Venture capitalists are shunning trendy information technology investments for a diverse range of industries including jewelry retail, organic farming and foot massage enterprises.

 

Broad IT investment has lost weight and traditional services investments are on the rise, a research report shows.

 

Some investors, however, insist they will seek opportunities in TMT (technology, media and telecom) sectors.

 

Chinese venture capitalists created a record high with US$3.18 billion invested during the first 11 months of 2007, a skyrocketing 78.9 percent increase compared with total investment in 2006, according to Zero2IPO Group, a Beijing-based VC and private equity consulting firm.

 

"The day of depending on IT has passed away and it will probably never return," Gavin Ni, president and chief executive of Zero2IPO, said during an investment forum in Shanghai yesterday.

 

In terms of industrial distribution, IT investments to November 30 fell to 42.5 percent from 61.5 percent last year.

 

IT deals fell to 46 percent from 59.6 percent, according to Zero2IPO.

 

Clean energy, education, healthcare and consumer-oriented services have become hot topics, panelists from firms such as Sequoia Capital, Bain Capital and Carlyle Group said yesterday.

 

Sequoia Capital China, which manages funds valued at US$1 billion, is interested in personal wealth management, clean technology and chain fast food stores, according to Zhang Fan, Sequoial China's managing partner.

 

IDG Technology Venture Investment plans to invest in car-related sectors. "We had contacted with a food massage chain firm and, without doubt, it is a promising market in China," said Hugo Shong, general partner of IDG, which has invested into chain restaurant Chamate.

 

Unlike the IT investment downward trend, traditional industries related to people's daily life accounts for 16.4 percent of total deals and 16.3 percent of total investment in the first 11 months of 2007.

 

Similar investments in 2006 accounted for 10.8 percent for deals and 10.9 percent for volume. Bio-related and healthcare investment accounted for 12.2 percent on volume compared with 5.6 percent in 2006, according to Zero2IPO.

 

"The consumer-oriented investment is hot as it won't be influenced by the austerity policy, if it is kicked off," said Tim Gong, SIG Susquehanna Asia Investment's managing director.

 

SIG has invested US$400 million in China and Gong's team has shown interest in dental clinics, car renting, the second-hand car market, jewelry and medical service firms.

 

SAIF, which has invested US$500 million in China this year, has an ambitious investment project on agriculture, especially organic farming.

 

"The firm produced the world's best rice and it exports to Europe and Japan," said Yan Yan, SAIF's managing partner.

 

In the energy sector, China's market revenue from renewable energy, including wind, biomass and solar, may exceed overall growth expectations by more than 20 percent until 2020, because of the high level of support from the Chinese leadership, according to Merrill Lynch, a US-based investment bank.

 

Some investors, however, still have strong confidence on IT.

 

"IT, such as semiconductor production, is closely tied to country's growth therefore we strongly believe that will bring us lucrative returns," said Wang Nengguang, Legend Capital's managing director.

 

Compared with traditional industry investments, it probably takes longer for investors to exit through IT investment.

 

But IT investments will bring a long term solid return, Wang said.

 

(Shanghai Daily December 7, 2007)