Sofinnova Partners, Europe's largest independent venture capital firm (VC), said that it expects to inject funds into Chinese high-tech start-ups within three years, while continuously expanding its indirect investment in the local market.
"We will have our own operations in China within three years," Jean-Bernard Schmidt, president of Sofinnova Partners, told China Daily in an exclusive interview.
"Thus we will be able to invest directly in China."
Sofinnova Partners invests exclusively in early-stage companies in high-tech sectors, including life sciences and information technology (IT), with investments ranging from 500,000 euros (US$620,000) to 20 million euros (US$24.8 million) per deal. It has been focusing on European and US markets.
The VC's interest in life sciences is the development of new medical drug therapeutic devices. While in IT sectors, it has been investing in the technologies of microelectronics, embedded software, consumer electronics and network management solutions.
As Sofinnova Partners arrives in China, it will be inclined to invest in "fast-growing IT markets, in particular wireless applications, mobile phone-related technologies and consumer electronics" and also "newly-emerging technologies such as IPv6 (Internet Protocol version 6) where China is leading the way globally", said Schmidt.
The start-ups Sofinnova Partners seek are either university laboratories and R&D centers, or spin-offs from large companies, he noted.
"We had no China-market related investment three years ago, but now we are expanding quickly," said Schmidt.
"We expect to invest in a total of 10 to 12 foreign companies in the China market next year," he said.
The VC has so far invested in six foreign high-tech companies that either have business operations or sell products through local distributors in China, with an average investment of 5 million euros (US$6.2 million) each.
The largest investment is 6Wind SA, a France-based leading provider of key networking software for IPv6, with US$6 million injected since 2002. The ceiling could well reach 15 million euros (US$18.6 million) in the near future, according to Schmidt.
6Wind is closely co-operating with the Chinese Government and leading research institutions to promote the upcoming infrastructure construction of IPv6-based network across the nation. In particular "the partnership with the Acoustics Institution of the Chinese Academy of Sciences ensures our applications are developed with more localized content," said Alain Daste, chief executive officer of 6Wind.
Sofinnova Partners' benchmark for returns is usually "tenfold over five years," according to Schmidt.
"Although we cannot be sure about how much we will get from the injection in 6Wind -- it depends on the market -- we are confident as the company is building value around its technology."
For Chinese high-tech companies seeking VC injections, Daste added that they need a sound, active secondary financial market for IPOs (initial public offerings) or plans to go to NASDAQ, but "they are facing challenges from the country's existing financial market, where there is much that needs improving."
(China Daily September 15, 2005)
