Silicon Dragon time: Taiwan LED maker places in race of China startups to NASDAQ

Add one more venture-backed IPO with a Greater China tagline to the stockpile accumulating on NASDAQ. This one comes from venture investor WI Harper and managing director Y.K. Chu, who led a $7.5 million financing in the firm three years ago. And, it's in red-hot energy savings sector--yes, you guessed it, another LED deal, SemiLEDs Corp.
I first interviewed the founder of SemiLEDs, Vietnamese native Trung Doan (see photo), in Taiwan about 18 months ago, and he related not only his own interesting international background and his growing number of patents, but the story of his firm's link to Boise, Idaho. Turns out that potato king J.R. Simplot helped to form and invested in SemiLEDs six years ago. We joked then that Boise may some day become known for a different type of chip, the kind that goes into LEDs.
Now, that day has come closr, thanks to the Dec. 9 debut of SemiLEDs on NASDAQ and its 52% increase in value on the opening day of trades. The IPO offered 5.3 million shares, priced at $17 each.
Unlike some mainland China deals that are going public with high valuations before turning a profit (read Youku), SemiLEDs is churning out profits from its operations-$10.8 million based on $35.8 million in revenues.
SemiLEDs has two plants in Taiwan and is ramping up operations in mainland China, leverage a Greater China strategy and presumably lower production costs. The six-year-old startup aims to triple its number of chips from a new, $350 million production facility in Foshan.
WI Harper, like other venture firms, is making a bet on LEDs as the light of the future. The firm has investments in two other Taiwanese firms in the LED business--NeoPac Lighting and Testar Electronics.

Silicon Dragon Startups (Dangdang) Show Their Stuff

I was at a holiday party recently for DCM, a well-known venture firm in the Valley that has seen a series of IPOs from among its China portfolio — e-commerce retailer and bookseller Dangdang and automotive website BitAuto as the latest examples — when I was asked once again. Why don’t you raise a venture fund? No, really.
I’ve always been terrible at math so I figure anything that has to do with high finance is better left to the numerically gifted. But all joking aside, this isn’t the first time the suggestion has been made.
Maybe I do have a knack for picking promising entrepreneurs and their startups to profile – though I never invest in these startups myself and don’t offer investment advice.
Just this week alone, three venture-backed Chinese tech startups I wrote about in my book Silicon Dragon – e-commerce retailer Dangdang, video sharing site Tudou and an energy savings producer LatticePower — are marking major milestones.
Each is on their way to being the talk of Wall Street as investment prospects: Beijing-based Dangdang for raising $272 million in an IPO and seeing its opening share price soar, video sharing site Tudou from Shanghai for being next in line to go public (following the lead of rival Youku and its share price surge of nearly 110 percent over the IPO) and finally LatticePower for raising $55 million from the IFC to continue developing its breakthrough light-emitting diodes from Nanchang.
Just three years ago, most Chinese startups were unheard of in the West, aside from search engine Baidu and online trading marketplace Alibaba, which were among the earlier wave of Internet startups to make a splash with successful public trading debuts. But now more and more small China businesses are following the lead of these trend-setters a few years ago and being recognized on the global investment stage as attention turns to emerging markets for improved returns.
The sheer numbers of listings and IPOs from mainland China alone is a head turner. So far this year, NASDAQ counts 34 new listings and 15 IPOs from Mainland China while the comparables at NYSE are 24 and 19.
Of the 34 mainland China IPOs this year, 19 are trading upward from their IPO price, with a few showing triple-digit gains such as NASDAQ-listed ChinaCache International and Hisoft Technology. Most of these startups have venture capital support, and from such leaders as Sequoia Capital, which alone is an investor in four of the newly traded Chinese companies on U.S. exchanges.
I wasn’t too surprised by Dangdang’s impressive opening day of trading. I recall interviewing co-founder Peggy YuYu back in 2007 for my book, when she and her husband were establishing the online bookseller. Then, I had been impressed by her quiet determination and keen intellect. Since that initial interview, she wisely kept a low profile, taking a cue from DCM investor David Chao to stay focused on fast and profitable growth of the startup and not get distracted by the noise of China’s booming marketplace.
The ten-year-old startup turned a profit last year. Moreover, it solidified its lead in the Chinese marketplace over an Amazon-owned rival, Joyo.com – thanks to micro-management of the business details – like relying on bicycle couriers to deliver orders — and Peggy’s own flair for merchandising in moving Dangdang from an online bookseller to an e-commerce retailer with a range of popular goods.
Next in line for an IPO among the Silicon Dragon startups is video sharing site Tudou.com.
Founder and CEO Gary Wang is another returnee who, like Peggy, got his education and work experience in the West before moving back to his homeland about a decade ago to try his own business – albeit both versions of business ideas that were proving successful in the U.S.
Over the past decade, these and many other Chinese startups have evolved quickly, and judging from insights I’ve gained from interviews with their founders, investors and competitors, are measuring up to the best from Silicon Valley.
Now, I’m spotting a new trend as Chinese entrepreneurs go to the next level and begin to show enough confidence to come up with new ideas and innovations – no longer just close copies of U.S. originals.
LatticePower, started by a physicist with skills and experience honed in China, is a good example of this new trend with its breakthrough technology for making a highly efficient source of light. I went to tour LatticePower in Nanchang and can still hear Sonny Wu, the investor at GSR Ventures, telling me that LatticePower will be a “billions” IPO.
That may be an exaggeration, but it’s clear that Chinese startups are maturing – and fast. They are beginning to set their own standards – be it on Wall Street or in the lab – and are a force that’s here to stay.

Silicon Dragon startup LatticePower raises $55M from IFC

Though I couldn't be in Beijing today for the signing ceremony at the China World Hotel, I know Sonny Wu of GSR Ventures is grinning. His deal, LatticePower, has just raised $55 million from the IFC to continue its expansion and breakthrough designs for LEDs.
Venture capitalist Sonny deserves the credit. He has been running LatticePower as CEO, a necessary step since the founder is a physicist by training. He'd rather be in the lab than in front of a PC crunching numbers.
LatticePower is Chapter 12 in Silicon Dragon, by the way. Don't say that I don't identify these innovative rising stars from China early on!

Silicon Dragon Social with Who's Who

A who's who of China venture recently attended our Silicon Dragon Social dinner in Hong Kong, co-hosted with financial group SecondMarket. The event proved so popular that we had an encore! See a selection of photos from the event, above: (l to r) Joe Zhou, Keytone Ventures with Bruno Bensaid, ShanghaiVest; Cadol Cheung, Fuel Capital; and Joey Chen, General Atlantic with David Berger, SecondMarket and Alice Au, Heidrick & Struggles.
See more photos from our Silicon Dragon PhotoStream:
http://www.flickr.com/photos/32790202@N06/sets/72157625314203833/detail/

Silicon Dragon Shanghai: November 8, 2010

Featured Event: Silicon Dragon Shanghai
November 8, 2010






Ray Zhang, Founder and CEO, eHi Car Rental (right)
Gary Wang, Founder and CEO, Tudou (above)
Gary Rieschel, Managing Director, Qiming Ventures
William Bao Bean, Partner, Softbank China & India
Tina Ju, Managing Partner, Kleiner Perkins China
Jixun Foo, Managing Partner, GGV Capital
Joe Tian, Founding Managing Partner, DT Capital
Thomas Chou, Partner, Morrison & Foerster
Intro: Egidio Zarrella, Global Partner-IT, KPMG
IPO trends: Eric Landheer, NASDAQ, head-Asia Pacific
Moderators: Rebecca Fannin, Silicon Drago
Russell Flannery, Shanghai bureau chief, Forbes

