Date post: | 13-May-2015 |
Category: |
Economy & Finance |
Upload: | phi-dinh |
View: | 2,083 times |
Download: | 1 times |
1
The Opportunities and Challenges of a Foreign VC
Investing in China
Venture TDF China Fund
Managing Partner
Tina Ju
2
VCs Classification in China• Overview of Buyout Funds, Private Equity and VC
• Local Venture Capital• Mainly founded by Government or state-owned entity; affiliation with
technology park or university
• Foreign Venture Capital• Mainly are US/European VCs ( Intel Capital,Carlyle Venture, Fidelity,
IDG, Softbank, etc )
• Independent VCs• Fund raising & management by a VC fund management company (Venture
TDF)
3
VC Investments in China
0100200300400500600700800900
1000
2001 2002 2003 2004
2001:US$520M
2002:US$420M
2003:US$990M
20041H:US$450M
4
VC Investment in 1st Half 2004• Investment of US$450M for 80 projects
• Top ranked is (28%) in Semiconductors, Internet sector is the second welcomed (27%) and telecom is the third (19%)
• Most of the projects are in Beijing, Shanghai, Zhejiang and Shenzhen
• Sectors focus emerge from each city/region (IC; Telecom & Wireless; Internet; Software & Services; Electronics manufacturing, etc.)
• VCs exit from 36 projects with return of US$212M, including 9 VC-backed IPO events
5
Industry Distribution, 1 H2004Telecom ranked the first in terms of deal number, while IC got largest amount funding
Industry Number of Deals
Percentage
Number of Deals with Disclosed
Investment Amount
Disclosed Investment
Amount(US$ million)
Percentage
IC 11 14% 10 124 28%
Internet 10 13% 10 117 27%
Telecommunications 17 21% 16
8119%
Services 5 6% 5 30 7%
Software 2 3% 2 25 6%
Traditional 11 14% 9 21 5%
IT Service 3 4% 3 6 1%
IT Others 1 1% 1 6 1%
Biotech/Medicine 5 6% 4 5 1%
New Materials 2 2.50% 2 5 1%
Others 13 16% 11 18 4%
Total 80 100% 73 438 100%
6Confidential
Comparison of 2000 & 2004
Challenge 2000• Legal Risk
• Can’t set up a Local entity• Some sectors prohibition to foreign investment
• Exit
Opportunity 2004
• Improving legal environment• WOFE or Joint Venture• WTO entrance
• IPO in US, Hong Kong and Singapore• M&A
7
Special Arrangement for Projects
Offshore Holding
Offshore US Fund
PRC Co.
Invest
On Shore
(Licensing vehicle for ICP, …)
Off Shore
WOFE
8
Foreign VCs are More Aggressive in 2004
• VC investment from Foreign VCs contributed 85% of VC investment amount in China, surpassing local VCs and dominate the market
• Foreign VCs’ Average single deal size reached US$10 million, about 7 times that of domestic VC
• In June 2004, Silicon Valley Bank organized a VC delegation to visit Beijing and Shanghai
• U.S. based mainstream VCs and funds have been exploring China opportunity by top management visiting, seeking deals for direct investment, setting up China offices, or invest into China-specific VC funds
9
Improving Exit Environment
• Exit is viable and feasible for Foreign VC funds. They are getting realistic returns from China portfolios through IPO or being acquired
• In past 1.5 years, nearly 50 IPO and M&A cases showed that the exit environment were improving for VCs
10
Some Successful Exit Cases
• Amazon – Joyo
• Sohu – Goodfeel
• Sina – Crillion
• Sohu – 17173
• eBay – EachNet
• Yahoo – 3721
• NHN – Lianzhong
• HK.com – New Palm
• Tom – Leiting Wuji
IPO• Linktone
• SMICS
• Sinocom Software
• DMX
• Shanda
• Mengniu Dairy
• Lining
• Ctrip
• 51Job
• China Finance Online
M&A
11
Exit Analysis in 1H 2004
VCs exited a total of US$157 million from IPO, 74% of total exit amount
Exit RouteNumber of
ExitsPercentage
Number of Exits with Disclosed
Exit Amounts
Disclosed Exit
Amount (US$ M)
Percentage
IPO 11 30.56% 10 156.93 74.17%
M&A 3 8.33% 2 15.45 7.30%
MBO 1 2.78% 1 0.15 0.07%
Trade Sale 18 50.00% 15 29.83 14.10%
Unknown 3 8.33% 3 9.21 4.35%
Total 36 100.00% 31 211.57 100.00%
12
Venture TDF China Fund• US$120M is under management by Venture TDF Group
• Venture TDF China Fund (www.venturetdf.com) founded in Oct 2000 , US$33M under management
• Sponsored by TIF from Singapore & Shanghai Venture Capital Corp
• Granite Global LLC, a U.S. based VC managing US$360M has been a strategic partner
• Focus in the area of Telecommunication, Media and Technology and other emerging and high growth sectors
• Total of 15 projects in China,including Alibaba, Baidu, Hurray, etc. 3 exits to date
13
Our Differentiation• One of the few independent China Venture Capital Fund
with local presence and owner like behavior
• Strong network of domestic, regional and US VCs, plus proven entrepreneurs where deals are sourced and syndicated
• Identify and invest in quality companies that are “Built to Last” (management, vision, solid business model and execution capabilities)
• Identify and invest in leaders of high growth sectors, leveraging on China’s vast and fast growing consumer market
• Balance return focus with emphasis on cash on cash and IRR returns to our LPs
14
China Fund’s Investment Calendar
0%
10%
20%
30%
40%
50%
60%
70%
80%
Oct
-00
De
c-0
0
Ma
r-0
1
Jun
-01
Se
p-0
1
De
c-0
1
Ma
r-0
2
Jun
-02
Se
p-0
2
De
c-0
2
Ma
r-0
3
Jun
-03
Se
p-0
3
De
c-0
3
Ma
r-0
4
Jun
-04
Se
p-0
4
De
c-0
4
PotomacBoard Seat
Active Follower
Observer
% F
un
d I
nve
sted
15
Concluding Notes• Technology application is more promising than technology creation
• Products and technology for import substitution, distribution channel to reach vast and diversified customer have good potential
• Seasoned and well rounded founders is still scarce in China
• Portfolio management needs more hand-holding & proactive involvement
• To win the game, it is quite important to operate by professionals who are familiar with local regulations, industry rules and market admittance system
16
Contact Details
Shanghai Office
Venture TDF Shanghai Co., Ltd
Unit 2102 China Merchants Tower
161 Lujiazui East Road, Pudong
Shanghai 200120, China
Tel. : 86-21-5888 3185
Fax : 86-21-5840 0078