Venture capital and private equity in China — the emergent environment
2004 was a turnaround year for venture investing in China. After a three year slow down in investments, more than US$1.2 billion was invested into Chinese ventures. Venture capital and private equity financed companies like Shanda, Li Ning, China Finance Online went public on U.S., Hong Kong or Singapore markets — raising hundreds of millions in new capital and yielding billions of dollars in valuations.
The "Seven Disciplines of Venturing in China," outlines the key features of China's venture capital and equity marketplace. The report, written by U.S.-based Deloitte Services LLP and China Venture Capital Association, illustrates the application of these principles — from sourcing, to managing and, finally, to exiting a deal. Based on detailed interviews with pioneering venture capital and private equity investors, the research identifies seven disciplines vital to successful investment in China. These include:
Developing "guanxi" or social capital networks to access information, and to establish and maintain business relationships;
Implementing corporate governance and shareholder rights;
Managing intellectual property;
Adapting foreign business models to local Chinese contexts;
Adding managerial and technical value to grow enterprises without much global experience;
Establishing clear pathways to exits through innovative legal structures;
Navigating complex political and regulatory environments for competitive advantage.
The key lessons of leading investors and innovators in China can inform all potential investors in the country — from limited partners in equity firms to corporate investors establishing operations in China. As the Chinese economy grows, institutional capital from private equity and venture investors will transform private and state owned enterprises into world class multinationals. But the art of a successful investment in China will require the patience and a mastery of these seven principles. Learn more from the PDF file attachment below:
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