Shanghai Art Museum, Kathleen's 5
November 8, 2010, 6-8:30PM

Panel discussion, Talks, Q&A
Networking, Cocktail reception

To register, please click:
http://silicondragonshanghai2010.eventbrite.com/

In Partnership with AAMA Shanghai Angels

Sponsored by Morrison & Foerster, KPMG, NASDAQ, and Ushi.cn

Silicon Dragon: China Startups Battle the BAT

China Startups Battle The BAT
Rebecca Fannin
Forbes column, 10/18/2010
Chinese venture investing is growing ever less dependent on Silicon Valley.
Entrepreneur Joe Chen, who runs China's leading social-networking sites from his Beijing-based startup Oak Pacific Interactive, no longer looks to Silicon Valley for clues on strategy.
A Stanford MBA grad who formed and sold his first startup while still a student, Chen is rarely in the Valley anymore. That's because China's entrepreneurial roots have shifted away from there.
What concerns Chen most about keeping Oak Pacific Interactive healthy is not Silicon Valley stars Facebook, Google or eBay, but three giant Chinese brands he collectively calls the BAT--search engine Baidu, e-commerce powerhouse Alibaba and instant messaging service Tencent.
(See video)
http://www.youtube.com/user/RAFannin?feature=mhum#p/u/3/nnge-NM68Bg
These Chinese upstarts are so hypercompetitive that Chen finds himself continually aiming to outsmart these super-sized brands. But even as Chen does battle with the BAT, he has his eye on driving Oak Pacific Interactive to an IPO. See photo (right) of Joe with DCM venture investor David Chao.
In China, the action is shifting from returnee entrepreneurs--so called "sea turtles" who were educated in the U.S., got experience there and then moved back to China to start companies--and tilting toward what Chen calls "pancake turtles." Known for their ferocious eating habits and for being a Chinese delicacy, the pancake turtle is an exceptionally aggressive Chinese entrepreneur who is increasingly one-upping the returnees.
Not everyone agrees. While venture investors along Sand Hill Road may dig China, they still think Silicon Valley has a decided edge over the Mainland for innovative, if not disruptive, technologies--and will have it for at least another decade.
See Forbes column continued here:
http://www.forbes.com/2010/10/18/facebook-startups-venture-investing-intelligent-technology-china.html?boxes=Homepagechannels

Silicon Dragon: The Steve Jobs of China

Silicon Dragon: Silicon Dragon: The Steve Jobs of China

Silicon Dragon: The Steve Jobs of China

The Steve Jobs Of China
Rebecca Fannin
Alibaba's Jack Ma shows off his marketing flair at the annual AliFest summit.
Forbes column, 9/14/2010
Hangzhou, China -- If there is a Steve Jobs of China, it is Jack Ma, the founder and leader of Alibaba, China's largest e-commerce group. No other Chinese entrepreneur has the Jobs-like star quality, strategic vision and flair for promotion that Ma does.
Each September Ma can be found on stage at his annual AliFest in Hangzhou, the Chinese city known for its scenic West Lake and the home base for Alibaba. Labeled a "Netpreneur Summit," AliFest is, in effect, a love fest for Alibaba, its maverick founder and its accomplishments, which in ten years has gone from rising Chinese Internet startup to publicly listed player with global ambitions. In 2009, Alibaba earned $148 million on roughly $573 million in revenues (RMB 3.874 billion) and currently sports an $11 billion (RMB 77 billion) market capitalization. Yahoo invested $1 billion in Alibaba back in 2005 for a 40% stake.
This year's summit, held on Sept. 10, was on Ma's 46th birthday. To help him celebrate, Alibaba put on a show of impressive speakers: California Governor Arnold Schwarzenegger (on his first stop of a week-long trade mission), the U.S. Ambassador to China John Huntsman, and even a rival, eBay President and CEO John Donahoe. Last year's AliFest featured basketball legend Kobe Bryant and former U.S. President Bill Clinton.
Each one of these speakers complimented Ma for building Alibaba into an online trading platform for small businesses and creating millions of jobs. All called Ma a good friend, and presented him with a gift onstage.
Schwarzenegger gifted Ma with dark sunglasses and a form-fitting leather jacket, which Ma promptly put on. On cue, some 300 Chinese journalists and dozens of international reporters from madly snapped photos and shot video.
Later, at an Alibaba press conference, Schwarzenegger posed for more photographs and fielded questions as attendees were told that Alibaba aims to create 100,000 jobs in the U.S. (mostly in California, if the "Governator" has his way) and develop a Schwarzenegger-branded scholarship to train youngsters to be entrepreneurs.
See Forbes column continued here: http://www.forbes.com/2010/09/13/ebay-yahoo-ecommerce-china-technology-alibaba.html

Making Sense of China, Google and Censorship

Making Sense Of China, Google And Censorship
My Forbes Column, July 9, 2010

I had never been called a Communist until I testified at a hearing on Capitol Hill.
The hearing in late June was on "China's Information Control Practices and its implications for the U.S." U.S.-China Economic and Security Review Commissioner Carolyn Bartholomew was introducing me as an expert on China's leading search engine company, Baidu.com, and the Internet. What she meant to say was that I am a "columnist" for Forbes--a slip of tongue she immediately corrected.
That slip-up gave me an insight into the types of politically charged censorship issues that would be raised during the day-long hearing. I tried to present a balanced perspective of the Chinese Internet in a business context and point out how Baidu had modeled itself on Google and opened up the Internet to billions of Chinese. But many of the points I made about Baidu got caught in the political crosswinds over U.S.-China tensions.
The questions I was asked to address included some tough ones:
--Describe the nature of Baidu's relationship with the Chinese Government.
--Explain Baidu's censorship activities.
--How do these activities compare to those of other firms that operate in China?
--What are the implications of American involvement in China's Internet censorship activities?
--Two of Baidu's five directors are American, American investors provided much of the startup capital for the company, and U.S. institutional investors own significant stakes in it. Is Baidu, therefore, something of an American organization? If so, what is its responsibility for Internet censorship?
--Explain how Google's recent decision to scale back operations in China has affected Baidu and Chinese Internet users.
While I've covered the rise of Internet startups in China as a journalist for more than a decade, these are not the types of issues that regularly come up during my interviews with venture capital investors and entrepreneurs in Beijing, Shanghai and Silicon Valley. I'm used to reporting on the communications boom in China through a business lens.
But it soon became quite clear that the U.S.-China Economic and Security Review Commission, which is charged with submitting an annual report to Congress on the national security implications of trade and economic relations between the two countries, had a political agenda. It provides recommendations to Congress for legislative action.
Commissioner Jeffrey Fiedler started off questioning me by noting that he had invited one of Baidu's American directors--Greg Penner, general partner of Madrone Capital Partners--to testify, but Penner had declined. Fiedler pointed out that Penner moves among the higher reaches of American society and is closely connected to the Wal-Mart Stores fortune through his marriage to a granddaughter of Sam Walton.
I tried to keep focused on the cross-border China-U.S. investment issues that are central to my book, Silicon Dragon. I pointed out that Baidu owed its origins to Silicon Valley's culture of entrepreneurship and was not unlike dozens of startups developed by Western-educated and trained young Chinese who returned to their homeland as China was opening up via economic reforms. Venture capital investment in China-much of it from Silicon Valley's Sand Hill Road-peaked at $10 billion in 2008. Also, China has the world's largest Internet and mobile communications markets, and text messaging is quite routine.
Baidu, like all Internet companies doing business in China, self-censors its content on the Web. Google's recent rumblings over censorship in China--and its decision to redirect searches from inside China to Hong Kong, where it is still subject to the Great Firewall of China but no longer required to censor itself--has strengthened Baidu's financial results and share price. Internet analysts such as Richard Ji of Morgan Stanley are predicting Baidu will capture between 20% and 30% of Google's market share in China. (Google itself has 31% of the Chinese search market.)
Seated next to me at the hearing was Rebecca MacKinnon, a free speech activist and expert on Chinese Internet censorship. As Commissioner Bartholomew correctly pointed out to me during the hearing, MacKinnon's perspective did not match my own. She forcefully argued that American investors in China--institutional investors and private equity financiers alike--should own up to a broader responsibility to invest ethically, whether the issue is human rights, the environment or censorship.
The talk turned to how to deal with Chinese censorship and ethical investing. Commissioner Fiedler asked me if there should be a censorship tax on American companies that invest in countries where speech and information is restricted. My reply was greeted with a frown from Fiedler: It would have to be a very high tax to discourage investment in countries such as China where returns have been outsized in recent years as dozens of Chinese startups have gone public on the Nasdaq and the New York Stock Exchange.
I do agree with MacKinnon that the Chinese people would be worse off if all American companies and investors were to abandon the Chinese Internet. A policy of engagement to work for positive change, rather than withdrawal, will result in the best outcome.
Perhaps in an acknowledgment that my own statements were falling on deaf ears, Commissioner Bartholemew, a California lawyer who was previously chief of staff to House Speaker Nancy Pelosi, pulled me aside to let me know that she was probably the only one on the commission who understood what I meant when I referred to "Sand Hill Road." That did make me feel more at ease for a moment. Even so, I think the issues of censorship, American companies and the Chinese Internet will be with us for many years to come.

