One of Focus Ventures' top value-add strategies is assist portfolio companies with expanding their presence in Asia through introductions to high quality partners, customers and distribution channels. As part of these ongoing efforts, Focus personnel travel throughout the region continuously to maintain current knowledge and relevant contacts. Jim Boettcher recently presented the following paper at the 5th Annual Asian Private Equity & Venture Forum in Beijing.

Why China presents a new investment model for private equity and venture capital: High growth, strong cash flows and more.

By James Boettcher

Boardrooms are filled with entrepreneurs who pitch their ideas as a new paradigm or a paradigm shifter. After three decades in private equity, it’s not hard to feel skeptical. But this hot button word may actually fit the current environment for private equity and venture investing in China. Why?

A paradigm is more than just a general descriptive model or prototype; it’s a quintessential pattern – deeply rooted, self-contained, and entirely unique to whatever system it describes. That’s precisely what exists in China today: a private equity and venture market that is evolving entirely unto itself, incorporating attributes that are highly specific to Chinese culture, politics, history, and business traditions. These defining characteristics are the critical, and often unexpected, variables that govern how Chinese companies are formed, run, and ultimately valued.

And for private equity investors, that is very good news, indeed, because these attributes – which taken together, I call the China Paradigm Factor – can markedly enhance the value of a Chinese company relative to a similar company in North America or Europe. Any investor doing business in China or thinking about it should understand these intrinsic qualities and recognize how they are at work in their portfolio companies to maximize their effects on their investment outcomes.

To read more about how seven elements (listed right) interact to constitute the China Paradigm Factor, click here.

So, what are the elements
that comprise the
China Paradigm Factor?

Smart, Dedicated Managers

High Rate of
Economic Growth

Capital Markets in Transition

Abundant, Low-Cost Talent

Advantageous Business Models

Creative Solutions/Early
Adopting Consumers

Risk-taking,
Innovative Culture

Jim Boettcher was a featured speaker at The China Private Equity Forum in New York City in November.

Focus Ventures hosted a dinner in the Fall at Spago Restaurant in Palo Alto for its distinguished group of Venture Advisors. Attendees included Stanford Professors John Cioffi, Joe Goodman, Hau Lee and Bill Sharpe as well as industry veterans Frank Fanzilli, Ross Ireland , Frank Marshall and Niel Ransom.

Mark Boucher joined Focus Ventures as an Associate in September. Mark was most recently an Analyst at Thomas Weisel Partners.

Tara Farnsworth was recently promoted to Chief Financial Officer. Tara joined Focus in 1999 and currently oversees all financial and legal aspects of the firm.