Current crisis will slow down but not greatly hurt the VC market in China as the fundamentals of the Chinese economy are still strong and investment opportunities are still there.
There is a major shift from offshore USD funds to domestic RMB funds, from a 70% - 30% split in 2008 to 30% - 70% in Q2 of 2009. </li></li></ul><li>… but where is Early Stage?!<br />Source: FENWICK & WEST LLP<br /><ul><li> In China, very little attention to early stage (which according to Zero2IPO is defined as all deal sizes below ~7m USD!), furthermore …
Traditional industries still account for almost 50% (!) of the VC money invested in China.
In the U.S. Series A and B rounds typically account for over 40% of total funds invested.
57<br />Restructuring into an offshore holding – the “SINA structure”<br />Offshore holding entities set up: <br /><ul><li>At the time of founding a company, Chinese founders set up an offshore holding company, usually in the Cayman Islands and a full subsidiary in Hong Kong. The Hong Kong entity’s fully owned subsidiary (WFOE) in China is the operating unit.
WFOE process can easily take 3+ months and requires considerable initial registered capital.