China Venture capital Forum theme speech record

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Host: Distinguished guests, friends, good morning. Welcome to the China Venture Capital annual Forum sponsored by the Qing Ke group. From 2001 onwards, every year in December, is our industry gathering for a year's work to sum up and inventory, this year, the theme of our Congress from fanaticism to rationality, this statement summed up this year's Chinese venture capital market tone. We have invited four guests to the keynote address and set up 11 expertise discussions, with a total of 80 guest speakers participating in the discussion of each topic. At the end of the forum we will officially announce the 2006 China Venture capital rankings and hold a grand ceremony. This is not only the most superb part of our forum, but also an annual event that is eagerly awaited in the industry. At the request of the organizers, most of the expertise in this forum is conducted in Chinese, with the third, ninth and 11th sessions in English. First of all, I would like to invite the Chairman of the Qing Group, John Dean, to welcome, John from 1993 to 2001 as the chief executive of Silicon Valley Bank, and 2001 to 2003, as the executive chairman of Silicon Valley Bank holding company, during his eight-year tenure, Corporate assets rose from $935 million to $5.5 billion, and the company's market value rose from $63 million to $ more than 3 billion. John was named by Businessweek as one of the 25 most influential people in Silicon Valley in 1997. Let's give a warm applause to Mr. John Dean.

John Dean: Good morning, everyone. Some of our speakers will give a speech today and tomorrow. I would also like to thank the guests here, thanks to your participation and support, make our China's annual venture forum a very good example.

I would also like to briefly talk about the achievements of the Qing group, it was mainly last year's achievements, in addition to the annual meeting, for example, in Shanghai and Beijing, we held our first meeting in Silicon Valley, next year we will meet in another two places, one is Tokyo, one is London.

When it comes to our database services, we rank first in China in terms of providing venture capital information. is a leader in IPO reporting. As for the private placement, we have successfully completed 15 transactions, the value of which is $100 million. Also this year, we set up a fund, we call it the Qing branch funds, we together with our partners, in Detroit Investment, about 20 million dollars. We are working with venture capitalists rather than competing with them.

Finally, I would like to thank all of you for participating in today's forum, and I wish the two-day forum a complete success. If we can help you, please try to let us know, thank you very much.

Moderator: Thank you very much for John's wonderful speech. Next, I would like to introduce the main sponsor of this forum Needham, she is a monograph on the High-tech industry, the omni-directional investment Bank, you may be unfamiliar with it, but the listing of their operating case is familiar. Below we would like to ask the Needham Chad W Keck to give us a keynote address. Today he spoke mainly about Needham's views on the global technology industry and China's technology market.

Chad W. Keck: Hello everyone, I am very happy to be here to communicate with such a dynamic audience, I can feel the entrepreneurial spirit here, probably just because everyone is younger than me, but I would like to say that this is a good opportunity for us, and all of you here are experts.

I will mainly talk about three major points, first of all, we will talk about our company, and then talk about our focus on some key trends in the industry and some opportunities in Chinese companies.

I'm sure you're all going to be asking about what kind of company we are, and I want to tell you a little bit about how we're an investment bank, and we're basically linking entrepreneurs and capital to the role of a bridge. We are a private company, we have 200 employees, we have almost 100 million dollars of capital, if you look down again, you will see that we are concerned about institutional capital, such as mutual funds, even hedge funds, hedge funds are very advantageous. We are mainly concerned with medical and technical aspects, we are the leader in this field, we went to finance the company, we do better than other American companies in this area. We find that over the past few years experience has taught us that we must be focused and we need to find the right entrepreneur. So the reason we're here today is because we want to connect the technology of Chinese entrepreneurs to the institutional capital of the United States.

I'll tell you how we work, fundamentally, what we do is invest in research, we have a lot of research channels, we have investment reports, which can be said to be our intellectual property. You see there are some industries in the picture that we focus on and we look at these industries to evaluate a new company and submit the report to investors to tell them if it's worth investing. We have three channels of interest, we do research for those institutions and they give us commission. Because we know the industry and the company very well, so we can let our peers truly invest in some companies. We're dealing with more than 100 million dollars, and we think the best kind of startups should get the best capital. Here are some examples of our clients including some manufacturing companies that they can search on the Internet and then we offer them some of their own. Even some companies produce equipment in China, including ZTE International, who use our fundraising funds to serve the entire world's clients.

