The Venture Capital and Hightech Firm Financing Mechanism

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The Venture Capital and High-tech Firm Financing
Mechanism
Dr. Xia LI General Manager Centre of Venture
Capital Research and Development Shenzhen
Capital Group Ltd. July 3, 2008
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Content

• 1?VC Background in China
• 2?The Characteristics of High-Tech Firms in China
• 3?How do VCs invest High-tech Firms in China?

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1. VC Background in China

• The typical VC industry has only less than 10
  years history, which can be divided into two
  periods
• period 1 1999 to 2005
• period 2 2005 to present
• The liquidity reform of China Capital Market,
  which happened in 2005, is the milestone of China
  VC industry. So the China VC believe that the
  Coship listing is the symbol of The VC Springs
  Coming
• The VC mechanism is developing very fast, and the
  investment preference is changing.
• Beijing, Shanghai and Guangdong are 3 centers of
  VC industry in China.

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2. The Characteristics of High-tech Firms in
China

• The entrepreneurs have very strong technological
  background.
• A lot of High-tech Firms have their own
  Intellectual Properties.
• Most of them are based on the market-oriented
  strategy.
• Most of them are the Small and Medium Size
  enterprise, which is sometimes neglected by the
  financial market.
• Most of them can get some assistances from the
  Governments.

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3. How do VCs invest High-tech Firms in China?

• How do VCs pick up the High-tech Firms?
• How do VCs evaluate the High-tech Firms?
• How do VCs make the decision to invest High-tech
  Firms?
• What do VCs do for the High-tech Firms after the
  investment?
• How do VCs exit from the High-tech Firm
  investment?

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3. How do VCs invest High-tech Firms in China?

• How do VCs pick up the High-tech Firms?
• The clear ownership of Intellectual Property
• The high entrance barrier
• The great market growth potential
• The clear business model
• The excellent team

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3. How do VCs invest High-tech Firms in China?

• How do VCs evaluate the High-tech Firms?
• The Intellectual Property
• The revenue forecasting and related
  hypothesis/condition
• The team
• The credit records
• The risk factor analysis

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3. How do VCs invest High-tech Firms in China?

• How do VCs make the decision to invest High-tech
  Firms?
• More detail Due Diligence
• Panel discussion meeting
• Technological expert participation
• Multi-voting mechanism
• Multi-stage investments

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3. How do VCs invest High-tech Firms in China?

• What do VCs do for the High-tech Firms after the
  investment?
• Help High-tech Firms to obey the law and the
  other regulations
• Help High-tech Firms to make and execute their
  strategies
• Help High-tech Firms to integrate resources and
  expand
• market channels
• Help High-tech Firms to solve difficult problems
  
• Help High-tech Firms to enhance public relations

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3. How do VCs invest High-tech Firms in China?

• How do VCs exit from the High-tech Firm
  investment?
• IPO
• Share transfer
• MBO
• Bankruptcy

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