Amy J. - Couldn't find the Intel disti article on the WEB, but did find this regarding Intel and Chinese venture capital industry. I believe this link will only work until Monday. PB
mercurycenter.com
Posted at 6:36 a.m. PDT Friday, May 28, 1999
Intel to help China quest to build venture capital sector
BY ALYSHA WEBB
Bridge News
Shanghai -- China's venture capital industry has a lot of space to grow, and the U.S. computer chip maker Intel is ready to help the infant industry through its growing pains, according to the company's Hong Kong-based business development chief.
Tony Jansz, director of corporate business development for Intel Semiconductor Ltd. recently described China's current venture capital industry as a ''time warp -- the West of the mid-80s.''
''There are all these smart, brilliant people going through the same cycle as people in the West.''
Intel hopes to help those people and their firms find a ''short cut'' to catch up with the West of the 1990s, where high-tech stocks rule.
The Chinese government is looking for the same thing, if reports carried by the official press are any indication.
China's state-run papers are filled daily with news of how the government wants high-tech firms to act as an engine for future economic growth.
Although preferential government policies like rehiring researchers to their former jobs if they leave to pursue business venture that later fails is one way to grow the sector, China is also eyeing the United States venture capital tradition as a role model.
There is ''market and opportunity'' in China's venture capital industry, but the fledging industry has some growing up to do, Jansz said.
China's venture capital industry is immature in just about every respect, he said.
According to Hong Kong's Asian Venture Capital Journal, total new investment of this type in 1997--the most recent figure available--was U.S. $421 million, down from U.S.$471 million in 1996.
New funds raised in 1997 totaled just U.S.$96 million, compared to U.S.$294 million in 1996.
Experience is one problem. China's small, high-tech firms--the kind that most often attract venture capital in the West--are aware that venture capital exists, but they don't have any real knowledge of ''true venture capital,'' or how to attract it, Jansz said.
That may be because China hasn't been able to completely abandon its planned-economy, and because its new entrepreneurs are just beginning to acquire the management and marketing skills needed in a more market-oriented society.
''There is a pool of locally run and managed firms that need to go up a significant learning curve,'' Jansz said.
That's where Intel, and other foreign venture capital firms, can help out.
They can provide some of the management skills and the money needed to develop venture capital organizations, analysts, and business consultants--all key components of the West's venture capital industry.
The most important component lacking in China's venture capital industry can't be imported. Venture capitalists need a way to recoup their investment, something they don't have in China right now.
Venture capital by its very nature is a short-term investment--three to five years is usual in the West. The investors are generally bought out within that period, usually through public listing.
Shanghai and Shenzhen each have A-share and B-share exchanges. The A-share markets for domestic investors are fairly lively, but trade only in local currency. Meanwhile, the foreign-currency-denominated B-share markets are moribund.
That leaves potential venture capitalists feeling a bit cold, Jansz said.
''A lot of work still needs to be done on establishing an effective tool'' for recouping an investment and exiting the market, he concluded.
That hasn't kept Jansz's group from sinking some venture capital into the Chinese market, however. Currently it has has two mainland investments.
In April 1998, it took a stake in Sohu, a popular Chinese-language web site, and in December 1998 it invested in Shenzhen Prosperity, China's first and largest e-commerce solution provider for the securities and financial industries.
The group is currently finalizing several more China investments and will be announcing one within a month, Jansz added.
Most venture capital investments in the West range between U.S. $1 million and U.S. $10 million. Intel's investments in China generally range between U.S. $500,000 and U.S. $5 million, Jansz said.
As Intel's venture capital experiments in China are fairly young, it hasn't had to deal with the problem of exiting the investment yet.
''The approach we have taken is to work with an organization and to hope that there will be an effective exit law down the line,'' he said.
Intel is fairly new to the Asian venture capital market--most of its efforts were concentrated in the United States until about 18 months ago, said Jansz, who worked for Intel in Australia, New Zealand and Singapore before moving to Hong Kong to head up corporate business development.
The company seems to have jumped in with both feet, however. China is currently working on a venture capital law, and Intel has discussed the law ''at different levels with Chinese officials,'' Jansz said.
His firm is ''enjoying a lot of the frustrations of a relatively immature venture market but it hopes the momentum to reform this area will continue, and deliver tangible benefits like an exit vehicle,'' he said. End
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