Now let's talk about some of the key trends in the industry we're focusing on. This figure is proof that we have long been allowing more people to share our technology. At the start of the computer revolution, these technologies were mainly at the headquarters of some companies and then disseminated to individuals, and today we found that computers can relate to every aspect of our lives. In the early days, computers were not very common, and now we have shown that we can share all kinds of information through computers. Here are some driving forces, mainly to promote the development of information technology. Electronic digital families, people want to enjoy the convenience of the office at home, to find a solution to provide them with a wide range of information. My Bluetooth phone can let me surf the internet, my ipod can tell me the music information Let me watch the video, even through it I can do word processing, in the car can do so. The network is a very good communication and information platform, in fact, you can see the cleaners can have the same information as the CEO. Because of the network can let information continue to spread out, there are many international markets are also closely follow the trend of technology.

So how do speculators assess opportunities? How do they look at the trend of technology? If you still remember the pension fund I was talking about, mutual funds, you can see that they have a lot of analysis before they invest, and my experience tells us that if you want to raise money your company must meet high requirements, we suggest to see five aspects, one is the size of the market is very important. The second is the position of the owner, whether it can deter competitors. The third is the user, the key is the user to be with you. Visibility, if you want to see whether your company has a future, it depends on how you look at its past history, so that you can well evaluate the company, financial visibility. The fifth one is management, this is very important. We are looking at these five points, of course it may take some time, it is definitely worth it.

If we look at the opportunities that China has, what opportunities do we see? Obviously, we can see that China's consumer market is very big and developing very fast. We also see a lot of innovation, people will soon be able to introduce some new technology, but also have an economic ecosystem can really good for the development of new companies, thrive. There are so many ways to make investments, and international companies are very interested. I think these companies here today have very good opportunities and, of course, some worries, these are the international investors who are troubled by the lack of managerial experience, especially in China. The other is your chassis, whether you have the competitive edge or not. So I'd like to say that investors are very interested in companies that really can trust, and they like this kind of company very much, which requires the company to manage. Geographical distance can be overcome, if other aspects of the problem can be well resolved. It may be a very important point of view that companies in the United States also look at other issues, as well as management. There is also the protection of intellectual property rights, which is also an important consideration for corporate investors.

What are the opportunities for Chinese companies to balance these strengths and weaknesses? IPU, for example, is a great opportunity for Chinese companies, and if you do well you can get IPU. And mergers, international companies are very interested in your customers and local technology. There is also a strategic investment, which is now in its infancy, and is often made up of various forms of joint ventures, so that different companies can contribute to their strengths. Let's say you're interested in IPU, then you have to focus on a series of questions, and you have to remember that American companies are not only interested in your management, but also in your board and other areas. They will take a look at whether the market accepts you, and there are channels for listing, whether you intend to list on Nasdaq or on the New York Stock Exchange, except that there are now other places, such as London and Japan, that can be listed in Hong Kong in Asia. Now that more local companies in China are listing in Hong Kong, you have to choose the right investment bank, the right information, the pricing, these are essential prerequisites for completing a successful IPU. Assuming you're going to do the merger now, we think if you're going to do a merger, you need to look at strategic buyers and some financial buyers, and many of the strategic issues are financial. If there is no strategic solution to the problem, there is no financial way to achieve it. All of these investors will look at your various metrics and you need to have the liquidity to see if they can get a return on the investment. What issues do you value as a peer? First you have to have someone who really understands your business, people need to have a hand in the experience, and very understanding of your industry, where you are often to the Chinese market is very involved, you know in your relationship is only a part of the transaction, this is very important, but in fact, after your transaction is completed, your peers will come to help you. So your partner must be very stable, and your partner has to understand that the deal you want to make is what they want to do. For our Needham, our company is definitely the first choice for emerging companies around the world, including China's emerging companies.

I finally wanted to send you an invitation, it was a very good meeting and we also had a very good meeting in New York for four days, which can be said to be the largest start-up company in a good meeting in the United States is the largest. We invite those investors, who want to be able to contact the emerging companies to conduct meetings, if you need any information please contact me, thank you very much.

Moderator: Thank you very much for Mr.chat's wonderful speech, the following guests are very familiar with, he in a short span of three years will be the advertising network of the media from a city to more than 100 cities nationwide, from the original 50 senior commercial office expansion to the urban integrated communication platform, he advocated the media group is from the imagination into reality. He was listed on Nasdaq in 2005 as the first Chinese advertising media unit to be listed overseas. At present the company's market value has exceeded 3 billion U.S. dollars, is the Nasdaq China listed company's leading shares. Let us welcome the President and CEO of Jiang Nan Chun, his keynote address is the challenge and opportunity of traditional media and new media.

