Venture capital investors see increasing investment opportunities around sport-related products and services in China as consumers place greater emphasis on health and wellness, the GBA International Sports Business Summit in Macau heard.

“COVID-19 has played an important role in enhancing mass awareness of health,” said Harry Man, a partner at Matrix Partners China. “Chinese people’s understanding of sports has gradually formed over time and reached a new level post-pandemic.”

While technology could be seen as enabling laziness among China’s younger generations – relying on delivery instead of collection, staying indoors instead of going outside – he noted that it is also encouraging participation in sports and exercise through faster dissemination of information.

Social media platforms such as WeChat Moments and Douyin have helped drive the uptake of sports that previously enjoyed minimal exposure in China, such as frisbee and flag football, Man said. At the same time, basketball has become one of the core categories behind traffic growth on Douyin.

This belief in the investment potential of consumer-related sports – Matrix is tracking opportunities in consumer products, games, and events – runs contrary to challenges in the broader consumer space. China’s consumer price index posted year-on-year declines for four consecutive months through January as general economic weakness deterred household spending.

“We have always paid attention to and been optimistic about sports investment in the products spectrum,” Man said, adding that the market is characterised by “consumer differentiation” rather than “consumer degradation” as domestic products emerge that can compete with overseas peers. Matrix’s interests stretch to local sports brands in areas ranging from sneakers to ski equipment.

New consumer brands sit alongside new economy, deep tech, industrial digitalisation, healthcare, and frontier technologies in the venture capital firm’s core investment coverage. Matrix is deploying its seventh China fund, which closed on USD 1.6bn last year. It focuses on early- and growth-stage investments, often writing cheques of USD 1m-USD 10m as the first institutional investor.

Referencing slower growth in the consumer sector compared to technology, Man said that Matrix is willing to be patient and may support start-ups over 10-year periods. Rather than copying business models that have proved successful in Western markets, new concepts are required for China, he added, noting how event operators like Spartan Race have adapted to the local conditions.

Hong Kong-based Rising East Asia League (Realeague) launched last year with a similar vision. It proposes creating a new regional professional basketball competition involving teams from mainland China, Japan, Korea, Hong Kong, Macau, Taiwan, and Mongolia. The goal is to create a sports entertainment brand that can engage the next generation of basketball fans in Asia.

Gobi Partners provided seed funding for Realeague through its AEF Greater Bay Area (GBA) Fund. The capital will be used to expand operations ahead of the inaugural season.

“We invested in Realeague because we believe that sports are a good bridge to connect the world in delicate geopolitical situations,” said Chibo Tang, a managing partner at the venture capital firm. “Basketball is a great way to bring everyone to the table.”

The network effects are seen as aligned with the fund’s remit to help GBA-focused start-ups scale and access larger markets. The fund reached its HKD 2bn (USD 256m) target last August and was set to close at the end of 2023, Mergermarket previously reported. It is the successor to Alibaba Hong Kong Entrepreneurs Fund, though it has a wider LP base and a broader geographic mandate.

Tang identified potential synergies – in areas such as sponsorship and business promotions – between Realeague and another Gobi portfolio company, sneakers and apparel-focused e-commerce platform Kicks Crew. Gobi, Pacific Century Group, and Complex China led a USD 6 million Series A round for the start-up in 2022.

AEF GBA Fund’s interests span deep tech, artificial intelligence (AI), industry 4.0, healthcare, sustainability, consumer, and financial technology. “We are primarily focused on deep tech and we have a mandate to look at GBA nexus opportunities,” Tang added. “this is a very opportunistic approach.”