Unsolicited Holiday Advise to Venture Capitalists on China

Filed in archive Venture Capital on November 23, 2005

According to veteran reporter, Matt Marshall from Silicon Beat, now in Shanghai, China fever continue unabated, with two other venture capital firms raising new mega- funds focused at least partly on China.

JAFCO Investment (Asia Pacific) is targeting a $200 million fund, and Walden International, which has offices in both Palo Alto and San Francisco, wants to raise between $350 and $400 million. Both funds are to be raised in part or full by the end of this year, according to VentureWire (subscription required). Walden's Lip Bu Tan is the Chairman and founder of Walden International and has been active in the venture capital industry for the past two decades. Additionally, he introduced and pioneered the U.S. venture capital deals in Asia.

Sean Foote from Labrador Ventures issues a cautionary tale about investing in China. He writes in a recent issue of Venture Capital Journal, that "early stage U.S. investors -- don't be tempted. Picking which early stage China-based companies will be able to capitalize on domestic and international markets while executing on their own growth strategies -- including navigating anti-piracy laws, hanging onto IP and recruiting the right business talent -- requires substantially different skills than the ones you have honed in Silicon Valley and the U.S. "

My thoughts about those still on the sidelines watching the action in China is simple: They have little basis for interjecting red flags about investing in the Middle Kingdom. After all, according to a recent Goldman Sachs report, China's GDP will overtake the UK's and Germany's by 2010, Japan's by 2016 and the U.S. by 2041. Surely, those timid VCs and others who target China with rhetoric about heated antiglobization and protectionism missed the boat with the investment opportunitites in pre-bubble Japan. I disagree with all those naysayers and skeptics, I say get out of the offices and 4 star hotels and onto the streets of China and gain access to local knowledge.