Venture capitalist is 'brother' to ideas

DFJ Dragon Fund China, one of the first US dollar-denominated venture funds to enter China in 2005, just had a first closing of 200 million yuan-based venture fund on April 15, 2013.

Bobby Chao, founding managing director of DFJ Dragon, said a Chinese domestic registered venture fund can access even more China-based investment opportunities that would be otherwise restricted.

Such an RMB investment-based capital structure would also be easier for investee companies to access the growing Chinese stock markets to do IPOs.

According to Chao, IT and healthcare are the top tier investment portfolios DFJ Dragon is focusing on in the current market, and last year, the liquidity from investment in both industries was a proven success.

"There is an increasing older generation population in China and the society needs an infrastructure to support that," Chao explained. "On top of the infrastructure 'hardware', the healthcare system is the 'software'. You need to have both to make the system complete."

Chao believes that China, being the world's largest emerging market (or re-emerging market), offers plenty of opportunities in a variety of industries for a venture capitalist like him to tackle.

A joint venture between DFJ and Dragon Venture, Chao's firm is currently focused on coastal city investment in China. DFJ has had an established presence in Chinese technology investment since the early 1990s and is the only venture capital firm with a presence in more than 30 Chinese cities with more than $6 billion in capital commitments.

"Bobby Chao and his DFJ Dragon Fund is a pioneer in terms of bringing US venture capital to China," said Eugene Zhang, President of Santa Clara, California-based InnoSpring, one of the largest US-China tech startup incubators in the US.

Born in Chongqing, Sichuan province, Chao came to the US in 1973 and earned a master's degree in physics at Georgia State University and later studied aeronautical engineering at Stanford.

Chao's Chinese given name "Guangdou" is unusual in Chinese, but actually came from a famous piece of literature by Wang Bo of the Tang Dynasty,Preface to the Prince of Teng's Pavilion, and, according to Chao, naming him after a character in that book was his father's way of showing off his high standards and understanding of Chinese literature. And his English name Bobby was not chosen without a rationale either. He said he was called BaoBei (the precious baby) by his parents since he was little.

Friends, however, like to call him"Bubba" ([buhb-uh] noun, Chiefly Southern US brother) to show their affection for him. After all, he is something of a beloved "brother" in Silicon Valley, not only for the fund he leads and the entrepreneurial triumphs he achieves through it, but also for the mentoring role he has played in the lives of hundreds of entrepreneurs.

Chao became a tech guru in Silicon Valley after gaining a long list of operational, entrepreneurial, and investment experience in the semiconductor, hardware and software industries over the past three decades.

He began his career as one of the founders of Cadence Design Systems (1988), an electronic design automation software and engineering service company, and served as its vice-president and general manager, responsible for sales, marketing and operations in Asia and Japan. A roadmap on the wall of Chao's office shows numerous acquisitions the company went through after it went public (Nasdaq: CDNS) in 1987. Chao said he was proud to be an entrepreneur back then and would always remember the glory for the rest of his life.

After Cadence, Chao founded and served as chairman and CEO of OCRON, a pioneer in the optical character recognition and document management space. It was eventually acquired by Umax Group.

Chao's landmark experience was being the first incubator for and investor in VA Linux, which was started in 1995 in a dorm room at Stanford by Jim Vera and Larry Augustin. Their idea was to make a high-power Linux-based server for the booming internet network market. A name card printed back then shows Chao as the "CEO" of the company instead of "Founder", which he said was the result of the "sloppiness regarding titles of any startup company back then".He left the company after Sequoia Capital and other institutional investors took it over and went public on the Nasdaq in December 1999, opening at $30 a share and hitting $320 before the end of the first trading day, a record in US IPO history.

"It (VA Linux) literally started from a shack and rose to its ultimate glory just like a typical Silicon Valley fairytale," said Chao.

In 1999, Chao decided to concentrate his venture capital in China. He co-founded Dragon Venture as chairman that year, and later co-founded DFJ Dragon Fund. First fund of DFJ Dragon in 2006 raised over $100 million, which was invested in 24 companies, and second fund raised $30 million in 2010 that went to seven companies. Chao said the newly raised Dragon RMB Fund with its initial closing of 200 million yuan will give the company a kind of ultimate freedom when it comes to investment in China.