San Francisco and Shanghai groups form venture fund targeting China
Two leading business groups in San Francisco and Shanghai are teaming up to invest in Chinese start-ups, adding to the growing ranks of venture capitalists looking to tap China’s booming economy.
The new venture fund, announced here Wednesday, is expected to launch with $200 million to $250 million and will target companies in information technology, biotechnology, alternative energy and transportation industries.
The move is part of a broader partnership between the Bay Area Council and a regional economic alliance centered in Shanghai. No timetable has been set for the launch.
The Bay Area Council is supported by more than 275 large firms such as Google Inc. and Cisco Systems Inc., which have invested heavily in China. The Shanghai group, known as the Yangtze Council, includes commercial hubs in the Yangtze River Delta and is headed by Vincent Lo, a real estate magnate and one of Asia’s richest men.
Lo, whose Shui On Group developed the fashionable Xintiandi retail district in Shanghai, said he would personally back the venture fund.
He and the Bay Area Council’s president, Jim Wunderman, called their groups’ cooperation a historical achievement that would boost two of the world’s most vital economic regions.
Venture capitalists pumped $1.8 billion into China last year, 55% more than in 2005, according to research and consulting firms Ernst & Young and Dow Jones VentureOne. Still, that’s just a fraction of the $28 billion of venture funding in the U.S. last year.
Silicon Valley venture firms are increasingly jumping into the Chinese market. This week, Kleiner, Perkins, Caufield & Byers, based in Menlo Park, said it had raised $360 million to invest in technology start-ups in China and would be opening offices in Shanghai and Beijing.
Such moves are “just scratching the surface” in China, said Richard Kramlich, co-founder and general partner of New Enterprise Associates, one of the world’s leading venture capital businesses.
New Enterprise has invested in 14 companies in China, including Spreadtrum Communications, a Shanghai developer of wireless products that is expected to be listed on Nasdaq shortly.
Kramlich, who serves on the executive committee of the Bay Area Council, said Wednesday in Shanghai that the partnership with Yangtze Council was particularly attractive because of the support from local government officials.
Relations with local governments are often crucial to business success in China, but they can also present considerable risks. In recent months, Shanghai’s party head and a number of his subordinates were ousted on corruption charges, putting many projects on hold and a chill on new ventures.
“We’re here for the economy, not politics,” said Kramlich, though he acknowledged that the two were intertwined.
“That’s why we try to be fast on our feet,” he said.