Silicon Dragon: DCM invests $4M in Silicon Dragon-like startup PapayaMobile

Silicon Dragon: DCM invests $4M in Silicon Dragon-like startup PapayaMobile

DCM invests $4M in Silicon Dragon-like startup PapayaMobile

Not too many 28-year-old female entrepreneurs manage to land $4 million in financing from savvy DCM for their first startup in China. But then again, Si Shen is far from average. At age 16, she got into the prestigious Tsinghua University in Beijing, soon graduated with a degree in computer science, then moved on to Stanford and picked up two Master’s degrees in three years’ time—all before starting her career as a product manager for China, Japan and Korea at Google.
Transferring from Silicon Valley to Beijing in 2007, she spent a year building the team for Google’s mobile business to 40 staffers. That grass-roots experience only served to reinforce her dream of starting her own business.
After leaving Google in 2008, she and former classmate Wenjie Qian raised some angel funding from friends and cranked up PapayaMobile to be what Shen describes as “the mobile Facebook on Android.” By September 2009 and after a few bumps in switching from the Java platform to focus instead on the open Android platform, she says the startup was profitable.
This is the classic stuff of successful Chinese entrepreneurs who returned to their homelands and put 'Silicon Dragon'--China's Silicon Valley--in motion beginning about a decade ago. This story of this startup, and the young female entrepreneur behind it, also showcases the energy level and smarts of China's entrepreneurs today.
It wasn’t too long before David Chao, who was clued into Shen’s progress, made sure that DCM backed PapayaMobile with $4 million to build its base.
Some three months-plus passed before government approvals were in place in China for investment in the startup, set up as a wholly owned foreign subsidiary, like many of the early venture-backed Chinese startups, in the Cayman Islands. DCM worked with Chinese law firm Hankun on sealing the deal.
It’s these kinds of entrepreneurial tales that show that the traditional Silicon Dragon model continues strong in China-–even while more and more investment moves locally within China, with less connection to Silicon Valley.
With DCM on board, Shen got the benefit of working with DCM partner and SINA co-founder Hurst Lin on dealing with operational issues in China. She was also able to rely on DCM’s connections to tap into the developer community in the U.S. and Japan, while building a customer base in the U.S., home to 85% of its revenues.
Today, PapayaMobile counts 3.5 million users for its mobile social networking service that offers up social games—including PapayaFarm--and virtual goods.
What’s next? Shen says she’s totally absorbed in building the business, flying regularly between Silicon Valley and Beijing to keep pace with the startup’s fast growth. Given the competition in China in the social networking and gaming sector, that’s likely a good thing.

Silicon Dragon: China's Coming Age of Invention

Silicon Dragon: China's Coming Age of Invention

China's Coming Age of Invention

When will the familiar label "Made in China" switch to something more challenging: "Invented in China"? Not for another decade at least, according to investors and technology entrepreneurs who gathered recently at an event in Beijing to discuss the topic. For video of the event, click here:
http://www.youtube.com/watch?v=PflvUVq4NC0

Sure, some things are already being invented in China. Internet whizzes have pushed advances in mobile gaming and instant messaging. But many obstacles prevent a full-scale leap into widespread inventing.
Keep reading my column at Forbes:
http://www.forbes.com/2010/06/06/pfizer-ipad-invention-intelligent-technology-china.html

Silicon Dragon 2010_Beijing Highlights-Invented in China?

Silicon Dragon: Silicon Dragon 2010_Beijing - Invented in China?

Silicon Dragon 2010_Beijing - Invented in China?

Our Silicon Dragon 2010-Beijing panelists debated the topic of whether China is a tech innovator. The conclusion? The trend is starting, but will be more pronounced in another decade. Sonny Wu of GSR Ventures (right) showed the LED lightbulb that his portfolio company LatticePower has just begun to produce for the mass market. Feng Deng of Northern Light Venture Capital (left) pointed to one of his China deals as a breakthrough poised to hit big-time! But he noted that stronger links between China venture capitalists and university labs need to develop as they have in Silicon Valley with Stanford and Berkeley universities. KPMG's Egidio Zarrella pointed out (center) that while small and medium-sized businesses are at the forefront of disruptive technologies, we shouldn't ignore the vast amount of R&D going on at major corporate labs in China's massive software parks. Sina co-founder Hurst Lin of DCM (left) argued that China needs to develop more of a creative culture akin to America's before it can truly innovate. He also pointed out that China needs education reform to encourage students to go beyond tests of their memory skills and to develop critical learning skills. Former Google China leader Kai-Fu Lee argued that there's no tech race between the U.S. and China, a point well taken by his fellow panelists. He pointed to the arrival of 3G mobile communications as a catalyst for innovation in China.
His own Innovation Works incubator lab has eight business projects in the works, with 30 planned by the end of this year. Look for IW to need more funds soon to back all the startups it's doing. I know. I've recently visited the labs and they're running out of space, just in time to move to bigger quarters. Tech entrepreneur Charlie Paglee (right) of Brannan Auto told how his Shanghai-based subsidiary is working on more efficient batteries for electric vehicles-a must for China and the polluted air in all the major cities I've visited! Meanwhile, Faming Zhang (left) described the discoveries that Crown Bioscience is making in finding a cure for cancers common in Asia--lung cancer being the most predominant. I recently visited Crown Biocience, housed in one of Beijing's immense life science parks and out so far from Beijing central that it's nearly at the Great Wall. Look for China to move upstream in biomedical, judging from the multiple interviews I've done recently with CEOs of several emerging companies in the life sciences.
Before the evening was up, Silicon Dragon author Rebecca Fannin autographed copies of the new, updated Chinese edition of her book. The books were graciously provided for the guests by her co-publishers McGraw-Hill and the University of International Business and Economics Press.
Our thanks to Roc Yang of China Data Group, an emerging player in outsourcing of financial services, for making introductory remarks and donating the books to our guests. Roc (left) also helped to facilitate the translation.
And a big thanks to our sponsors KPMG, O'Melveny & Myers, DCM and GSR Ventures. We couldn't have held this event at Beijing's Silicon Valley--Tsinghua Science Park--without you!
Finally, let me acknowledge AVCJ's Dan Schwartz for his own newly published book. Forbes Beijing bureau chief Gady Epstein (left) led an active Q&A session to ferret out the contents of Dan's book, which focuses (among other topics) on the future of venture capital globally.
Now onward to Sand Hill Road, October 7, and our next event! The program will be held at Rosewood Sand Hill, with an all-star group of panelists once again--Dick Kramlich of NEA for starters. And there's likely to be a surprise appearance by one of our best-known Silicon Dragon entrepreneurs. The theme of our next event? Of course, it is "China Shakes the Venture and Entrepreneur World."
We plan to continue to capitalize on the trend by holding our next China-side event in Shanghai, November 8. See Events at www.siliconasiainvest.com for more details.

