China Private Equity/Venture Capital From People Who Know.
Project Alpha just posted the transcript from a very enlightening panel discussion on private equity/venture capital in China. The discussion was at JP Morgan's recent China conference in Beijing. I attended this discussion and found it very informative.
Shaun Rein (Managing Director, China Market Research Group) did an excellent job moderating the discussion between Robert Theleen (CEO, ChinaVest); Joel Kellman (Managing Partner, Granite Global Ventures), and Brandon Lin (Partner, SAIF Partners).
All three of the panelists have done big deals in China and all three did a great job conveying what it takes to succeed as a VC there. If you have an interest in China private equity/venture capital investing, you absolutely should read the transcript.
Comments
Great discussion! Thanks for sharing, Dan. I think there are a couple of future trends we can logically draw.
First, there is going to be more VC and PE activities in China. In 2006 the VC amount over GDP in China is about 0.067% versus 0.2% in the US and 0.3-0.5% in Europe and 0.5% in Israel (Dr. Mannie Liu). Obviously there is much room. The existence of robust exit opportunities will certainly help.
Second, the dynamics of deal flows is going to be different. On the fund side, as the money have concentrated on the few most successful funds, it is hard to see truly “early stage” funds these days anywhere. In China, funds have reached “mega” status in a matter of two years as opposed to two decades in Sand Hill Road (York Chen). This does not bode well for “true” start-ups. In fact the panel all kind of alluded to the fact that they are “growth stage” funds. On the target side, in an economy growing 11%, there’re going to be sectors that grow 20 or even 30%. Therefore the VCs are going to go out of their technology tradition, investing in consumer businesses.
Third, there might be some changes in the VC industry due to the emergence of RMB funds. Because of the lack of “GP culture”, Chinese LPs may be more reluctant to honor the traditions of 2% fee plus 20% carry. Just as in any other industry, local GPs may very well compete on “price”.
Fourth, the emergence of China VC fund in the US. Well, this is purely my imagination. As China continue to sit on this huge mountain of dollars, it is not inconceivable that some GPs will raise USD funds from China and invest in Silicon Valley. Globalization does go both ways. To PEs it may not be a big deal, but if such infusion of dollars goes into the VC industry, it may create another small bubble of something. Who knows?
Posted by: Tian | May 8, 2008 12:37 PM