Exclusive Interview with Tracy Ji, Founding Managing Partner of Meridian Capital China

Technology, Financials Author: Lina Peng Editor: Luke Sheehan Jul 28, 2022 05:13 PM (GMT+8)

In the middle of 2022, venture capital firms are still pondering the economic trends in China, with their collective mentality leaning towards the pessimistic. EqualOcean hosted a dialogue with Tracy Ji, Founding Managing Partner of Meridian Capital China, to explore the driving ideas behind her optimism.

interview with meridian capital

Editor's note: China's venture capital and private equity industry have undergone huge shifts over the past few years, thanks to a sea change in the global and domestic socio-economic climate.

As Chinese businesses struggle to adapt to the new normal – marked by more stringent regulatory oversight against overseas listings, a Covid-battered economy, dwindling household consumption, and stronger headwinds – as startups aremoving up the value chain. Likewise, their financial patrons are looking for new preferable places to locate funds.

So, how are VC/PE investors faring in these turbulent times? What are the challenges they deem the most intractable and what are their solutions? Conversely, which are the emerging areas of opportunities that can be turned into the next money-spinners?More generally, how do they expect China's entrepreneurial scene to evolve in the next couple of years? And most importantly, after having their finger on the pulse of the country's innovations, are they still China bulls or have turned into China bears?

These are defining questions to which no one has the exact answers. But we at EqualOcean believe that one can at least get a glimpse into the future of the Chinese economy by looking at how VC/PE investors are planning and making their moves.

With this in mind, we havestarted a new series called ‘China VC Interview,’ in which our analysts will sit down with frontline industry practitioners to hear their opinions about China's VC/PE industry.

The following is the third in this series, conducted after talking to Tracy Ji, Founding Managing Partner at Meridian Capital China (Chinese:华映资本).

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If we all respond to the environment with cynicism and pessimism, we might be stuck in the economic mud for a longer while. During the first half of 2022, Meridian Capital China and Tracy Ji have been rare presencesin venture capital communities with theirupbeat mentality and bold action. As Tracy sees it, the VC community has entered a “speed skating curve” now. “Different reactions to collision might lead to reversed competition.” And for those who are able to “make the turn”, the future is bright!


“During the first half of 2022, 60% of our consumer companies have achieved revenue growth on year-on-year basis. One third of them managed to grow over 100% on revenues. That exceeded expectations.”

Meridian Capital China is one of the very few venture capital firms with which EqualOcean has spoken about OKR (Objectives and Key Results, a management tool used to measure the team cohesion and work performance).

“In terms of our AUM (Asset Under Management), speed on the curve is our chance at overtake.” 

About 「Meridian Capital China」 and Tracy Ji

Meridian Capital China is a venture capital firm founded in 2008. Rooted in TMT industries, it has now developed intoa comprehensive fund with AUM worth over RMB 8.5 billion in USD and in RMB. Meridian looks for innovation-driven startups in the following sectors: consumption upgrading, technology, enterprise service and web 3.0. Extending around A-series, Meridian Capital China has invested in over 200 companies, withfamous ones including BOSS, Weimob, Biren Technology, Golden Union Commercial, Ocean Butterflies Music, Hefu-Noodle, Zihaiguo, White T, Hibobi, Mabang ERP and Origin Quantum.

Tracy Ji is Founding Managing Partner of Meridian Capital China. She has an MBA degree from Imperial College London and over 10 years ofexperience in venture capital investment. Tracy Ji is a veteran in TMT, consumption and digital content industries with expertise in distributed investment and industry integration. She used to lead the investments in Tian Ge, Weimob, Golden Union Commercial, Jiemian, BOSS, DeepBlueAI, Joyowo.com, Hefu-Noodle, Zihaiguo and Origin Quantum.


Part Ⅰ | Plan thoroughly and act precisely

EqualOcean:What are your primary industries this year?

Tracy Ji:Our professional team focuses on three main sectors: consumption, technology and enterprise service. There are alsosub-sectors such as communication, high-end materials, base computing, and industry robotics under technology sector, cross-border, metaverse, food, beverage&catering, consumer technology, and synthetic biology under consumption sector.

We are looking for consumer projects, despite the industry’s current unpopularity. We do have faith in great brands to resist economic downturns.

