Doll Capital Management (DCM), a leading US-based venture
capital firm, is trying to expand its footprint to traditional
industries with its new US$500 million DCM V fund.
"We are looking for opportunities in education, energy and
medical institutions in China this year, continuing the investment
emphasis on early stage technology companies," Hurst Lin, general
partner of DCM, told China Daily in an exclusive interview. He was
previously co-founder and chief operating officer of SINA
Corporation and joined DCM early this year.
VC firms typically pour their money into the information
technology sector, Internet firms and telecom companies. But many
are now turning to Web 2.0 technologies such as Blog, Instant
Messenger (IM) and Social Network Software (SNS).
"We are also interested in Web 2.0 technology, but the current
entry cost is too high, raising more uncertainties for profits,"
Lin said. "Some traditional sectors, which are neglected by most VC
firms, have more potential opportunities for us."
According to him, there are two types of opportunities in
traditional sectors: industries facing bottle-necks such as the
energy sector where technologies for new and clean energy are badly
needed; and sectors where efficiency could be boosted with
applications, such as databases in educational institutions.
"But the decisive factor is still the price," Lin added. "What
we most care about is the premium between the buying and selling
price."
DCM recently announced the closing of DCM V, a US$500 million
venture fund, bringing its total capital under management to more
than US$1.5 billion. Following four previous DCM venture funds, DCM
V is expected to begin funding new portfolio companies in late 2006
or early 2007.
"Quite a number of them will go to China, given the surge in
opportunities here," Lin said.
After entering the Chinese market in 1999, DCM has invested in
over 10 companies, including 51job, Semiconductor Manufacturing
International Corp (SMIC) and Vimicro. They have already completed
successful initial public offerings (IPOs) in the United
States.
In July, DCM and two other VC firms Walden International and
Alto Global injected US$27 million into Dang Dang, the country's
largest online retailer.
Of DCM's three key markets the US, Japan and China it has
invested 20 percent of its overall total in China and continues to
invest more in the country.
Since 1999, the firm has poured some US$100 million into its
Chinese investments. "And we will invest more than 4 billion yuan
(US$494 million) in the Chinese market in the next 10 years," Lin
added.
While injecting more money into China, DCM has also enhanced its
co-operation with local partners.
Last April, DCM formed a strategic partnership with Legend
Capital, a firm that manages more than US$100 million and has about
30 investments across two funds. DCM has taken on four investment
projects with Legend Capital two in China and two in the US.
Legend Capital's parent, Legend Holdings, also owns Lenovo Group
Ltd, which in late 2004 agreed to purchase the personal computer
operations of IBM.
The overall policy environment for VC firms is also
improving.
According to Liu Jianjun, an official with the National
Development and Reform Commission (NDRC), the government will
unveil a package of policies this month to encourage more rapid
development of venture capital firms.
VC firms will be granted preferential tax policies, and
insurance institutions and security firms will be encouraged to
invest in VC firms.
Meanwhile, the NDRC, together with the China Banking Regulatory
Commission, is working on rules to let VC firms improve their
investment capabilities through equity financing.
"We are very encouraged by these measures," said Lin, adding he
is quite optimistic about the potential of China's VC sector.
"There are three criteria for a booming VC sector: a rosy macro
economy, a big talent pool and enough money. And China has all of
them," said Lin.
VC firms' investment on the Chinese mainland will hit a record
US$1.5 billion this year, fuelled by capital being poured into the
Internet, telecommunications and semiconductor industries,
according to a recent report by Beijing-based Zero2ipo Inc.
In the first half of 2006, VC investment on the Chinese mainland
reached US$772 million, up 128 percent year-on-year. And there will
be a bigger increase in the second half, the report said.
VC investment in the information technology sector was US$562
million in the first half, 73 percent of the total volume. Of this,
Internet firms got US$276 million and telecom companies raised
US$152 million, while US$49.86 million went to the integrated
circuit industry, according to Zero2ipo.
(China Daily August 15, 2006)