Silicon Dragon Event: Tech Innovations in China, May 20, Beijing

Silicon Dragon: Silicon Dragon Event: Tech Innovations in China, May 20, Beijing

Silicon Dragon Event: Tech Innovations in China, May 20, Beijing

Event Registration Online for Technology Breakthroughs in China:
Panelists Kai-Fu Lee, Hurst Lin, Feng Deng, Joe Zhou, Sonny Wu and leading entrepreneurs in biomedical and cleantech
Moderator-Rebecca Fannin of Silicon Dragon
Q&A: AVCJ's Dan Schwartz with Gady Epstein of Forbes powered by Eventbrite

Online Ticketing for Technology Breakthroughs in China:
Panelists Kai-Fu Lee, Hurst Lin, Feng Deng, Joe Zhou, Sonny Wu and leading entrepreneurs in biomedical and cleantech
Moderator-Rebecca Fannin of Silicon Dragon
Q&A: AVCJ's Dan Schwartz with Gady Epstein of Forbes powered by Eventbrite

Silicon Dragon: Silicon Dragon Meets the Future of Private Equity

Silicon Dragon: Silicon Dragon Meets the Future of Private Equity

Silicon Dragon Meets the Future of Private Equity

The talk of midtown Manhattan this week was a heated discussion about the future of private equity, led by panelists (right to left) Leonard Harlan of Castle Harlan, Dixon Doll of DCM, Michael Pralle of Caprice Capital Partners, Xiaohu Ma of Morrison & Foerster, Ron Schramm of Columbia University and author and AVCJ chairman emeritus Dan Schwartz.
Schwartz, photographed here with guests Miki Kashiwagi and Tom Bingham of White Oak Research, John Kjorlien of Aladdin Capital and New York University's Ann Lee, challenged the panelists to concede that the golden era of private equity is over and that a new model that reflects greater focus on operational performance rather than financial engineering for the business is past due.
Harlan emphasized that the mega-funds in the private equity business are struggling with the credit crunch and that a fall-out is coming. He stressed that mid-sized firms have a brighter future and noted that Castle Harlan has bypassed the banks to finance deals and get them done. Venture capitalist Dixon Doll noted that the number of firms is being compressed as invesmtent returns have shrunk due to the plunge in portfolio companies going public.
Even so, both Harlan and Doll agreed that returns for the top half of private equity and venture firm will be in a healthy 20-30 percent range--a prediction later challenged by Schwartz. Doll made the case for a vibrant venture capital business as a job creator and growth engine of the economy. Harlan argued that the middle-market private equity firms should flourish, particularly if longer holding periods of portfolio companies can become the norm.
China was a core topic of discussions, with Morrison & Foerster partner Xiaohu Ma pointing out the importance of the Chinese government's involvement in fostering the growth of private equity and providing a legal framework for dealmaking.
Asked where the business is on the pendulum of greed and fear, Pralle responded that the era of greed ended with 2007, while adding that the highly cyclical business has encountered other downturns previously. As for real estate, the current game is finding the right acquisition opportunities now that there are motivated, over-leveraged sellers and cash or under-leveraged buyers.
The Harvard Club of NY offered a good networking venue for guests. Shown here are Howard Krongard of the China Investment Group (left) and Neil Jairath of UBS.
Below, moderator Rebecca Fannin of Silicon Dragon chats with fellow panelists Doll and Schramm.
We'd like to thank our sponsors Morrison & Foerster and DCM for their generous support. We'd also like to give thanks to the Global China Connection's David Zhu and Amy Shi for helping to make our event a successful one.
Now, it's on to Beijing, May 20, for our panel on leading edge technologies in China. The event will be held at the Silicon Valley of Beijing-Tsinghua Science Park with panelists Kai-Fu Lee, venture investors Joe Zhou, Sonny Wu, York Chen and two leading technology entrepreneurs.
For more info, see http://siliconasiainvest.com/Events.aspx

Silicon Dragon: Sand Hill Road Event Highlights in Photos

Silicon Dragon: Sand Hill Road Event Highlights in Photos

Sand Hill Road Event Highlights in Photos

Silicon Valley may not be as dead as some folks think, at least judging from the remarks of our venture capital futurists gathered to discuss the state of the industry. Dick Kramlich of NEA pointed to the solid returns his firm has scored, Ted Schlein of KP fame talked up cleantech (and later got a lecture from Stanford's Tom Byers--see photo), Gary Rieschel of Qiming spoke of a China fever and Charles Comey of MoFo confided that's he working on a lot of new deals (even though he wouldn't confess just how many RMB funds he's working on for investment firms in China.) AVCJ's Dan Schwartz (photographed with George Drysdale) challenged the industry leaders to reconsider whether it's time that venture capital needs some sort of facelift or just a new strategy to face the new millennium, considering the losses of the last decade. At least March was a lot better than the previous 18 months for the venture business. So for now, I'm all for keeping up an upbeat spirit.
Our next futuristic event to challenge conventional thinking is April 21, at the Harvard Club NY. Contact me if you want an invite.
Thanks goes to our sponsors NEA and Morrison & Foerster. Couldn't have done this Silicon Dragon-Future of VC event without you! Rosewood too.

Silicon Dragon: China sourcing: $1 billion and ambition

Silicon Dragon: China sourcing: $1 billion and ambition

China sourcing: $1 billion and ambition

$1 Billion and Ambition
What China is doing to become the world’s outsourcing giant
By Rebecca Fannin
Forbes, March 18, 2010
The chief executive of VanceInfo, Chris Chen, had no qualms in telling me that he wants the business he founded in 1995 to “become the biggest outsourcing firm in the world.” We met between flights at Beijing’s airport. He is on this way, counting Microsoft, Hewlett-Packard and IBM as clients.
He’s not the only one advancing China’s push into the vast, varied outsourcing market. In northeastern China’s industrial city of Shenyang, I recently met with Liu Jiren, the CEO of Neusoft – the largest Chinese outsourcing company with $540 million in revenues, 15,000 employees and 8,000 corporate customers, the majority of them in China and nearby Japan.
China offers a large talent pool of skilled workers who can handle both basic jobs such as processing insurance claims and mortgage loans to more technically advanced information technology jobs. Its outsourcing firms position their services for both local as well as international companies. One big selling point: cost. Compared with India, pricing for this labor is generally 30% less.
Then, there is ambition. China’s quest to lead the outsourcing ranks has no match. Name another country in the world that would craft a plan to spend $1 billion in subsidies, incentives, and training like China has in outsourcing. In grand fashion that recalls successive five-year government plans, this project seeks to develop 1,000 vendors, attract 100 multinational customers and foster the growth of 10 hubs nationwide for outsourcing. The goal is to create 1.2 million jobs in China by 2013.
China’s disadvantages compared with India are real, though. First, India has a natural advantage with English language skills. Secondly, India is typically considered less risky when it comes to intellectual property protections. India also has an edge in managerial skills to tackle more high-end, technical projects.
Last year, the Mainland’s outsourcing market grew by 25% to reach $25 billion in revenues, according to Chinese government statistics. That’s a fairly sizeable chunk compared with the $60 billion and 16% growth rate that industry association NASSCOM pegged for India in 2009.
China has the opportunity to surpass India in outsourcing in a couple of ways. Infrastructure is one. The Haidian tech district of Beijing is home to several challengers, all with the suffix “soft” in their name -- Beyondsoft, iSoiftstone, ChinaSoft – headquartered in modern office parks that resemble the finest in Silicon Valley. In Shanghai’s Zhangjiang Park, state-of-the-art facilities can be found in structures built to resemble a modernized version of Versailles, complete with moats and landscaped gardens (plus sports facilities, too). The scale of these zones is far larger than those in Bangalore, home to Infosys and Wipro.
But China needs to develop a global reputation for outsourcing. It’s a factor that Neusoft CEO Liu readily acknowledges, and one reason why he’s initially focusing on getting customers closer to home. Chinese outsourcing vendors rely on a large percentage of their work within the region or domestically – unlike India which derives the bulk of its business from abroad.
Currently, any manager at a multinational company looking to outsource work to China would face challenges in navigating through all the options of firms, locations, pricing and specialties. It takes on-the-ground insights to figure out, for instance, that Nanjing is making a claim as one of the country’s most promising biomedical hubs for outsourcing of pharmaceutical research and development and clinical trials. That’s in spite of outreach efforts.
Last May, municipal officials staged a welcoming ceremony for a group of investors, biomedical experts, entrepreneurs, technologists and real estate developers – even a doctor from Mayo Clinic – to witness the establishment of a biotech center in a city software park.
Later the group toured a lab that is standardizing herbs for use in Chinese traditional medicine, the facilities for an animal testing lab (still empty) and met with Gian Gao, dean of the Nanjing University’s School of Medicine and a professor at Yale. Chuck Zhu, CEO of a NJ PharmaTech, a startup that moved from New Jersey to Nanjing to do contract research here, beamed as he showed the delegation his new office space at the biotech zone.
Former Chinese government official Roc Yang, who today leads Beijing-based China Data Group, an outsourcing firm that specializes in financial services, is leading the charge for Chinese outsourcing firms to develop a unified voice and higher profile. He and others in the business would like China to have an industry-wide association like India has had for years with NASSCOM.
It will take some time before China gains the spotlight in outsourcing, but its rapid rise is just one more sign of the Dragon’s power.

