Qiming Fund Signifies New Day for Partners

Filed in archive Venture Capital on March 5, 2006

U.S. venture capital group Ignition Partners has teamed up with other China investment specialists to create a new $200-million fund called Qiming aimed at making investments in the Middle Kingdom. Since the Chinese name translates as "startling" it appears to signify the beginning of a new day for its new partners.

The venture based in Shanghai is headed by two key executives from Seattle-based Ignition, including founding partner Rich Tong, and partner John Zagula. They are also joined by Gary Rieschel, founder of Mobius Venture Capital; Duane Kuang, former director of Intel Capital China; and Edward Zhou, who until recently was the senior manager of corporate business development for Cisco Systems.

Duane King in this recent interview with CVN describes some specifics about their fund and his confidence in China's venture capital industry.

CVN: What is unique about the new Qiming Fund?

DK: There are three characteristics that set the Qiming fund aside. First, all 5 people on the founding team come from long operating histories, including senior executives at Microsoft, Intel and Cisco. Secondly, Our fund structure is unique compared to others. While Qiming is a local fund with all investment decisions made locally in China, we also enjoyed the benefit of having two
partners from Ignition physically located in China working with us as part of the local team. Finally, the Qiming team has been investing in China for as long as almost anyone else in the market. Gary Rieschel was one of the earlier investors of UTStarcom, and for the last 6 years, I led the Intel Capital China team which was one of the most
successful and active investing organizations in China.

CVN: Is there too much venture money chasing a few good deals in China now?

DK: There is too much venture money chasing a few "hot" deals in China. There is not too much venture money for the whole China market yet. If you look at the size of the economy, the spirit of entrepreneurialism in China, and the increasingly maturity of the talent pool including managerial and technical, the aggregate pool of opportunity warrants the amount of money in the market.
However, the new surge of venture money in China is mostly going after two segments. One is late stage profitable companies. Another is web 2.0 companies. This creates the impression of too money chasing after too few deals.

CVN: What confidence do you have in the new Chinese enrepreneur and tech
innovation?

DK: As mentioned earlier, the entrepreneurs in China are maturing. We are seeing some second time founders now. Business model innovation is going strong. Tech innovation is still somewhat lacking and hopefully will come in the years ahead.

CVN: How are you sourcing new enterprise development in China?

DK: If you are asking how we source our deals, then there are a few avenues. First, all the partners have our strong industry connections, dating back to our operating roots from Cisco,Intel, and IBM. We get referrals and business proposals from our former colleagues and business associates. Secondly, we have been investing in China for a number of years. Entrepreneurs seek us
out. With the launch of our new fund, we have been getting lots of enquiries lately from entrepreneurs who either knew us from before or know of us as
investors. We also have close relationship with quite a number of venture capitalists and intermediaries in China and we are perceived as value added
co-investors by many.

CVN: What are your views on the new China venture capital landscape?

DK: We could be at the beginning of a virtuous cycle of venture capital in China. The Silicon Valley has proven to be a successful one and China is moving towards the same. We expect to see more firms set up as partnerships, much like Qiming, and have successive funds with stable teams. We expect more and more people with company building experience to get into the business, and
with that, more and more early stage investing. This will also encourage more true innovation on the part of the entrepreneurs. In the past, while the VC industry complains about the lack of true innovation in China, entrepreneurs
also complain the lack of vision and foresight on the part of the venture capital industry in China to back early stage innovation. We expect this to change in the next few years.