Right now, our guiding principle in locating consumer projects is ‘strong trends, solid fortresses’. So, which projects lie in the scope of strong trends? We count healthy lifestyles, pet care, beauty and digitization as strong areas. What constitute solid fortresses? The application of new technology, such as multi-brand asset management, supply chain upgrading, digitization and material innovation. Take an e-commerce project in our portfolio as an example. The company just disclosed a new round of fundraising and is currently building a nation-level lab on clothing material innovation.

In the first half year, our investment in consumer projects moved to later rounds than the previous years. Compared with startups from scratch, we now prefer consumer companies that have constructed a certain level of fortresses such as brand awareness, core competitiveness or supply chain ability in their divisions and are looking for reproduction or resource integration. For example, we invested in some multi-brand management companies in cosmetics, skin care and sportswear sectors.

Another focal point of Meridian Capital China is technology. We have constructed an integral ecosystem from basic technology breakthroughs to higher-level applications, under which some sub-sectors received extra emphasis such as 3 dimensional(3D) perception technology. This technology has a huge space in future application. Not only does it constitute the hardware infrastructure of themetaverse, but it’s also the technological post of intelligent manufacture, industry automation and automatic pilot system. Meanwhile, we invested extensively on the foundation layer and hardware layer of web 3.0 such as optical display, integration and digital twins. As for content layer, we’re looking for projects that transform IP works into NFTs.

Lots of projects are cross-industries now, for example consumer technology. Teams collaborate if a project concerns product definition and technology threshold.

EqualOcean:How did the companies in your portfolio perform against the first half year’s sluggish consumption background?

Tracy Ji:The epidemic hit almost all businesses. I was a little worried, since we’d invested heavily in consumption during previous years. Lately I found chances to go on business trips to see how our companies functioned during the epidemic, along with the detailed business data collection and interpretation. During the first half of 2022, 60% of our consumer companies have achieved revenue growth on year-on-year basis. One third of them managed to grow over 100% on revenues. Their performances exceeded expectations. Starting from June, 90% of the companies have experienced revenue growth compared with 2021 since the economy is gradually recovering.

On retrospect, we think how we choose investment targets matters. Our two major criteria in screening consumer projects are the following: whether they serve livelihood needs such as food and clothing, and their digitization ability, which is significant in combating the epidemics’s aftereffects. All the companies we invested in reach at least one of the standards.

Digitization underlies all Meridian Capital China’s investments. By digitization we mean a comprehensive version. For example, online growth, outreach and sales for marketing and distribution, digital brand chains for retailing businesses, and transforming advertising on public media into private member management. We also invested in many enterprise service companies that facilitate digital transformation. There were Weimob, Mabang ERP and Multidimensional Data which serve a specific industry, and there were those such as digital marketing and store management softwares which canserve one type of needsacross multiple industries.

EqualOcean:How was your performance in the first half of the year?

Tracy Ji:The investment volume of Meridian Capital China grew double-digit on a year-on-year basis, even higher in Q1. So, I wasstill workingnonstop for the first half year. In May, when the Beijing office was shut down for epidemic control, I carried a set of camping equipment with me and held meetings with people outdoors.

But we did feel more comfortable in setting the pace. Firstly, many founders held a milder mentality towards fundraising. They wouldn’t expect too high for either valuation or speed. Secondly, there are not as many investors as the previous years when we jostled each other forward. We have more say now.

EqualOcean:Meridian Capital China previously invested mainly in cultural recreation, media and consumption. What brings your attention to technology?

Tracy Ji:Back when Meridian Capital China was founded, the 1.0 portal web era was at its end and the 2.0 mobile era was just burgeoning. We chose culture and entertainment industries, not because the team had related backgrounds(we actually didn’t), rather that we saw lagging actorsand openings in digital content and online marketing. We invested in basically every big enterprise service company in this sector.

It’s impossible for a 14-year-old fund to stay on a single point all the time. We respond to the trends based on a set of guiding principles that consists of underlying perception, methodology and standards. We don’t restrict ourselves to certain industries. Instead, we make progress all the time. Our investments in technology from application layer down to system layer and base layer don’t start from this year.

We founded the tech team in 2013. At first, we invested in the application layer. Weimob, BOSS, Shimo, and Joyowo.com were cases of this phase. Then we developed in depth to industry software, intelligent detection, AI and IoT. Cases during this phase included Beagle Data, Seeking Intelligent Control, Seaway and Gizwits. Now we want to go still deeper to look at base computing, communication, new material and new energy such as Biren Tech and Origin Quantum. We havestarted to pay attention to web 3.0 and metaverse in 2017 and now invest deeply in this sphere, which we think could be the starting point of the next phase.

