Less than 5 years back, investment funds from the developed nations were apprehensive about going to China, since they had little understanding of the region’s capital market. Now, given China’s fantastic growth and recent development in various industries, venture capital and private equity firms would not dare to ignore this emerging global superpower.
Only in 2004, leading venture capital firm, Kleiner Perkins, had said it was content being focused on the Silicon Valley and had no plans to invest in China. But soon the top-tier investment firm, which has backed names like Sun Microsystems, Genentech, Google and Netscape, realized it could no longer ignore China and was forging its way into the Asian nation. In April last year, Kleiner Perkins announced a $360 million China Fund aimed at high-growth industries, such as Internet, media, wireless, health and green technologies.
Last week, Tina Ju, a managing partner at Kleiner Perkins in China, said in an interview with China Economic Review that they were following a hybrid strategy in China – investing venture capital as well as growth capital. Private equity investments are necessary as a fund moves from targeting merely TMT (technology, media and telecoms) investments to investing in traditional businesses, such as consumer, healthcare or cleantech firms. Investments in these traditional businesses typically take place at a later stage, so venture capitalists are turning into private equity investors.
Tina Ju also stated in the interview with China Economic Review that the macro trend that the firm was capitalizing on with investments into companies like 9Diamond (which sells diamonds online and offline) was consumer spending. Ju added, “All the PE investors are capturing that.” I guess with the Chinese consumer becoming more quality conscious, educated, aware of options and wealthy, retail will become a more popular target for venture capital and private equity funds.
Over the past year and a half, Kleiner Perkins has been aggressively investing in cleantech. Now, it plans to target the healthcare sector as well.
* For series, references are published in the last installment of the series.
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