Art of investment
Updated: 2007-07-24 12:00
The second challenge is the increasing popularity of China' domestic stock market. I think renminbi-based funds are a trend and we are also considering getting involved in this in some way. But there are many uncertainties in terms of operation and policies such as the tax rate. There is also a difficulty in raising money from the domestic market. It' easy for us to raise money from foreign investors, but I think it will be much more difficult for us to raise an equal amount of renminbi in China, as there are few local investors who have a deep understanding of venture capital, the ability to take risks and the willingness to pay management fees to venture capital partners.
Q: What's your comment on competition between venture capital firms for a good project?
A: I think competition between VCs boils down to money, which is a very important resource in the commercial world. But too much competition will waste a lot of money. It might not be good for the individual company and it' not good for the venture capital industry. The average investment and return rate in the industry will be lower and investors will not give us their money as much as they did before.
But I must also say that competition is good for the whole economy. Competition between VCs gives opportunities to many companies or industry sectors that may not have had the chance to get investment before. This will encourage and promote development and innovation. But it will hurt the venture capital industry in the long run.
Q: How do you compete with other VCs for a favorable project?
A: We cant guarantee we'll get every good project. We have our principles, one of which is not to raise our bid in order to clinch a project. I think we have established certain advantages during our time in the Chinese market, such as our brand, management team and successful investments. We have invested in many more companies that have gone on to hold IPOs or be purchased for a high price than other VCs have. I think we have played an important role in the success of these companies. So it' not all about money.
Q: How do you identify a good project?
A: Loosely speaking, it's about a good management team in a promising industry. We don't require the project to be profitable at the time, but we want to see a trend. That' the difference between us and private equity investors.
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