If a big billboard collapses somewhere in Beijing, Shanghai or any other big Chinese cities, it has a good chance of killing at least one venture capitalist, so the saying goes. That may be a bit cruel but the growth of venture capital funds on the mainland is definitely amazing, thanks to a flood of liquidity and relaxed regulation.
By the end of September, there were 571 venture capital funds in the country, holding 150 billion yuan (HK$175 billion) worth of assets. That is a 50 times growth over 2006. The industry employs more than 720,000 people.
In 2008 and 2009, foreign players dominated the pre-listing investment of public offerings in Hong Kong. Now, the local breed has become the key players. They are loaded with money, and are keen to invest. Mind you, in the mainland stock market, the yield of a pre-IPO investment ranges between 300 per cent and 1,700 per cent.
Most important of all, 'they pay within 24 hours and a foreign fund will take at least three months', a foreign venture capitalist said.
The investor list of China New Materials Holdings (CNM), a chemical producer planning a public offering, is a telling case of the new breed.
First, they don't mind a crowded bed. Aiming to raise a maximum of HK$980 million and for a market capitalisation of about HK$4 billion, CNM has four venture capitalists putting in a total of HK$453 million (see table). That is on top of a HK$240 million investment by two individuals, according to its draft prospectus.
It is a small circle where everybody knows everybody. Yam Tak-cheung, a prominent owner of various listed shell companies in Hong Kong, went into CNM first. Qi Kebo, who founded Sun Investment Fund where Yam is an executive director, followed. Qi introduced CNM executive chairman Zhang Kaijun to two other funds, China Angel and Chinaland Investment. Suo Lang Duo Ji, chairman of Lumena Resources where Qi is an investor, was the last to join.