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VCs coach Silicon Valley startups on investing in China

Updated: 2012-08-21 07:41
By Chang Jun in San Francisco ( China Daily)

A rising number of venture capitalists with roots in China are helping prepare Silicon Valley tech startups to enter the Chinese market with cash infusions and business-incubator services.

The financiers - Chinese-born entrepreneurs who studied or made their fortune in California's technology mecca or were backed by China's government and technology and science parks - are part of renewed VC interest in the region.

China's still-growing economy, the government's thirst for technology and incentive programs, such as the 1,000 Elite Program offering subsidies of up to 1 million yuan ($157,000), have combined to attract talent and companies across the Pacific.

Venture capitalists with Chinese backgrounds invested in 28 US companies last year, double the number in 2009, according to the latest data from Dow Jones& Co.

In Silicon Valley, Chinese venture capitalists have already teamed up with US counterparts to compete against established incubators.

As the world's technology and innovation hub, Silicon Valley should have more players in venture capital and incubation, according to Roy Kong, a private investor and entrepreneur.

"There should be more players other than Paul Graham and his Y Combinator, Dave McClure and his 500 Startups," Kong said, citing two of the region's most recognizable early-stage tech investors.

In April, Eugene Zhang, president of InnoSpring, celebrated with 200 guests the launch of Silicon Valley's first US-China tech incubator.

InnoSpring is a partnership between Tsinghua University Science Park, Shui On Group, Northern Light Venture Capital and Silicon Valley Bank.

Its seed money came from Kleiner Perkins Caufield & Byers, a venerable VC firm; Northern Light; GSR Ventures; China Broadband Capital; and TEEC Angel Fund.

"We will use our many resources, networks and connections in both countries to help the start-ups better perform and navigate the local market," Zhang said. "To summarize - we want to be bridge the gap."

Zhang, who is in his late 40s, is a VC veteran. He had leadership positions at Sun Microsystems Inc (now part of Oracle Corp), Cisco Systems Inc and Juniper Networks Inc in the 1990s.

Ten years ago, he hatched his own startup, semiconductor company Jeda Technologies Inc and got rich.

"So, I have abundant knowledge of not only the whole IT industry, but creating your own start-up as an entrepreneur," Zhang said.

He recalled having to deal with every step of starting a company from scratch - drafting a business plan, assembling a team, pitching to investors, marketing and selling.

"That (start-up experience) was exhausting. I wish I'd had an incubator like InnoSpring that I could turn to," Zhang said.

So far 28 companies have become tenants at the 1,254-square-meter office complex, representing an industry mix of Internet, digital media, clean technology and healthcare information systems.

All are small and in very early stages of business development, said Zhang, and most lack a solid business plan or fine-tuned development strategy, and are staffed by ardent "techies".

"The founders usually have brilliant ideas and are excellent developers, but those won't automatically translate into business success and revenue.

"Our services include funding, mentoring, workshops, access to VCs and angel investors, as well as in-house resources like accounting, bookkeeping and paralegal consultation, plus the physical office space," Zhang added.

InnoSpring has invited acclaimed entrepreneurs to speak to its tenants, with guest speakers including Deng Feng, founder and partner of Northern Light, and Zhou Wei, an investment partner with Kleiner Perkins.

Jeff Becker, head of marketing for TrustGo, a maker of antivirus applications for mobile devices, knows InnoSpring and its services well.

"Speakers at the weekly workshop are knowledgeable about the US market and start-up operations. Our neighbors across the cubicle give us very good suggestions," said Becker.

His company set up its research and development operations in China and wants to expand into the United States.

Another recipient of InnoSpring's services was Empower Micro Systems, a start-up whose marketing focus is on China itself.

InnoSpring helped serve as a conduit to 22 local venture capitalists who heard the company pitch its technology of converting electricity between AC and DC current.

"Our partners and their connections in China are our biggest advantages," Zhang said. "They are priceless."

In June, another Chinese company showed its dedication to the US startup incubation industry.

Wang Hanguang, chairman of Hanhai Zhiye Investment Group in Beijing, flew to Silicon Valley to sign a contract to buy an 7,432-sq-m office building in San Jose.

The contract was signed on Feb 17 at an event in Los Angeles attended by Chinese Vice-President Xi Jinping and his US counterpart Joe Biden, and the deal grew out of the official China-US Economic and Trade Cooperation Forum.

Wang's incubator company, which has $50 million in assets and is backed by China's Zhongguancun Science Park, already operates a Beijing business park, five scientific-technology buildings and has 10 years of experience.

For any startup, "you either grow fast, or die faster", said Zhang.

To help push companies along, InnoSpring has introduced a six-month accelerator program for which as many as 10 companies will be selected by March 2013, each to receiving $100,000 in funding.

The entrepreneur also cautioned like-minded people not to follow trends but to focus on what they do well: "Be yourself, otherwise you'll lose your character."

Chen Jia contributed to this story.

(China Daily 08/21/2012 page16)