One of our realizations is that our perception and investment ability in a certain sector canbuild with time. Meanwhile, it takes time to form a talent pool. One division we have beenplanning to invest in recently has been under our inspection for one year and a half to two years. We’ve seen a lot of projects worldwide, only to find quality targets recently which also suit our growth stage. Personally, I believe in thorough inspection and precise action.

EqualOcean:What’s the most valuable quality you see in startups?

Tracy Ji:Innovation. Last year, when an intense atmosphere shrouded the investment community, we set INNOVATION as the theme of our annual conference mainly to deliver a ‘looking forward’ attitude.

Every time a new project is raised in the team, the question we must ask is: how does it innovate? A project without innovation, even with the utmost cost performance, is beyond our consideration.

For the longer return cycle of venture capital investment, no innovation equals lagging behind.

Every project we invest in is innovative either on supply side or on demand side. Take Zihaiguo (an instant food that can heat automatically when eating) as an example. On the consumer side, it fills in the blank between take-out and cooking and serves a bachelor lifestyle. On technology side, it develops fast frozen techniques to maintain the nutrition and taste of foods. Also, the company has built anautomated robotic supply chain.

EqualOcean:Why choose Singapore to build a local team?

Tracy Ji:Meridian Capital China hasroots in Singapore. Our first fund is in SGD (Singapore Dollar). Currently, Singapore plays the role of middleman ingeopolitics. It is also a crucial confluence of top minds and projects in theweb 3.0 and metaverse, which is a major trend in our investment.

Part Ⅱ | Managing the team with synergy, transparency and open-mindedness

EqualOcean:How to guarantee the organizational stability when your directions are in constant change?

Tracy Ji:The talent mobility is not high within the team. We have an employee assessment system which is transparent and objective for everyone based on their target completion degrees, not on Guanxi (an unofficial relationship between people, often implying exchange of interests) with me.

The fundamental organizational capability lies in corporate culture and values, which are– in Meridian Capital China – honesty and integrity, beingself-driven and result-oriented. I approved of management in previous years, but now I lean towards “weak management, strong consensus”. For example, when we look for talent, the match of culture and value outweighs ability. We would like to see ‘strong consensus’ formed all over the organization so it could be recognized and followed by every member.

We also appreciate institutionalization, which can be disassembled into three senses: one, make division of labor functional. In Chinese saying, we call it “one pit for one radish”, “two pits” are fine if the “radish” is especially capable. Based on that, we expect deliverables to be in the form of normalized products that meet steady anticipations, whether they be daily working achievements of team members, or project management and post-investment services so that organization transparency could be lifted, working achievements be accumulated and efficiency be promoted. The third part of institutionalization is comprehensive digitization, which we have achieved both in office automation and in investment and project management. The MOSS system Meridian Capital China developed has been updated to version 3.0 to include limited partners in. OKR from the top down across departments could be seen and aligned clearly, which further facilitates cooperation. Business data and financial data of the companies in our portfolio are uploaded to the MOSS system regularly and integrated in the Meridian Capital China digitization.

In June 30, we held a partners’ conference once project data for the first half year became available. The speed was realized through digitization, not by manual labor.

I want to further introduce the web 3.0 ‘distribution’ philosophy into management. We worked in distributed locations during the epidemic. Besides, everyone could volunteer to lead new projects despite department or rank – as long as you could win the approval and participation of other departments, or even external resources.

EqualOcean:How do venture capital firms view organizational capability?

Tracy Ji:The calling of VC is to create returns for limited partners. Everything that serves the goal directly, effectively and quickly should be done.

A healthy organization is one with a lot ofconsensus and few disputes –  meaningthe optimal outcome canbe achieved efficiently. Otherwise, it may take longer for the team to achieve something, or the risk of falling apart is higher. The management of Meridian Capital China hasn’t experienced many changes since its founding time, mainly because the consensus in cultural level maintained organizational stability. The result-oriented behavior style, in the meantime, has helped the management avoid much internal friction caused by ego and meaningless fights for control.

Every person follows a certain pace of development which needs to be respected. In Meridian Capital China, the promotion mechanism is unobstructed. There are early employees now working as managing partners, two-year new arrivals becoming investment leaders in one direction, and those who stick at frontline research posts for a long time.

On the other hand, certain constant standards are required to align the whole team and to make sure it stays on track to draw inand retain talented minds. For example, the web 3.0 project was first initiated by younger members in our team. With them sharing lots of information and insights in that area, the whole team formed a recognition that web 3.0 is a strong trend and we started to increase investment right away.

