang Cha Ji. I don't think there's a contradiction between research and rapid decision - making.

Of course, claiming to be a research - oriented fund has both advantages and disadvantages. The biggest disadvantage is that people may think you're slow, which can cause many problems. For example, entrepreneurs may not approach you first. This is indeed a hassle, and I hope people won't have such misunderstandings.

Kuaishou, a project "researched" out

Pu Fan: This seems even more contradictory. If research can be done in advance, did you search for Kuaishou and Ba Wang Cha Ji with prior research in mind, or was the research just an impulse of interest, and you just happened to recall your past research when you came across them later?

Hu Boyu: I think it's more likely the latter. Actually, when we allocate research time and decide what to research, it may still be based on interest.

But where does interest come from? As venture capitalists, firstly, we're instinctively interested in various excellent business models and outstanding companies and will conduct research on them. For example, we study Facebook, WeChat, and Weibo to understand long - term user retention, stickiness, and network effects in the social media field. Secondly, we pay more attention to structural changes. For example, the mobile Internet was a huge structural change, and so are cloud computing and AI. The penetration of social media into daily life is also a huge structural change. Many outstanding consumer companies today, such as Pop Mart, Lao Feng Xiang, and Ba Wang Cha Ji, have achieved rapid growth and continuous user recognition to a certain extent due to the penetration of social media.

Pu Fan: I think I can understand. Your initial research is all driven by emotional impulses, just being interested in a company and excited about the current technological changes. You must figure things out, and the projects that may appear in the future may not have been within your initial expectations?

Hu Boyu: Yes. I think most of our research starts from interest, but there's also a lot of research driven by projects. For example, when there's a sudden opportunity and we need to understand it deeply, we'll conduct a large amount of research. These two may complement and stimulate each other, and we may also discover new structural changes and opportunities during the process of looking at projects.

Pu Fan: I have a prejudice that the more one researches, the more stubborn one becomes. Especially when doing research without a specific purpose, since there isn't much external feedback, one will naturally immerse in one's own small world and deepen stereotypes.

For example, I quoted Kant's words in my outline: "All our knowledge starts from experience, and everything we receive through our senses and our inherent knowledge abilities themselves are a combination of things we take from within ourselves." This means that when researching, people will constantly draw from themselves. In this case, I'm worried that such research without a specific question may lead to self - isolation and missing many opportunities.

Hu Boyu: This is indeed what we're worried about. To prevent this, we encourage fact - driven decision - making and respect for phenomena. Once we find that a phenomenon doesn't match our expectations, we shouldn't discard the phenomenon first but challenge what we believe in.

Pu Fan: What are phenomena and what we believe in?

Hu Boyu: Let me give an example. In the investment industry, there was a long - standing impression from 2009 when I entered the industry until 2013 - 2014. The entire industry believed that China couldn't create a UGC platform. This was a widely - held consensus.

The industry generally summarized two reasons: one was China's regulatory environment, and the other was that Chinese people lacked creativity compared to Americans. So when Kuaishou emerged, many investors, influenced by this inertia, thought that Chinese people couldn't create a UGC platform. At that time, Kuaishou was a pure UGC platform, and its early - stage content was considered "low - end." It first penetrated from big cities to third - and fourth - tier cities, and many technical secondary school and junior college students started using it. Later, it spread to all age groups.

However, I noticed two points in the phenomenon that didn't match the industry consensus. First, there was a wide variety of novel content on Kuaishou, and users were very creative, although there was also a large amount of imitative content. For example, in 2014, there was a simple gameplay where one person carried another person and spun around. People thought it was funny and imitated it. There were also somersaults and other strange plays like two people tied together doing somersaults. People learned from each other, and new and interesting content stimulated the emergence of more new content. This clearly shows that it wasn't that Chinese people lacked creativity.

So why didn't a large amount of UGC content emerge in China in 2006 - 2007? It was because there were no home video recorders at that time, while they were very popular in the United States. By 2014, the situation had changed. Many Chinese people had mobile phone cameras with decent pixels and could shoot videos of acceptable quality. The popularization of 4G also allowed them to upload and watch videos. These structural changes inspired people's creativity and provided tools for dissemination.

Second, the user data of this APP was growing rapidly. Basically, every two or three weeks, the user's usage time was increasing, the retention rate was rising, and the content was becoming more and more diverse. Looking back from the time we started observing, the average daily usage time might have increased from ten - plus minutes to twenty - plus minutes and then to thirty - plus minutes within three months. This was an amazing data in 2014, indicating that users were very addicted, with high stickiness and good retention. At that time, the average user watched 60 short videos per day, which was very rare in 2014. Few APPs could make users so addicted and have such high stickiness.

Pu Fan: During that period, people often talked about viral marketing, but at that time, it seemed that people only regarded it as a marketing method and rarely associated it with products. It was probably Kuaishou and Douyin that made people realize that products could also achieve viral spread.

Hu Boyu: Yes, I remember that about 3% of the daily active users would share the good content they saw on Kuaishou to social platforms like WeChat Moments.

Pu Fan: This data is crucial.

Hu Boyu: I can't remember the specific data clearly. It should have brought about 30,000 new users per day. Compared with its daily active users at that time, the proportion of new users was about 3%, and basically all these new users came from viral spread. For a long time after that, it maintained a positive cycle. New users would stay, spend a long time watching content, and then some of them would continue to share interesting content with their friends, attracting more new users. These new users would then become retained users and continue to spend time watching. This cycle kept the ratio of new users to active users at around 3% for a long time without any need for paid promotion. At that time, its biggest expense was "bandwidth."

Many thoughts about venture capital can only be realized through "entrepreneurship"

Pu Fan: So was it the Kuaishou case that made you determined to establish a research - oriented fund?

Hu Boyu: Not really. We decided to establish a research - oriented fund in 2016, and at that time, Kuaishou wasn't sufficient to support this decision.

Pu Fan: Then what was the reason?

Hu Boyu: When I decided to start a research - oriented fund, I also did some research. I studied how some successful VCs operated, such as Benchmark and Greylock. I talked to people from these funds to understand how they made decisions, how they searched for projects, their internal decision - making mechanisms, corporate culture, and recruitment criteria.

I found that these excellent funds valued research ability when recruiting. Even in the early days, when Benchmark recruited partners, it required candidates to have earned a certain amount of money through investment - I can't remember the exact figure, but it was probably around 100 million RMB, and it had to be earned through secondary - market investment. This was an interesting early recruitment criterion for them. Moreover, neither of these two funds used voting systems. They emphasized independent thinking. I also studied how some successful secondary - market funds made decisions and conducted research.

Actually, I had some previous experiences. I entered the industry in 2009, so I wasn't a complete