Investment Opportunities in China Await Venture Capitalists, Entrepreneurs

With doors opening in Asia, golden opportunities await for venture capitalists and entrepreneurs, according to a panel at the student-led Asia Deep Dive 2007, the seventh annual Chicago Asian-Pacific Business Conference, at the Charles M. Harper Center November 17 .

“This really is a golden era for an entrepreneur who has an idea and who wants to really leverage outside resources,” said Joe Born, CEO of Neuros Technology, “because there’s a giant infrastructure in Asia that is so eager for the kind of thing that entrepreneurs can bring,” such as, understanding of the market and creative, proprietary ideas. “You can very effectively leverage that to get out products in a fast, low-cost way,” he said.

Tang’s consultancy acts as a bridge between business partners in the United States and China. “There is a lot of money in China wanting to come out, and there’s also a lot of money from the outside wanting to invest,” she said.

While government policy may limit foreign investments in some industries, those investments can still be made as a minority interest in a joint venture, Tang said.

A critical aspect of doing business in China is finding a good partner and making a commitment to be there for the long-term, said Darragh, who traveled to China on behalf of the Polsky Center's Entrepreneurial Immersion trip in October.

For American entrepreneur Joe Born, the process of finding new business partners in Taiwan and China took eight years.

“You have to be patient with this whole process,” Born said. Finding an Asian partner is “a significant event in a company’s life cycle” and shouldn’t be thought of as a remedy to solve a short-term problem, he said.
 
Tang herself works with a partner, found after several false moves, she said. Finding reputable partners is painful, Tang said, because “everyone said he was a consultant.”

Signing an agreement with somebody is not enough.  “You need to have the right chemistry. You need to have the right view.”

Business ideas aren’t always received the same way in the United States and Asia. Nakamura, for example, presented a business proposition in the United States when he came here for business school. But no venture capitalists in the Chicago area would back it, he said. In contrast, his same plan was “huge” in Asia, he said.

Today at his job at Mitsubishi’s Innovation Center, the focus is on such new ventures in the United States as green technology, IT, and medical devices, he said.

Born said he and his business partners in the United States have learned how to stick with what they do best - innovating, research and development, and understanding consumers – and leave the rest, such as design and manufacturing, up to their Asian partners.

The first product, an MP3 player, took 18 months to get to market at a $6 - $7 million cost. It was domestically engineered, with the final assembly done in China, Born said. A second product, a digital video recorder set-top box, also manufactured in China, as well as designed and engineered there, cost under $1 million to develop and was brought to market in less than five months, he said.

The difference in cost and speed was attributable to how Born’s company partnered with Taiwan and China, he said.

When outsourcing the design and engineering aspects to Asia, it was initially frustrating to relinquish control, Born said, having been used to having “a dozen or two dozen domestic engineers right in your facility.” But rather than going with first instincts and retreating out of frustration, Born’s company decided to develop processes and strategies to make outsourcing a centerpiece of the business, he said.

When his firm partnered with businesses in China and Taiwan, it faced the lack of a “rule of law” comparable to that in the United States, he said. Contracts were more like “a term sheet” and contained no contingencies or boilerplate issues. They were not reviewed by attorneys.

Though the contract process was not done the way it usually is in the United States, Born said, because the process was faster and less expensive.

“If you come with an open mind and you’re really listening, you’ll find that some of the differences may not be in your best interests, but a lot of them will,” Born said.

–Mary Sue Penn