Venture capital favors start-up companies with local knowledge
(Xinhua)Updated: 2007-01-19 14:52 What does it take for a venture capitalist to find a company he or she is willing to sink cash and time into? For Xiong Yuzhu, a venture capitalist from WI Harper Group, the answer is reading 300 business plans, 150 face-to-face interviews, and a bit of luck.
The San Francisco-based WI Harper is often associated with providing quick money in China. Its investment in the now NASDAQ-listed Focus Media in 2004 brought about a twenty fold return in just one year, and is known as one of the best venture capital deals ever made in China.
For Xiong, the strongest plays in China are start-up companies with strong local knowledge of the market. "China offers great investment opportunities for earlier stage investors like us, but it takes great patience and local knowledge to pay off," says Xiong.
Peter Liu, former group managing director at US venture capital firm Walden International, established WI Harper in 1993. Born in Hunan and having grown up in Taiwan, Liu led WI Harper to become one of the first venture capital companies to invest in China.
The company has around $400 million under management. With offices in San Francisco, Beijing, Taipei and Singapore, WI Harper has invested in 27 companies in the Chinese mainland.
Start-up friendly
Unlike deep-pocket investors, often in favor of late-stage investment, WI Harper is keen to put bets on start-up firms in China. After helping streamline the company's business, WI Harper tends to bring in US VCs for a second round of funding at a higher valuation.
Those companies, with staff between 20 and 180, are usually expected to be the top three players in an industry with high-growth potential.
In late 2005, WI Harper invested around $250,000 in Maxthon International Ltd, an Internet browser creator. The browser, first developed by a five-member team in Hong Kong, has been gaining popularity despite the dominance of Microsoft's Internet Explorer. It says users around the world have downloaded 40 million copies of the software since 2003, half of them from China.
Like the browser Foxfire, Maxthon provides tab browsing, an embedded RSS and podcast reader, a search bar, and allows users to customize browsing experience.
With WI Harper's help, Maxthon secured a series of deals with other Internet
companies, such as the US giant Yahoo Inc. Moreover, one year after its
investment, WI Harper brought US-based Charles River Ventures for Maxthon's
second round financing. In the process, the valuation of Maxthon increased nine
fold, according to Harry Man, vice president of WI Harper.
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