US-based Silicon Valley Bank, a technology-focused lender, formed a joint venture with the Shanghai Pudong Development Bank Co in 2012 to cater to the investors' demand for funds in China, The Wall Street Journal reported. More funds are on the lookout for investment opportunities in the mainland where innovation is growing. The joint venture, known as SPD Silicon Valley Bank, gives loans and banking services to venture capital, startup firms and private equity.
In a recent interview, the WSJ talked with Silicon Valley Bank Chairman and SPD Silicon Valley Bank President Ken Wilcox about the investment landscape in the world's second largest economy. Wilcox said one of the main differences between venture capitalists in China and those of the US is that the although there are now more venture capitalists in China than in the US, the Chinese venture capitalists are largely inexperienced.
Wilcox also pointed out that venture capital funds in China sometimes face pressure from government authorities who are more interested in the number of people employed, the companies registered and the taxes raised. Compared to their Western counterpart, China's venture capitalists pour money in a broader range of firms. Wilcox told the WSJ, "I wouldn't say all western venture capitalists are investing in technology. But a higher percentage in China is investing in innovative business models."
According to Wilcox, most of China's venture capitalists support companies at a later stage when they are already exhibiting profitability. The early-stage investors are family, friends and angel investors. China does not also distinguish between venture capital and private equity they way western markets do. They just look at them all as funds.
WSJ also asked Wilcox about the lack of intellectual property protection in China. Wilcox answer was, "Intellectual property protection should be a global phenomenon, not a country-by-country phenomenon. But if you remember, 200 years ago, the U.S. copied everything from the U.K. because it was easier and the U.K was ahead of us. The turning point in the U.S. came when we caught up with the U.K, and we had nothing more to copy. China is catching up quickly."
Join the Conversation