Venture Capital Trends in China

China Venture Capital Forum organized by Zero2IPO made its Silicon Valley debut on April 24th – 25th at Crown Plaza Hotel in Palo Alto. More than 500 people attended the conference. Among them were venture capitalists, entrepreneurs, lawyers, and others who see the China market as the next big thing not to be missed.

With $4 billion raised and $1 billion invested last year, China’s venture capital industry has experienced exponential growth. The conference provided a platform for people to network as well as to discuss topics such as the capital market, regulation issues, opportunities, and strategies for deployment, etc.

A new message that highlights the conference is that China is moving away from its "world factory" image to "wealth-pursuing consumers" in world economy. Here are some key take-aways regarding opportunities:

1. Internet is powered by mobile phones and remains the most promising area
2. New wireless applications are evolving because of 3G rollout
3. e-Commerce is picking up with great momentum
4. Under-invested clean-tech creates new opportunities
5. Multi-media advertising for consumer brands is yet to come

One of the top issues discussed is whether the market is over-heated. We have heard that there is too much money chasing too few deals. However, according to Andy Yan of Softbank Asia Investment Fund, the overall capital supply and demand environment is still in favor of investors, although some “hot” deals are getting increased valuations. Hearst Lin, partner of DCM, made it very clear that there is no bubble in China.

Another issue is intellectual property. Surprising to many people in the audience (but not surprising to me), the panelists don’t consider IP as a big problem. The reason is most technology companies in China are in application rather than invention. In China, it’s not always the technology play, but more the execution play. The most successful barriers for comepitition are not technology barriers but business barriers.

It’s a very interesting time for China. As someone described it in Chinese: 乱世出英雄 – “the real heroes arise in chaotic time.” Gavin Ni, the founder of Zero2IPO, used a picture of the tip of an iceberg to end his presentation for VC industry trends. He didn’t give any explanation except saying “a picture is worth thousands of words.” It could mean the mass of the market is still yet to emerge, or it could mean there is danger for The Titanic. It’s up to individuals to interpret.

China, venture capital, China business, emerging market