Gaocheng Capital bets on Chinese enterprise software growth

In a recent interview held during the Forbes Global CEO Conference, Jing Hong, the founding partner of Gaocheng Capital, highlighted the significant undervaluation of Chinese enterprise software firms by investors. Despite the downturn in stock prices that has led many investors to withdraw, Gaocheng Capital remains committed to investing in this sector. Since its establishment in 2018, Gaocheng Capital has shifted its focus from food delivery and e-commerce to enterprise software solutions, viewing it as a sector with immense potential, particularly in light of China's economic challenges and the emergence of generative AI technologies. The firm has a diverse portfolio consisting of over 30 investments, including notable companies like Youzan Technology and Beisen Holding. Jing Hong expressed optimism based on her past successes in pivotal investments such as Alibaba and Meituan, and how these experiences shape her current investment strategies. She shared that the median revenue of her portfolio companies has quadrupled over the past five years, further reinforcing her belief that the market for enterprise software in China is set for a turnaround. Approximately 80% of these companies are either profitable or cash flow positive. Hong remarked that Chinese companies are beginning to see software not merely as a one-time asset but as a vital component for operational efficiency. The economic landscape in China is undergoing a transformation, with organizations increasingly favoring outsourcing software development rather than in-house solutions, a significant shift from previous practices. Hong anticipates that this trend will further accelerate as companies work to adapt to economic pressures, leading to renewed investment opportunities. Additionally, she noted that her portfolio companies are well-positioned to leverage the AI boom, thanks to their strong tech capabilities and industry insights. For example, Beisen Holding has drastically reduced hiring costs through its services, while Bairong has innovated by developing its own large language model to enhance customer services for financial firms. The broader implications of these trends suggest that the enterprise software market in China might witness a resurgence, provided that companies prioritize sustainable growth over uncontrolled expansion. In light of these observations, Jing Hong's strategical emphasis on stability and profitability may establish Gaocheng Capital as a key player during this transitional phase in China's technology landscape.