Venture Capital Guiding Fund for by fjhuangjun

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									Venture Capital Guiding Fund
for Technology-based SMEs



                      Li Wenlei
    Administration Center of Innovation Fund for
               Technology-based SMEs
   Ministry of Science and Technology, P.R. China
                     July 3, 2008
Outline

   Background of VC Guiding Fund
   Objectives of VC Guiding Fund
   Strategy of VC Guiding Fund
   Operation of VC Guiding Fund
   Current Achievement & Next Plan
      Background of VC Guiding Fund

1. No. of VC investment organizations in China increased
significantly in 21 century

                      No. of VC Investment Organizations in China

450
400
350
300
250
200
150
100
 50
  0
      Y1994 Y1995 Y1996 Y1997 Y1998 Y1999 Y2000 Y2001 Y2002 Y2003 Y2004 Y2005 Y2006 Y2007
   Background of VC Guiding Fund

2. The amount of VC investment in China also increased
significantly in 2007
                   VC Investment Amount in China

             120
             100
              80
   Billion    60
    RMB
              40
              20
               0
             Y1 4
             Y1 5
             Y1 6
             Y1 7
             Y1 8
             Y2 9
             Y2 0
             Y2 1
             Y2 2
             Y2 3
             Y2 4
             Y2 5
             Y2 6
                 7
               99
               99
               99
               99
               99
               99
               00
               00
               00
               00
               00
               00
               00
               00
             Y1
   Background of VC Guiding Fund

3. No. & amount of VC investment in technology based
companies occupy about 60% among the total no. &
amount of VC investment in China


     Others                                          Others
       40%                                             41%
                                          No. of                                      Amount in
                                       Technology                                     Technology
                                          Based                                          Based
                                         Program                                       Programs
                                            60%                                           59%




     No. of Technology Based Program    Others      Amount in Technology Based Programs   Others
  Background of VC Guiding Fund

4. Lack of VC investment in early stage of tech-based SMEs
due to high risk and high uncertainty
            Million
            RMB

                                                                             IPO

35-45
                                                      3rd Round           Profit>RMB30m


25-35
            Lack of VC
            investment                    2nd Round   Breakeven,Profitable

           In early stage
10-15
                           1st Round    Revenue
                                                                       Most VC
                                                                       funds invest
 3-5
              Seed                                                     in mature
                        Prototype
                                                                       stage
        Establishment      2        3     4       5      6            7            8      Yrs
    Background of VC Guiding Fund

   5. Government and state-owned VC investment is still the largest
   source of VC, the portion of private VC is insufficient compared
   with mature foreign VC market


                       Foreign VC
                            6%               Government
              Others
                                                 16%
                13%                                           SOE
Individual                                                    17%
     5%



       Bank
        8%
                                                           Listed
                                                          company
                             LLC                             4%
                             31%
Background of VC Guiding Fund

6. The development of tech-based SMEs in China
 Over the past 20 years, tech-based SMEs in
   China contributed 65% of patents, 75% of
   technology innovations and 80% of new
   products.
 Lack of capital is the biggest bottleneck for the

   growth of tech-based SMEs.
 Most founders of tech-based SMEs are strong in

   R&D but weak in management, sales &
   marketing, fundraising etc.
    Objectives of VC Guiding Fund

   To ease up the bottleneck of fundraising of tech-
    based SMEs by encouraging earlier-stage VC
    investment.
   To attract private capital flowing into VC by profit
    sharing policy
   To develop tech-based founders on entrepreneurship
    by post-investment management
   To foster professional early-stage investment and
    management team
Strategy of VC Guiding Fund

   Innovation of Government Financing
       Indirect investment: leverage the
        methodology of VC and guide the
        investment of multiple private capital
        sources
       Equity investment vs grants
       VC experts appraisal vs technology
        experts appraisal
Strategy of VC Guiding Fund

   Target on Demand of tech-based SMEs
       Focus on earlier-stage tech-based SMEs
       Leverage more equity investment
       Bring more added value through VC experts to
        foster professional early-stage investment and
        management team
Strategy of VC Guiding Fund

   Candidate category of VC Guiding Fund
       VC firms
       VC management firms
       Incubators with investment skills
       Potential deal flow
Strategy of VC Guiding Fund

   Four ways of VC Guiding Fund
       Fund of funds: <=25%, with condition,
        sharing profit principle
       Parallel investment: max. of 3M RMB, 50%
        profit as reward to VC
       Subsidy to VC: 5% of investment amount
        with max. of 5M RMB
       Pre & Post-investment subsidy: max. of 3M
        RMB
    Operation of VC Guiding Fund

   Interim Measures on Administration of
    Venture Capital Guiding Fund for Tech-
    based SMEs (Caiqi 2007 128#) was
    promulgated by Ministry of Finance and
    Ministry of Science and Technology
    (MOST), effective as of July, 2007
   Fund source comes from central
    financial budget annually
    Operation of VC Guiding Fund

   Ministry of Finance and MOST are co-in
    charge of decision making
   Investment Advisory Committee provides
    expertise in VC investment
   Administration Center of Innovation Fund
    is responsible for daily operation
   Local governments recommend qualified
    VC firms
Current Achievements and next plan

   95 qualified VC firms applied for VC
    guiding fund in 2007
   50 VC firms got guiding fund subsidy,
    with amount of 71M
   52 early-stage tech-based SMEs got Pre-
    investment subsidy with amount of 29M
    On-going allocation of subsidy to VC and
    Pre & Post investment subsidy
   Pilot the fund of funds and parallel
    investment
Thank You!

								
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