More Venture Capital Flowing to Chindia

By Aug 24, 2008, 1:24 AM Author's Blog  

The economic developments made by China and India have won and continue to win admiration and interest from the world’s business community. According to data released by Dow Jones VentureSource — in the 2Q of fiscal ’08 venture firms invested $238 million in 17 deals in India – posting a 120% jump on a year-over-year basis. Growth was attributable mainly to investments in ad companies, including $70 million put into ‘Laqshya Media of Mumbai’, an outdoor ad company that runs digital ad networks.

Meanwhile, investments in China increased by 85%, easily eclipsing those in India. Venture firms in the first two quarters of the current year have invested a total of $2.15 billion in China-based co’s, up from $1.16 billion during fiscal ’07.

The largest deals, notes cnet – came from Internet companies, including a whopping $430 million investment from Softbank Corporation into China’s leading provider of Web 2.0 communities – Oak Pacific Interactive. The country’s second-largest operator of social networking websites likes to call itself the “Facebook of China”, since the capital backing in dollar terms gives OPI a yearly financial warchest relatively comparable to that of Facebook.

Venture firms also doubled-down on China’s nr.1 video sharing website: Tudou.com. They invested $57 million. The company keeps fighting for supremacy in China’s video sharing marketplace. Web site 51.com also received $51 million cash infusion into its business operation.

Specific to information technology – venture firms injected $1.1 billion in 42 deals, up from $553 million in 60 deals during fiscal ’07. Venture investments into mainland China during the second quarter ’08 — hit their highest level in five years with over 70% of the money flowing directly into the companies in the ‘information services’ and ‘media, content and information’ sectors.

The large amount of dollars being invested by some well-regarded venture capitalists, combined with the rapid economic growth and expansion of domestic capital markets – once again, underscores the importance of Chindia as a market for high-tech products and services.

Clearly, China and India at this stage have irrefutably become the fastest-growing part of the world in terms of virtually any economic variable. The trend will most likely continue, particularly in China, given the legal changes recently made by several large cities including Beijing and Shanghai to reduce tax burdens for foreign firms – while allowing private equities and venture capital funds to register legally as local equities investment firms.

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