By Red Herring (September 12, 2005 Issue) China’s young, innovative companies desperately need early-stage funding. But there have to be some ground rules first.

In China, precious little venture capital goes into seeding startup companies and that, say VC experts on the ground, is what’s holding the country back from beginning its ascent to becoming an innovation powerhouse.

That could change, if the World Economic Forum gets its way. Over the past year, the Geneva-based WEF held a series of workshops—with Chinese and Silicon Valley universities, venture capitalists, and global consultancy Ernst & Young in California and China—all aimed at pinpointing problems and remedies for nurturing early-stage companies. Now, the plan is to present findings and recommendations arising from those deliberations to China’s central government agency in September, including the State Administration of Foreign Exchange, Ministry of Science and Technology, China Securities Regulatory Commission, State Council Research Office, Shenzen Stock Exchange, State Development and Reform Commission, State Administration of Taxation, and National People’s Congress.

This Red Herring article on China is being re-distributed by Adj.Prof.Dr. Martin Haemmig at the SECA event on China, since he was involved in this article together with his team members from the World Economic Forum VC Working group on "Nurturing the early-stage venture climate in China", managed by Mr. Anand Sunderji, the WEF community manager of this VC/PE team.

China First: A Growing Venture Capital Business Case, Clearer Challenges

By
Gil Forer (Global Director VC Advisory Group, Ernst & Young)
and Adj. Prof. Dr. Martin Haemmig (CeTIM)

CHINA’S VENTURE CAPITAL INDUSTRY has experienced strong growth in recent years, both in scale and breadth of activity. Existing foreign and local venture capitalists have stepped up the pace of investment, both in early-stage and private equity deals, while new entrant investors join the market as a China strategy becomes increasingly essential. Venture-backed M&A and IPOs meanwhile have provided profitable exits and created the success stories needed to fuel further investment. The business case for venture capital investment in China is clearly growing, driven by a virtuous cycle of investment and returns, corporate activity, and overall economic growth. At the same time, the increasing activity is pressing against regulatory and structural barriers, bringing the challenges faced by the venture capital industry in China into clearer focus.

The document includes other topics related to typical questions for investors in China, accounting differences to US GAAP, and due diligence in China.

by Dr. Martin Haemmig (CeTIM) for SECA Event on China (October 24/2005)

China’s booming economy has revitalized Asia’s venture capital community, with vast sums pouring into the PRC from around the globe. Major risks remain, however, not only legal, regulatory and fiscal issues but also around the areas of corporate governance and intellectual property protection. Nevertheless, a number of factors favor collaboration and/or investment efforts, being it to provide access to foreign portfolio companies to the world’s largest single market or to tap into innovative companies for investment purposes and help them exit in international markets.

Dr. Martin Haemmig was invited to contribute an article to the launch issue of the Indian Venture Capital Journal (IVCJ--10/2005). The 8-page article describes "How and Where Institutions Invest in PE/VC General Partners". The article describes the global fundraising flows and global best practice by LPs and GPs.
Dec 11, 2005 in Mumbai/India.

Author: Martin Haemmig