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Foreign players are likely to become the dominant force in venture capital (VC) in China thanks to a trio of newcomers planning to enter the market.
US-based Defta Partners, Israeli firm Comgates and Japan's Global Venture Capital are all preparing to launch operations in China.
Defta Partners has well-defined goals in the world's most populous country. "We are seeking a Chinese VC to form an (information-technology) joint venture here and I hope the new firm will start operating in next few months or early next year," said George Hara, managing partner of the firm, which has its headquarters in San Francisco.
Hara said his company will inject US$20 million into the proposed joint venture to test the waters of the Chinese VC market.
The new company's investment will focus on next-generation telecommunications networks, broadband network applications, e-commerce, digital signal processing technology and embedded chips, Hara said.
Meanwhile, Defta Partners will also introduce some 20 of its portfolio companies in the United States, Britain, Japan and Israel to China to form joint ventures.
Comgates, an Israeli software developer for the transfer of voice, video and data over next-generation networks, said it would try to seek an alliance with Shenzhen-based Huawei Technology or other major Chinese telecom equipment vendors to tap the Chinese market.
The Tokyo-based Global Venture Capital Inc also showed strong interest in the Chinese market, although it is mostly focused on Japanese companies.
"We are still looking for Chinese partners and investment opportunities to bring our portfolio companies to China," said Kazukiyo Toyoshima, a partner and director of the Japanese firm.
According to a survey of 325 VC firms in China by domestic VC market researcher Zero2ipo Co Ltd that was released in July, 36 foreign invested firms poured US$87 million into the country in the first half of this year, while their 289 Chinese counterparts invested US$70 million.
"While many domestic VCs adopted a conservative attitude and focused on short-term returns, their foreign peers did not slow their pace in spite of the global high-tech depression and the lack of exit channels for their capital," said Gavin Ni, president of Zero2ipo. The average investment per project by foreign companies was US$7.3 million, compared with the US$990,000 from Chinese VCs.
(China Daily September 12, 2002)
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