Silicon Dragon: Inventor makes robotics vacuum cleaner!#links

Silicon Dragon: Inventor makes robotics vacuum cleaner!

Inventor makes robotics vacuum cleaner!

Need I also mention that I wouldn't mind having one of these robotics vacuum cleaners? Only in India can you find it now. But the inventor I met in Bangalore--Janesh Janardhanan at Robhatah--tells me this nifty device is coming to shelves soon at less than $150. Watch it work here:

Silicon Dragon: Northern Light picks up Lei Yang as venture partner

Silicon Dragon: Northern Light picks up Lei Yang as venture partner

Northern Light picks up Lei Yang as venture partner

Feng Deng didn't mention this to me when I saw him recently at Tsinghua Science Park, but his China-Siicon Valley firm, Northern Light Venture Capital, has just made a new hire: Lei Yang as venture partner.
Lei, a returnee to China from the U.S., is sourcing deals from the Beijing office in some of the firm's key areas of investment: cleantech and semiconductors.
He joins NLVC from VantagePoint Partners in San Francisco where he was a principal for three years focused on investment in solar, electric vehicles, lighting and energy storage. A PhD from the University of Wisconsin-Madison who also sports a degree from Peking University, Lei began his career at McKinsey & Co. in 2001.
Expect to hear more from Lei soon, as he is well-connected in the venture capital and tech space in China and Silicon Valley.

Silicon Dragon: India, the gap is narrowing

Silicon Dragon: India: The gap is narrowing

India: The gap is narrowing

India's entrepreneurial journey is a few years behind China's own path, but the gap is narrowing. I was surprised to see this in a recent three-week stint of interviews there.
Like China, India has a growing number of startups with innovations designed to disrupt standards and help solve big problems in sectors including biomedical, clean technology, digital communications and e-commerce. Yet China still has unique advantages over India, which I'll get to later.
A Chennai-based entrepreneurial team led by S. Nandakumar has a robotics system to precisely guide a needle to a tumor for a biopsy. A geek named Bikash Barai showed me a demo of a simulated cybersecurity attack, and the software his startup, iViz, has developed to prevent hackers from stealing confidential data.
In Bangalore, Robhatah founder Janesh Janardhanan, demonstrated how this soon-to-be-launched robot-powered vacuum cleaner works. At a retail price of less than $150, it seems like a bargain. I'm curious to see if Wal-Mart stocks it. Two Stanford and Indian Institute of Science Ph.D.s have a 3-D interactive application that makes online games, avatars and greeting cards come alive on mobile screens. Their startup, 3D Solid Compression, will soon debut software on Nokia and Sony handsets.
I also met with an impressive group of entrepreneurs in India working on the next generation of electric cars (Reva), recycling facilities for transforming electronics waste into precious metals (Attero), energy monitoring systems (Connect M), plus solar-powered LED lanterns (DLight) and water purification pumps, lights and energy (Kotak Solar). (See my Forbes Velocity blog: "Cleantech Startups Heat Up in India")
The Silicon Valley culture of tech entrepreneurship and venture capital has been slower to take hold in India than in China. Venture investment in both markets accelerated during the dot-com boom and quickly deflated with the Internet bust.
It took India until 2006 for a second wave of investors to arrive, joining veteran shop Sequoia Capital India. In China, funds from Sand Hill Road poured in earlier and by 2008, $9.3 billion was invested in Chinese startups. The comparable figure for India was $8.5 billion in 2008. Combined, these two countries make up 80% of Asia's venture investment.
Mirroring China, India is undergoing its own surge in mobile communications, and much of the startup action is centered in this market. Already, India counts more than 500 million mobile phone subscribers, second only to China's approximate 700 million users.
The popularity of mobile has led to a swarm of startups relying on the cellphone as a business platform, from gaming companies Nazara, Games2Win, and Kreeda, to search firm Just Dial, to ring tones and advertising, inMobi.
But Internet usage in India lags far behind China. Only about 81 million users surf the Net in India, with a mere 5 million using broadband connections. That compares to 384 million Internet users in China, 83 million of them on high-speed.
This gap in Internet usage is one reason why China has turned out so many publicly listed online winners while India has struggled to break through.
For instance, in China, search site Baidu, e-commerce marketplace Alibaba, travel site Ctrip, online classroom New Oriental Education and Technology, and gaming and social networking sites Shanda and Tencent all have gone public--many with lofty valuations.
The comparables aren't there yet in India because the Internet is still in the early stages of development. India has numerous online travel sites--TravelGuru, Cleartrip and Yatra. Not one has scored yet. TravelGuru was acquired by Travelocity last year for $12 million in a money-losing deal for the venture investors.
While India has its share of outsourcing, portal and mobile startups that have gone public, the success stories among dot-com players nearly starts and ends with job site Naukri, the Monster.com of India, which founder Sanjeev Bikhchandani took nine years to take public.
India's startups must go public first on in-country stock exchanges while Chinese startups can detour to Nasdaq or the NYSE without listing at home. This helps explain why China gets more credit for financial homeruns.
As India's Internet population grows, more home-grown startups in e-commerce, gaming and social networking could take off. Some up and comers I met with include online book seller Flipkart, customized merchandise seller Myntra, Twitter-like GupShup and a Facebook wanna-be named Minglebox.
Many of these Indian brands compete with big American Internet brands, partly because of the shared English language. That's a key difference compared to Chinese startups that have used their local language advantage to beat Google, Amazon and eBay.
One advantage for India's startups over China's: Entrepreneurs there have a faster runway to selling abroad. Some of their young businesses are really just a new twist on outsourcing, building upon the early successes of Infosys and Wipro in the early 1990s and later public listings of smaller firms such as Mindtree.
I stopped by TutorVista, the brainchild of serial entrepreneur K. Ganesh. His service offers unlimited sessions with Indian tutors to U.S. residents for $99 a month. I also met with Uday Challu, the entrepreneur at iYogi, which markets a remote PC service hotline staffed with workers in India who provide unlimited tech support for $149 annually.
The most visible difference between these two rapidly evolving consumer and technology markets is infrastructure. Beijing and Shanghai are a marvel of upgraded highways, subways lines and architectural achievements such as the new airports, mag-lev trains and up-to-date software parks. India's faulty infrastructure is improving, though hardly on the scale of China. In Bangalore, Delhi and Mumbai and other major cities, metros, bridges and multi-lane highways are being constructed, if slowly. Power supply is still sketchy.
Modern commercial zones are popping up, ranging from Whitefield on the outskirts of Bangalore to Gurgaon in Delhi and lots of recently erected skyscrapers in Mumbai's Lower Parel district--easier to get to now thanks to the Sea Link bridge.
Signs of India's growing middle-class population and consumerism are appearing as well. Café Coffee Day's founder VG Siddhartha has made his chain nearly as prominent as Starbucks in the U.S. Another positive indicator is an ample supply of five-star hotels from India such as Oberoi, Taj and Leela that are bustling with business--that in spite of the recent terrorist attacks in Mumbai and the extra security that is still very much in place.
It's easy to be seduced by China and its fast forward economic and technologic achievements. But even after years of reporting extensively on China, I find India to be refreshing. I left India encouraged by the groundswell of innovation and entrepreneurship and the spark of creativity that democracy encourages. The open access to the Internet in India helps too.
(from my Silicon Dragon column in Forbes)

