In a recent fireside chat, Boyu Hu, partner and founder of XVC, discussed the firm’s investment strategy and approach to identifying promising startup opportunities. Topics discussed during the conversation were:

1. Hu’s Background and XVC’s Formation: Hu started as an entrepreneur, co-founding China’s largest credit risk management software company, Emerson. He then transitioned into venture capitalism, working for firms like DCM and Bully Cap before founding XVC in 2016. XVC manages about $1.2 billion across all funds (00:00 – 00:02:27).

2. Investment Strategy: Hu looks for two key traits in start-up founders: good decision-making habits and the potential to grow into a great leader. He also seeks companies with self-reinforcing patterns, such as self-reinforcing brands, self-reinforcing data, economies of scale, and network effects. Additionally, XVC targets companies that have a product-market fit in a big market driven by a long-term structural change (00:03:19 – 00:07:38).

3. Case Studies: Hu gave examples of successful investments by XVC, including a Chinese milk tea chain that grew rapidly despite the founder’s lack of formal education, and a coding class company that leveraged AI and gamified experiences to attract and retain customers. He also mentioned a company that produces a high-speed hairdryer and a cordless robotic pool cleaner company (00:07:39 – 00:38:45).

4. Future Aspirations: Hu expressed satisfaction with XVC’s current status as a “sniper” in the market, executing a few, high-quality deals each year. He sees no significant changes in their approach in the foreseeable future and aspires to continue building great companies (00:38:46 – 00:39:27).