Monday, April 9, 2007

Interesting VC facts in China

I was reading Marc van der Chijs' Shanghaied Weblog and he highlighted some interesting key facts about China that i thought i should share with you guys.

1. China is now the second biggest VC market in the world. Still much smaller than the US, but growing at an amazing pace. The focus is not only on high-tech, but also on high-growth (well, I guess most Chinese companies are high growth companies)

2. The VC industry is the most internationalized industry in China

3. There is a shift from offshore USD investments to onshore RMB investments. This year is probably the year that this shift will take place, partly due to SARFT regulation 75 which tries to limit offshore investments in China

4. Local IPO's become a more profitable exit option. For example an IPO on the Shenzhen stock exchange can be quite interesting, with a current P/E average of 51 and reasonable liquidity.

5. The average life span of a business plan in China is..... just one month! That shows how fast the market (incl. regulations, competitors) change here. Foreign investors often don't realize this. Competition is cut-throat here and you have to work twice as hard as outside of China to succeed, but you can also grow much faster than outside China.

6. Because many funds are trying to get into China, it is getting easier for entrepreneurs to get funded. This means that they get more powerful, and as an investor you need a quick decision process to make sure you don't lose the deal.

7. Chinese VC's vs. US VC's: Chinese VC's are more hands-on, have tougher term sheets, invest in several tranches, are more short-term focused, and (of course) have better connections in China.

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