Silicon Dragon: WI Harper seals third LED deal in Taiwan#links

Silicon Dragon: WI Harper seals third LED deal in Taiwan#links

WI Harper seals third LED deal in Taiwan

Energy efficient light-emitting diodes or LEDs for short are the new venture investment hotspot, judging from the swarm of businesses that are getting funded.
WI Harper just inked a deal with a Taiwanese firm that tests LED chips, Testar Electronics Corporation. It's the venture investor's third company in LEDs in Taiwan: SemiLEDs Corp. and NeoPac Lighting Group are the two other promising firms. I've met with the founders of both of these in Taipei. Trung Doan (in photo with Silicon Dragon author Rebecca Fannin), the founder of SemiLEDs, has several patents for producing LEDs at lower cost but still with reliability and quality. Jeffrey Chen, the founder of NeoPac, has patents for bright light with less power. See earlier blog post for more info, June 22, 2009.
As LEDs go mainstream, expect to start seeing them used in households. For example, Sonny Wu of GSR Ventures in Beijing just showed me an LED light bulb that one of his firm's five portfolio companies in this space is launching soon.
Currently, LEDs are most often used for street lights, and the backlights of personal computers and TVs. Projections by industry analyst iSuppli are that LED shipments will nearly triple from 63 billion this year to 166 billion by 2013.
The "sweet spot" for Testar, which was founded in 2007, is an outsourcing service to test LED chips.
WI Harper has recently closed a new investment fund, and has been inking several new deals in Greater China to fit its early stage tech focus, including a new wind blade manufacturer in the Mainland: Jiangsu Chuangzhou CTC Technical Fabrics, Co. The firm also made news recently by linking up with Kai-Fu Lee's Innvoation Works as a backer of the incubation lab founded by the former president of Google China.
In Hong Kong, I recently interviewed David Lam, managing director of WI Harper, to hear his views on the firm's investment strategy in cleantech. Lam, in case you didn't know, is now the president of Silicon Valley's Asia America Multi-Technology Association.
See Silicon Dragon Video.

Silicon Dragon: Sand Hill Roadsters debate the future of venture capital

Silicon Dragon: Sand Hill Roadsters debate the future of venture capital

Sand Hill Roadsters debate the future of venture capital

Silicon Dragon: Sequoia, NLVC lead $22M deal in China energy storage company

Silicon Dragon: Sequoia, NLVC lead $22M deal in China energy storage company

Sequoia, NLVC lead $22M deal in China energy storage company

Energy storage is a hot investment area in China. The latest deal in this sector is a $22 million Series C deal in Prudent Energy Inc., a manufacturer and developer of technology that can improve the efficiency of delivering energy on demand to telecom and power utilities.
Northern Light Venture Capital and Sequoia Capital China led the investment, which was over-subscribed. Returning as backers were DT Capital and Draper Fisher Jurveston, which has been making numerous deals in the cleantech area in both China and India.

CEO Johnson Chiang said Prudent will use the new capital to expand its battery manufacturing operations in Beijing, where it relocated last year.

Silicon Dragon Meets Cleantech in India

Silicon Dragon: Silicon Dragon Meets Cleantech in India

Silicon Dragon Meets Cleantech in India

Cleantech Startups Heat Up In India
Rebecca Fannin
Forbes, Feb. 21, 2010

Everyone knows cleantech is a hot investment category in the U.S. But what about in such emerging markets as India?
On a recent tech tour (self-guided) of Bangalore, Delhi and Mumbai, I found that India too has its share of entrepeneurs and investors who want to save the world. I interviewed the founders of several young businesses that are helping to improve the environment -- from electronic waste recyling facilities to solar-powered LED lights to electric cars and water purification systems. These startups are proving that cleantech enterprises can make money, scale in size and do social good at the same time.
Several of of these are startups funded by the same venture investment firms in Silicon Valley that support cleantech deals in the U.S.--Kleiner Perkins and Draper Fisher Jurvetson, to name two prominent examples.
Here's a sampling of some finds during my three-week journey.
On the outskirts of Bangalore in an industrial area, Kotak Solar is churning out solar-powered products of many kinds--to light up streets and gardens with LEDs, heat swimming pools and provide drinking water. Chief Executive K. Srinivas Kumar gave me a tour of the operations housed in the same building as his office.
To prove a point that solar can work for every day practical uses, Kotak Solar recently electrified a village in India with solar power. Now 120 families in this remote spot pay just five cents per day to get light and drinking water, plus juice for a community-shared mobile phone, plasma TV and Internet connection.
The next step is to take this pilot project to more villages in India, where 80,000 villages or 45 percent of the total, are still not on the grid, Kumar says. "We want to take this trend-setting model on a much larger scale," he adds.
Kotak Solar generated revenues of $25 million in 2009 -- up from $15 million the year before -- and the Chief Executive says the business has been profitable since one year after it was formed in 1997. Little wonder that it attracted $6 million-plus from Kleiner Perkins and Sherpalo Ventures in October 2008.
In Delhi, I met with a Stanford MBA grad and former Peace Corps volunteer Sam Goldman, who's also into solar. He's formed a startup in Delhi named D.Light Energy that produces and sells solar-powered LED lanterns to replace kerosene lights in the emerging market villages. In two years' time, he's sold 100,000 lanterns to villagers in India, east Africa and Latin America. The lights help moms work on handicrafts at night-time to earn some income and get kids to study after sun fall.
The potential is huge. Goldman says about 1.6 billion people worldwide are off the grid. He's aiming to reach 5 million people. His startup has funding from Draper Fisher Jurvetson and Garage Technology Ventures plus two social investor groups and is aiming to generate revenues of $25 million this year.
About an hour's drive from DLight's offices in central Delhi, I arrive at the offices of Attero Design in a gritty area of the Noida district. Here, CEO Nitin Gupta describes how his startup recyles electronic products and extracts precious minerals for sell on the London and Indian metal exchanges. His one-year-old startup made $1 million in revenues in 2009 and is aiming for $12 million in 2010.
With only a powerpoint and a dream to improve the environment, Gupta raised $6.3 million from Draper Fisher Jurvetson and NEA-IndoUS Ventures in May 2008. He's looking to soon raise about $7 million. So far, the startup has invested $5 million. Most of that went to setting up the plant about 200 kilometers north of Delhi in Roorkee. To build the plant, Attero got tax breaks from the state government and research help from the local Indian Insittute of Technology.
Forbes discovered the Reva electric car back in 2005, but that didn't prevent me from meeting with the founder Chetain Miani (pictured, with the author) at his headquarters in Bangalore, about a twenty-minute drive from the world headquarters of Infosys. Here, Miani showed me the electric powered-roadster that Reva is coming out with in 2011.
Not wasting a PR moment, Miani led me through car's features: a top speed of 130 kilometers, a range of 200 kilometers, an optional solar panel that can add eight kilometers driving distance, a choice of 2,000 colors, automatic transmission, and a telematics system where drivers can send a SMS to get a power boost to make it home in case the battery runs low.
Reva's new solar-powered plant that I toured will produce 30,000 of these vehicles -- there are 3500 on the road now, including Miani's own Reva -- and take the cars into Europe and Latin America, Japan, thanks in part to investment of $55 million from Draper Fisher Jurvetson, among small investors. So far, the cars are sold mostly in Bangalore and London. Once the 30,000 vehicles are sold, Reva will not exactly be within GM's range but will generate a respectable $500-$600 million in revenues, up from the current $10 million currently.
I asked Miani why anyone would want a city car other than Reva? He laughingly answered, "Good question. Let the consumers decide."
When Reva gets to the U.S., I may even give up my Honda Element!

