Venture Capital Guiding Fund for Technology-based SMEs Li Wenlei Administration Center of Innovation Fund for Technology-b...
Outline <ul><li>Background of VC Guiding Fund </li></ul><ul><li>Objectives of VC Guiding Fund </li></ul><ul><li>Strategy o...
Background of VC Guiding Fund 1. No. of VC investment organizations in China increased significantly in 21 century
Background of VC Guiding Fund 2. The amount of VC investment in China also increased significantly in 2007 RMB
Background of VC Guiding Fund 3. No. & amount of VC investment in technology based companies occupy about 60% among the to...
Background of VC Guiding Fund 4. Lack of VC investment in early stage of tech-based SMEs due to high risk and high uncerta...
Background of VC Guiding Fund 5. Government and state-owned VC investment is still the largest source of VC, the portion o...
Background of VC Guiding Fund <ul><li>6. The development of tech-based SMEs in China </li></ul><ul><li>Over the past 20 ye...
Objectives of VC Guiding Fund <ul><li>To ease up   the bottleneck of fundraising of tech-based SMEs by encouraging earlier...
Strategy of VC Guiding Fund <ul><li>Innovation of Government Financing </li></ul><ul><ul><li>Indirect investment: leverage...
Strategy of VC Guiding Fund <ul><li>Target on Demand of tech-based SMEs   </li></ul><ul><ul><li>Focus on earlier-stage tec...
Strategy of VC Guiding Fund <ul><li>Candidate category of VC Guiding Fund  </li></ul><ul><ul><li>VC firms </li></ul></ul><...
Strategy of VC Guiding Fund <ul><li>Four ways of VC Guiding Fund   </li></ul><ul><ul><li>Fund of funds: <=25%, with condit...
Operation of VC Guiding Fund <ul><li>Interim Measures on Administration of Venture Capital Guiding Fund for Tech-based SME...
Operation of VC Guiding Fund <ul><li>Ministry of Finance and MOST are co-in charge of decision making </li></ul><ul><li>In...
Current Achievements   and next plan <ul><li>95 qualified VC firms applied for VC guiding fund in 2007 </li></ul><ul><li>5...
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Venture Capital Guiding Fund for Technology-based SMEs

  1. 1. 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
  2. 2. Outline <ul><li>Background of VC Guiding Fund </li></ul><ul><li>Objectives of VC Guiding Fund </li></ul><ul><li>Strategy of VC Guiding Fund </li></ul><ul><li>Operation of VC Guiding Fund </li></ul><ul><li>Current Achievement & Next Plan </li></ul>
  3. 3. Background of VC Guiding Fund 1. No. of VC investment organizations in China increased significantly in 21 century
  4. 4. Background of VC Guiding Fund 2. The amount of VC investment in China also increased significantly in 2007 RMB
  5. 5. 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
  6. 6. Background of VC Guiding Fund 4. Lack of VC investment in early stage of tech-based SMEs due to high risk and high uncertainty Establishment 2 3 4 5 6 Yrs 1st Round 2nd Round 3rd Round IPO Seed 7 Million RMB 3-5 10-15 25-35 35-45 Prototype Revenue Breakeven,Profitable Profit>RMB30m 8 Most VC funds invest in mature stage Lack of VC investment In early stage
  7. 7. 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 LLC 31% Bank 8% Individual 5% Others 13% SOE 17% Listed company 4% Government 16% Foreign VC 6%
  8. 8. Background of VC Guiding Fund <ul><li>6. The development of tech-based SMEs in China </li></ul><ul><li>Over the past 20 years, tech-based SMEs in China contributed 65% of patents, 75% of technology innovations and 80% of new products. </li></ul><ul><li>Lack of capital is the biggest bottleneck for the growth of tech-based SMEs. </li></ul><ul><li>Most founders of tech-based SMEs are strong in R&D but weak in management, sales & marketing, fundraising etc. </li></ul>
  9. 9. Objectives of VC Guiding Fund <ul><li>To ease up the bottleneck of fundraising of tech-based SMEs by encouraging earlier-stage VC investment. </li></ul><ul><li>To attract private capital flowing into VC by profit sharing policy </li></ul><ul><li>To develop tech-based founders on entrepreneurship by post-investment management </li></ul><ul><li>To foster professional early-stage investment and management team </li></ul>
  10. 10. Strategy of VC Guiding Fund <ul><li>Innovation of Government Financing </li></ul><ul><ul><li>Indirect investment: leverage the methodology of VC and guide the investment of multiple private capital sources </li></ul></ul><ul><ul><li>Equity investment vs grants </li></ul></ul><ul><ul><li>VC experts appraisal vs technology experts appraisal </li></ul></ul>
  11. 11. Strategy of VC Guiding Fund <ul><li>Target on Demand of tech-based SMEs </li></ul><ul><ul><li>Focus on earlier-stage tech-based SMEs </li></ul></ul><ul><ul><li>Leverage more equity investment </li></ul></ul><ul><ul><li>Bring more added value through VC experts to foster professional early-stage investment and management team </li></ul></ul>
  12. 12. Strategy of VC Guiding Fund <ul><li>Candidate category of VC Guiding Fund </li></ul><ul><ul><li>VC firms </li></ul></ul><ul><ul><li>VC management firms </li></ul></ul><ul><ul><li>Incubators with investment skills </li></ul></ul><ul><ul><li>Potential deal flow </li></ul></ul>
  13. 13. Strategy of VC Guiding Fund <ul><li>Four ways of VC Guiding Fund </li></ul><ul><ul><li>Fund of funds: <=25%, with condition, sharing profit principle </li></ul></ul><ul><ul><li>Parallel investment: max. of 3M RMB, 50% profit as reward to VC </li></ul></ul><ul><ul><li>Subsidy to VC: 5% of investment amount with max. of 5M RMB </li></ul></ul><ul><ul><li>Pre & Post-investment subsidy: max. of 3M RMB </li></ul></ul>
  14. 14. Operation of VC Guiding Fund <ul><li>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 </li></ul><ul><li>Fund source comes from central financial budget annually </li></ul>
  15. 15. Operation of VC Guiding Fund <ul><li>Ministry of Finance and MOST are co-in charge of decision making </li></ul><ul><li>Investment Advisory Committee provides expertise in VC investment </li></ul><ul><li>Administration Center of Innovation Fund is responsible for daily operation </li></ul><ul><li>Local governments recommend qualified VC firms </li></ul>
  16. 16. Current Achievements and next plan <ul><li>95 qualified VC firms applied for VC guiding fund in 2007 </li></ul><ul><li>50 VC firms got guiding fund subsidy , with amount of 71M </li></ul><ul><li>52 early-stage tech-based SMEs got Pre-investment subsidy with amount of 29M </li></ul><ul><li>On-going allocation of subsidy to VC and Pre & Post investment subsidy </li></ul><ul><li>Pilot the fund of funds and parallel investment </li></ul>
  17. 17. Thank You!
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