EqualOcean:What are your ideal talent profiles?

Tracy Ji:In addition to competence, we value the matching of thinking mode and vision. I don’t like it when people drift through life and make do with whatever happens. Systematic planning is what I would appreciate, but of course that’s adaptable to environment feedback. I don’t need the team to see me as ‘mysterious’, rather I would express my attitude frankly. If anyone wants to persuade me or change my stand, they just need to present adequate reasons.

I manage the fund the way entrepreneurs manage companies. Top minds are important assets for funds, but even the same person could sense totally different driving force on different platforms. Meridian Capital China offers plenty of chances for talent, provides data and tool support, and creates a result-oriented atmosphere so people can exert their capabilities to the utmost and the team can function in a positive cycle.

Part Ⅲ | Cross the cycles, outrace the trends

EqualOcean:What’s your expectation towards consumer business investment in the next two quarters?

Tracy Ji:We stay positive to our projects. They have survived tests so far and their businesses have recovered fast since the epidemic was mitigated. Currently the communication between the companies and us is more frequent than usual with us providing some industry indicators as feedback and benchmarks. Despite the still harsh consumption environment, I have faith in great companies to cross economic cycles and even outrace the trends.

When we invested in Hefu-Noodle in 2020, there were lots of pessimistic voices in the market. Their ability to resist the downturn was proven later. Of course, Hefu-Noodle was struck by the epidemic as other catering brands but not as hard as at the beginning of 2020. Their performance in the first half year qualified for expectations on year-on-year basis and the goals set at the beginning of 2022.

Nonetheless, I told our companies that after what had happened during the past half year, the management must set a kind of ‘bottom line’ mindset and prepare ahead for the worst, even the probability is slim.

EqualOcean:What’s your biggest feeling after extensive exposure to web 3.0?

Tracy Ji:Founders in the web 3.0 ecosystem are especially unique in that they are willing to share and open up as ‘blockchains’. We are used to high bars for admittance in 2.0 era. When we march forward towards 3.0 era, the experience and perception we’ve acquired during the previous times could be an advantage. But it’s essential that our cognition and behavior models evolve with thenext generation’s thinking style, not just on the technological level, so we can merge into the 3.0 ecosystem and become part of consensus. There lies great uncertainty in the future of web 3.0 and metaverse. Whoever believes in that vision hopes that more hands will be joined towards delivering that promise.

How do we steer our fund towards the right direction with all the emerging variables such as quantum computation, web 3.0 and metaverse? We do think it necessary to find certainties from uncertainties: although the industries face lots of changes, the certainties of direction and apex allow us to act swiftly. For new territories, we profile key abilities and characteristics of successful companies, then we look for targets according to the profiles.

EqualOcean:What’s your new Chinese narrative when raising funds from USD investors?

Tracy Ji:People worry about USD investors ‘fleeing away’ from China, yet they’re still active in China as far as I can see. They wish to acquire valuable long-term assets in moderate costs at appropriate times, which certainly still exist in China. I started from hedge funds and accumulated sensitivity to macro-economy and transactions. Indeed, lots of investors have returned to mainstream markets from riskier and not so rewarding emerging markets after the US increased the interest rate. But not all their funds will flow back to the US where unemployment problem is serious and the risks of depression or stagflation loom. Comparatively speaking, the Chinese economy has clear advantages in depth, width and potential. Even in consideration of risk hedging must they allocate resources in China. There are few better choices than China elsewhere in the world.

EqualOcean:What’s your expectation of Meridian Capital China towards the next phase if we count 12 years as a cycle?

Tracy Ji:Having a highspeed is our chance at overtaking on the curve in terms of our AUM. There will be some investment opportunities and a window next. We are relatively optimistic. I like to watch short track speed skating in the winter Olympics. There might be many crashes on the curve that lead to players’ different reactions which, in turn, lead to totally different results. An organization with medium size and a smooth communication mechanism like ours could act swiftly and adjust ourselves accordingly once we reach aconsensus.

EqualOcean released the ‘Exclusive Interview Series on 100 Global Brands’ in July 2022. By selecting the 100 most representative global brands originating from China and interviewing their principals, EqualOcean intends to deliver industry know-how and boost the global journey of Chinese enterprises. You’re welcome to send emails via lena@equalocean.com or scan the QR code below and get in direct contact with EqualOcean if you’re interested in the topic.