Yes, the VC growth will have an impact to the U.S. VC markets as more Chinese are looking to invest in Western ideas and opportunities. While there has been a boom in venture capital in China in recent years, the understanding of the industry remains fragmented without a clear understanding of how it differs from that in the mature economies of North America. The funds in China are more typically corporate funds associated with banks or corporations. I am not limiting opinion or review here to limited partnerships or bank/corporate venture capital firms, but such differences should be recognized. U.S. venture capital is generally understood to mean privately transacted, early-stage equity investments typically in small firms with high growth potential. This can include seed, expansion and pre-offering rounds of financing. In exchange for financing, venture capital investors receive significant ownership claims and some control over top management. They are active investors, usually appointing directors and exercising strict oversight during the investment period. Venture capitalists bring legitimacy and credibility to their funded firms, supplying experienced management and sometimes providing key contacts in the government and other firms. The term private equity is used for latter stage mezz arrangements, buyouts, and turnaround investments.
What has spurred the growth of China’s venture capital market and what impact can we expect to see in the United States?
A recent report states that China’s venture capital market has grown more than 12-fold in just the first half of the year. What has triggered this growth and how will this impact the US VC market?