Venture capital favors start-up companies with local knowledge
(Xinhua)Updated: 2007-01-19 14:52
Once making an investment, WI Harper will try to help the company with its resources, giving suggestions ranging from business development to human resources, according to Xiong. "We try to offer advice rather than interfere with the operation," says Xiong, adding WI Harper's managers spend about half their time with their portfolio companies.
Last February, WI Harper invested $2 million in HomeE information Holding Co, a Beijing-based online retailer for home goods such as floor-boards and toilets. Shortly after the deal, Qi Yue, the founder of HomeE, brought up the idea of acquiring a local home decoration company to speed up growth.
The idea won support from WI Harper, which then sent its venture capitalists to oversee the acquisition process. "We took care of the whole negotiation, due diligence and even the business integration process in three months," says Harry Man, who had six-years experience in mergers and acquisitions while working for Linktone Ltd and China.com, two NASDAQ-listed companies.
"In some areas such as mergers and acquisitions, we have more experience than the entrepreneurs and can help them," Man says. According to Man, more and more local entrepreneurs have been considering mergers and acquisitions to speed up company growth in recent years.
"Especially in the high-tech sector, money is no longer a problem for good start-up companies as venture capital firms are swarming into China," says Man. "The faster you grow, the more possibility of success."
Venture capital hotspot
In 2006, Chinese companies received $1.78 billion in venture capital, up 52.1 percent compared with 2005, according to Zero2ipo, a Beijing-based consulting firm focusing on the sector. The investment spree has made China the world's second largest destination for venture capital after the US, while competition in the sector has also been heated.
Unlike other venture firms, WI Harper shows little preference for Chinese returnees, despite their slick business proposals and fluent English. "We are seeking entrepreneurs with deep understanding of the local market, experience, strong execution and ability," says Xiong. "In this sense, overseas experience does not help."
So far, the biggest success of WI Harper in China is its investment in Focus Media Holding Ltd, a Shanghai-based company offering TV commercial services through flat TV panels installed in office buildings and even shopping malls.
Jiang Nanchun, the founder of Focus Media, received his education in a local university and worked in an advertising agency before setting up Focus Media.
"Although Jiang has no overseas background, he has deep understanding of the local market," Xiong says. "More importantly, he knows how to sell, making him able to forecast growth targets."
According to Xiong, WI Harper will continue to search for investment
opportunities in telecom, media and high-technology companies, especially
service-related ones. Last January, WI Harper invested $2 million in Shanghai
Healthcare Inc, which provides basic health information and reserves
appointments online.
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