Silicon Dragon Talk: Silicon Dragon Meets Singapore

Silicon Dragon: Silicon Dragon Meets Singapore

Silicon Dragon Meets Singapore

I've managed to squeeze in an entrepreneurship talk in Singapore! Here's the details. Thanks to the Entrepreneurship Centre at the National University of Singapore for hosting the event.

NUS Entrepreneurship Centre
(divison of NUS Enterprise)
Presents

Title : "Emerging Tech and Venture Investment Trends in Asia”
Speaker : Ms. Rebecca A Fannin
International Business Journalist
Author of Silicon Dragon (McGraw-Hill, 2008)
Date : 3 March 2010 (Wednesday)
Time : 6:00pm - 8:00pm
Venue : National University of Singapore
University Hall Auditorium, Lee Kong Chian Wing Level 2, 21 Lower Kent Ridge Rd
Please click HERE for campus map

Registration : Admission is FREE
Please register your details HERE by 3 March, noon
Seats are limited so please register early to secure a place

Program : 5:30pm – Registration
6:00pm - Emerging Tech and Venture Investment Trends in Asia by Rebecca Fannin
6:45pm – Panel Discussion
• Moderator, Prof. Wong Poh Kam Director of NUS Entrepreneurship Centre;
Chairman of Business Angel Network (SEA) Ltd

• Michel Birnbaum, General Partner, iGlobe Partners

• Neo Kok Beng, Co-Founder, President & CEO, AWAK Technologies

• Dr. Jeffrey Chi, Vice President- Investments, Vickers Capital Group

• Rebecca Fannin
7:30pm - Networking and Refreshment

Mobile, Internet, e-commerce, gaming, biotech, cleantech – they’re all booming in the emerging markets of Asia. Some startups with venture funding in these spaces have already scored successes with public listings at high valuations and acquisitions. Others are poised to return profits to their investors as the IPO window begins to open. Startups in Asia scale and get to profitability quickly. The region’s rapid economic growth and switched-on digital communications markets provide the spark for successful entrepreneurship and innovation. Rebecca Fannin, author of Silicon Dragon and a columnist with Forbes, discusses the emerging trends she sees from dozens of recent interviews with entrepreneurs and investors in China, India, Vietnam, Hong Kong and Singapore.

Silicon Dragon Meets Mumbai

We're having a Silicon Tiger Social in Mumbai, February 22, at the Four Seasons rooftop bar, 6-8PM. Please drop by and say hello.
See http://silicontiger-mumbai.eventbrite.com/

Silicon Dragon Meets Bangalore

We're having a Silicon Dragon Social in Bangalore! Drop by and say hello, if you're in town for Entrepreneur Week.
Talking tech, signing books & feasting @ KaatiZone, for Entrepreneur Week. Sign up here:
http://silicondragon-bangalore.eventbrite.com

Silicon Dragon: Here come the Viet Gamers

Silicon Dragon: Here come the Viet Gamers

Here come the Viet Gamers

Here Come the Viet Gamers
Rebecca Fannin
Forbes Asia Magazine dated February 08, 2010
Can IDG add its Tencent magic to a mini-Shanda?
Perched above a Big C supermarket on a street jammed with bipeds dodging mopeds, the Ho Chi Minh City headquarters of VinaGame is easy to miss. But inside, amid funky warehouse decor and lots of young staff (see photo) glued to big computer screens, sits Vietnam's leader in online gaming and social networking services. VinaGame aims to be one of the first homegrown Internet successes in its would-be tiger economy, a Vietnamese counterpart to China's huge hits, Shanda Interactive Entertainment and Tencent.
With stated 2009 revenues of $50 million on the back of what it says is 50% annual growth, VinaGame is capitalizing on Vietnam's rapid rise of digital communications and consumerism. Its chairman and chief executive, Le Hong Minh, 32, is an avid gamer himself.
Yahoo! BuzzSo much of one, in fact, that he aborted a financial career to start VinaGame in 2004 with a few fellow gamers. Duty calls now, however: The Saigon native has cut his playing time to one hour a day from his previous four to five hours.
Shy and modest about his accomplishments, which previously entailed posts at Vina Capital Group (no connection) and PricewaterhouseCoopers, Le nevertheless has big dreams. In a barely audible voice, he confides that he wants to take his startup public within a few years on Nasdaq or the Hong Kong Stock Exchange.
A large player in a relatively small pond compared with China or Korea (see table), VinaGame, by its own estimate, has a commanding 65% share of Vietnam's $109 million online-games market. Its titles, such as a localized version of Kingsoft Corp.'s Swordsman Online, attracted 3.5 million to 4 million gamers a month in 2009.
VinaGame also has moved into social networking--and plans to rename itself VNG to reflect its broader services. Two years ago it introduced the Zing.vn portal. Web research service Alexa.com ranks Zing.vn behind only Google and Yahoo in national Web traffic. Meanwhile, ZingMe, which offers music, entertainment, news, e-mail and instant messaging, leads the market with 4 million active users. "VinaGame is being modeled after Tencent," says Benjamin Joffe, chief executive of Asia-focused digital strategy and research firm Plus 8 Star in Beijing, referring to Ma Huateng's popular Internet and instant-messaging service, now worth billions on the Hong Kong exchange.
To read the rest of the story, please click:
http://www.forbes.com/global/2010/0208/companies-technology-online-games-vietnam-social-networking.html

Silicon Dragon: IDG's Scores

Silicon Dragon: IDG's Scores

IDG's Scores

Patrick McGovern recalls when people told him he was crazy to invest in China. That was back in 1993, when International Data Group set up IDG Venture Investment Fund. But he knew something they didn't grasp at first--through its technology, media and research business, IDG had an up-close look at which promising startups might turn into tomorrow's winners.
Since then there's been a gold rush to China, no doubt spurred by the handsome gains that IDG made from early calls. Besides a score on Tencent, IDG sold its holdings in search engine Baidu for $100 a share after buying them for $2.
IDG Ventures has since expanded to Vietnam (2004, with $100 million), India (2006, $150 million) and Korea (2007, $100 million). Says Henry Nguyen (see photo with Silicon Dragon author), IDG's Vietnam chief: "We are trying to replicate what we did in China and do what countries like Korea and Japan have in tech, media and telecom. We are obviously very bullish on Vietnam. It's a matter of using our collective experience across our funds."
Worldwide, IDG manages $3.6 billion in funds--$1 billion of that the firm's money and the remainder from outside investors--and has invested in 240 companies. The Asian deals have generated returns twice as high as those from its U.S. portfolio.
For the remainder of the article, please click:
http://www.forbes.com/global/2010/0208/companies-patrick-mcgovern-china-idg-scores.html

