As a managing director at Mayfield Fund, Raj Kapoor has real experience investing in China's Internet businesses—and advice for others
It's not hard to see why we, as investors, continue to flock to China. It has more than 125 million Internet users, the country's gross domestic product is projected to exceed that of Germany by the end of 2006, and early-stage opportunities are abundant.
But investing in China is not without its challenges. I have seen this firsthand as a managing director at Mayfield Fund. Over the last year, Mayfield and its local partner, GSR Ventures, have invested in approximately eight companies in the Chinese wireless, Internet, and semiconductor sectors. Here are some lessons we have learned, particularly in my area of expertise, the Internet:
1. Opportunities exist, but are harder to find. The first wave of Internet investment in China, which created giants such as search engine Baidu, portal leader Sina, and instant messaging powerhouse Tencent QQ, is over. Finding another Web-related giant will take patience and often the right connections.
For instance, sports lotteries were an underground market in China until the government, seeking revenue and control over the industry, decided to make them a legitimate business. The government granted an online and mobile sports lottery license to startup SportsGG. Another startup, SMIT, holds one of the few licenses to provide digital security chips for encryption in televisions.
2. Hire a stellar CEO and management team. One of the biggest challenges for a company in China is hiring the management team. In the U.S. we almost take great management for granted because there are so many experienced managers here. In China, the Internet, and even capitalism, is relatively young, so finding talented executives is more difficult.
Posted by The Dragon Lady, See full article at BusinessWeek.
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