Venture capitalists and bankers in Hong Kong are becoming more selective in financing new dotcom ventures as the once high-flying dotcoms slip into the red - no more are financiers influenced by a two-page business model and projections of profits in a couple of years.
Any venture capitalist in town would agree, though a bit reluctantly, that their honeymoon with the dotcom world is over, even before it started.
According to data from Asia Venture Capital Journal for 1998, the latest figures available, more than US$23.58 billion was disbursed by venture capitalists to various industries in Asia. That figure rose by about 7 per cent last year. But in the first six months of the year, information technology project investment dipped more than 20 per cent, venture capitalists said.
While the venture capitalists are taking a cautious approach in the SAR, venture-capital fund raising continues to experience explosive growth in the United States. Buoyed by remarkably high returns, investors poured US$25.2 billion into 94 US venture-capital funds in the first six months of the year, according to The Private Equity Analyst.
AsiaTech Ventures executive director Hanson Cheah said: 'Six to seven months ago there was a lot of hype about the dotcoms. Everybody was interested in Internet. There were venture-capital firms, private equity and even property companies vying [for a piece of the action]. All [property firms] needed to do was to announce an Internet or dotcom plan and their [stock] price would shoot up.' Then it was a borrower's market and Hong Kong was awash with so much venture capital that entrepreneurs could afford to be fussy about whom to pick to finance their start-ups.
But just a few months down the road, and after some sharp dips in the United States' Nasdaq Composite Index and Hong Kong's Growth Enterprise Market Index, the tables have turned.