Silicon Dragon: Keytone Ventures finalizes investment in China's Travelzen

Silicon Dragon: Keytone Ventures finalizes investment in China's Travelzen

Keytone Ventures finalizes investment in China's Travelzen

Specialized travel sites in China have emerged as a hot sector for funding, the latest proof being a recent $15 million financing of travel search provider Qunar.com in Shanghai as well as a just finalized Series A investment by Keytone Ventures for Travelzen.com, an innovative travel site that offers bookings for Greater China and payment in multiple currencies.
Qunar’s third-round financing was led by GGV Capital, with participation from prior investors GSR Ventures and Mayfield Fund, which provided the series A funding in summer 2006, as well as Tenaya Capital (then Lehman Brothers Venture Partners), which was involved in a November 2007, Series B round. With the new financing at Qunar, GGV managing partner Jixun Foo joins Tenaya managing director Ben Boyer and GSR managing director Richard Lim on the Chinese startup’s board of directors.
The travel market has attracted considerable startup action and venture financings and early positions have been taken, most notably by NASDAQ-listed Ctrip.com, which, according to Analysys International, commanded a 52 percent market share as of the second quarter of 2009. Business for such sites has continued to boom as the increased standard of living among Chinese consumers sees growing demand for leisure travel. The online travel booking market in China expanded by 13 percent in the second quarter of 2009 compared with the same period last year, Analysys International figures show.
Qunar differentiates its business model from rivals by focusing on online vertical search for hotels, flights and travel packages, explained CEO and co-founder Fritz Demopoulos. It also differs from competitors by selling advertising on the site, but not handling the travel transactions or bookings, he added. Moreover, unlike Ctrip, the market leader in the travel space with both online and offline bookings, Qunar is purely online.
Qunar’s CEO said ample opportunity exists for expansion of travel sites in China, despite a proliferation of contenders. He pointed out that the online component of travel bookings and services is still only about 10 percent of the market versus about 60 percent in North America and Europe. “In a sense, we have only started this race and it is going to be a long one,” said Demopoulos, who brings 10 years China Internet experience to the job, having most recently served as senior vice president of corporate development for gaming company Netease.com. He pointed out that in the U.S., Expedia was a “late starter but eventually rose to prominence.”
Other specialized sites vying for room in the travel sector are Tuniu.com, a reseller of package tours, which was funded by Gobi Partners in April 2009, and HUBS, an online hotel booking wholesaler that picked up backing in November 2008 from GGV and Matrix Partners.

Silicon Dragon: VCs weigh in on Google quitting China

Silicon Dragon: VCs weigh in on Google quitting China

VCs weigh in on Google quitting China

My column at Forbes about the real reasons why Google is quitting China has generated a strong response. Check out the comments if you don't believe me.
http://www.forbes.com/2010/01/15/baidu-china-search-intelligent-technology-google.html
I asked a number of leading venture capitalists in China and Silicon Valley if they agreed with my premise: that it was primarily a business decision--not censorship--that is leading Google to quit China.
Here's what they had to say:
"You hit the nail on the head. Nice ink."
"Yes, I agree. This was purely a business decision. It is what is called a 'Hail Mary' in football."
"Interesting . . "
"Interesting perspective."
"One thing is real: arrogance is like the hare losing the race to the turtle. It's true that expats can't play local."
"Many people are happy that Google is taking this decision. We will see how this plays out. . . I think Google is on the right side of the discussion."
"Is it 100 percent business decision, probably not. But if they had been #1 in the market, would they say they were pulling out? Unlikely. So it definitely factors in that they are not winning and have a lot of bodies there."

Silicon Dragon: Forbes column-Why Google is Quitting China

Silicon Dragon: Forbes: Why Google is Quitting China

Forbes: Why Google is Quitting China

Why Google Is Quitting China
by Rebecca Fannin
It's not censorship. The search giant just couldn't compete with Baidu.
It's easy to give up if you've already lost the battle. And Google is doing just that in China. Eric Schmidt's move to quit offering a censored Google.cn search engine to the Chinese market has been read by idealists as the right thing to do. But it is first a business decision.
Even though Google's market share climbed from 15% in mid-2006 to 31% today, the company had hoped for a bigger share by now. Kai-Fu Lee, Google China's former president, told me in 2006 that Google not only wanted to have a competitive product to Baidu's, the local search leader, but a superior product. This didn't happen: Baidu has only increased its market share, going from 47% in mid-2006 to 64% today. That's a big lead.
Baidu, started by China-born entrepreneur Robin Li in late 1999 just as Larry Page and Sergey Brin were cranking up Google in Silicon Valley, understands the local Chinese market better than Google's Mountain View team.
Google fumbled with an initially inferior Chinese search engine launched in 2000, while Baidu grabbed the lead in China--and kept it--with several innovative search features customized for local tastes. Baidu introduced community-oriented services that appealed to Chinese Internet users, including bulletin boards where leads on information could be exchanged--a service that Google China's former president Kai-Fu Lee dismissed as having nothing to do with search. Baidu also offered instant messaging, a hit with China's Netizens.
Plus, Baidu was first to the market with mobile search and information offered up in multimedia, including video clips. Baidu also set up a national network of advertising resellers in 200 Chinese cities to educate businesses about the power of online advertising--a step that Google did not take.
Baidu's search feature for music also proved highly popular. Google, realizing the potentially illegal nature of the free music downloads, opted to provide links to music stores instead. Baidu later began collaborating with music labels on authorized downloads.
One other key factor put Baidu in the lead: Its search technology was considered superior to Google's in the Mandarin language. Scrambling to catch up, in 2005 Google hired the experienced Lee as its president from Microsoft. Then in 2006 Google launched its first Chinese-language search engine run from China, Google.cn. With Lee at the helm, Google recruited dozens of top engineers and linguists to its Beijing headquarters to perfect search results on Google.cn. Working at the towering headquarters of Google China at Zhongguancun Software Park in northeastern Beijing, some 100 engineers wrote codes to deal with inputting Pinyin or Roman letters to signify Mandarin sounds and such intricate tasks as delineating words in Chinese characteristics that don't clearly define white spaces.
The efforts paid off with speedier and more precise search results as well as more reliable service. But no matter the global brand name, the maximized effort and the financial resources, Google's Chinese search engine couldn't trump Baidu.
Perhaps Google should have turned over its business to local rival Baidu and let Baidu run with it. There is a precedent. Back in 2005 Jerry Yang turned over the management reins for Yahoo! in China to Jack Ma, the charismatic leader of China's e-commerce powerhouse Alibaba. Yang knew that Ma, thinking local, acting local, would have a better shot at getting the right formula for China.
Granted this is still a work in progress as Yahoo! refines its features for the Chinese market. But as Zeng Ming, former president of Yahoo! China, told me, "The net is about culture. You can't have expats running it."
Indeed, why give up now--unless you realize there's no way you're ever going to win the race. After all, Page and Brin had already crossed the line back in 2006 by agreeing to have their new Google.cn, run from China, subject to censorship. They didn't have much choice. All companies doing business in China follow the same Chinese government rules. Yes, Baidu's search results are also censored.
It wasn't all that long ago--2004--that it looked like Google might use Baidu as its entry route. Google invested $5 million in Baidu for a 2.6% stake but shifted strategy in mid-2006 by selling those shares for more than $60 million and rolling out Google.cn the same year. In hindsight, and given its bumpy history in China and this latest jockeying with the Chinese government, maybe Google should have pursued the go-with-Baidu strategy.
If Google exits the $300 million Chinese search market now, it's giving Baidu runway to be a monopoly. And if that happens, Baidu has a shot at becoming the world's dominant search company (it's already entered Japan) by sheer arithmetic alone.
By serving China's nearly 300 million Internet users and 670 million mobile phone users--both the world's largest markets--Baidu may someday be bigger than Google globally, something Robin Li once told me he has no doubts will happen.

Rebecca A. Fannin is an internationally recognized author and journalist who has been writing about entrepreneurship and innovation for nearly 20 years. Her book, Silicon Dragon, was published by McGraw-Hill in 2008 and translated into several languages. During the height of the dot-com boom from 1999-2001, she was international news editor at Red Herring, later joining the Asian Venture Capital Journal as international editor and writing for several leading business publications, including Inc., The Deal, Worth, CEO and Fast Company. She also authored "A New Dawn" for KPMG in 2009. Fannin has lectured at several universities in Asia and the U.S., and has made numerous public speaking appearances worldwide.
See Also:
Google's China Blues
Google Takes on China
Baidu Rises on Google News