Jason: Thank you very much for this opportunity to share some recent thoughts with you, I think the community is doing the life Circle Media Group is what we usually see, more risk to invest in the future, to see in the next three years what kind of opportunities, especially the media industry, communication industry what is the possibility. I am mainly a retreat today, pragmatic is not to say. I mainly talk about the nine key words in the field of communication, and investors interested in the communications industry will also resonate with the investment opportunities underlying these nine words.

The first word has been practiced by the media, which is called the audience, I was the name of the company from the third wave of Toffler, he more personalized, the division, fragmentation, at that time did not understand the audience, probably in my secondary school, and later took out to do the name of the media company. We see that the word has become the state of life, before 1992 China does not need the word, everyone is the masses, there is not much difference between them, only hundreds and officials to distinguish. By the year 1998, we have seen the great change of society, the trend of fine differentiation of all kinds of social classes, which inevitably leads to the subdivision of the field of communication. So customers have been demanding more accurate means to impress the audience he wants to avoid advertising costs waste. So we see mobile phones, real estate, cars more and more class of symbol, if the ordinary milk is white milk, that yogurt represents a younger and more fashionable classes, Trensu represents a relatively high-grade class. I think this social differentiation trend deserves our attention, the future of the media must be changed from the public to the audience. I think the future of mobile media, search engines are slowly indicating the arrival of one-on-one media, this is the first keyword we see.

The second keyword is called implant, and we see all kinds of implanted power, like Mengniu's

Super Girl, do you remember what the ads are in Super Girl? I'm afraid no one knows. Why do you have no memory for the ads in the film? The international ratio is 1:3, in China is 1:6, we're joking that it's not super girl. The more the content of the program, the lower the rate of transmission, when the Super Girl is very high ratings, the film ads ratings or China, when the ads appear in our optimistic about a program is not easy, so many people put ads to this face, Finally come to a conclusion, the first look not to pay attention, endure, 10 minutes to see the new content out, the next time when the new ads come out of the table. It is obvious why Mengniu in the super female success is the power of implantation, consumers as long as the content does not see ads, this time only to let the ads become part of the content when the ads are not overlooked. When all of his things host background and so on are called up, it is difficult to avoid, because he implanted in the content, become part of. Including now a lot of marketing in the use of the power of public relations, some people control blogs, BBS, in the network or, in the news or not, the use of these models to more self experience to create a sense of the brand Trust is also becoming an important word of embedded advertising.

The third word is entertainment, in the future of the world's marketing in addition to advertising is a big factor in how to put ads into the entertainment, there are four directions can be seen, the first is in music marketing, such as the most obvious by column, ask for more, Faye Wong sing Pepsi Song, When it was played back and forth on the radio, it became autonomous. These ads and music entertainment are fully integrated, it is difficult to ignore its existence, you love the singer star is involved in it. Samsung or Lenovo in sports marketing, you can see the existence of European football pay channel, such as Huayi Brothers, such as television companies keep advertising involved. Alibaba, Taobao and so on. Foreign in game's ads, there is a road sign in the car is Intel's ads, the experience in the embedded games more recognition, so I think this is the future you can see the direction.

The 4th is experiential marketing, we can see such as Ikea, he has a lot of bed, sofa, projector hit on the roof, we can lie there, while experience Ikea comfortable relaxed, while Ikea to talk about the feelings. So I believe that an experiential meeting like IKEA will be a major guide to many future marketing.

The fifth I want to say is vertical, we see now the market continues to rise in the portal, to Sina as the representative of the annual advertising revenue is still showing high speed growth. At the same time also see the rise of vertical web sites, similar to net this, as China's largest financial portal, from the traffic point of view, I last went up to see a blog 90,000 people read, professional lethality, this lethality will be more and more strong. This vertical site is not only a website, he can do deeper and deeper, the upper and lower industrial chain dozen together. Not only become the most professional website, it extends to the operation of the password

stock software, this tens of thousands of pieces of software thousands of pieces of software, may finally develop the cost is almost zero, one day if you can sell 100 sets of words, this I think the income is very scary. So I think a web site like this perpendicular to the community and the field of expertise, the income is diversified, there will be beyond the previous generation of the site opportunities.

The 6th is the community, you can often see the current community websites, in today's market, the ability to build stars, whether it is

Furong sister or Angel sister, how to use the strength of the community to spread the brand, has become a mainstream force can not be ignored, but also the public opinion, representing a fair public opinion of the power of the emergence of this influence itself to create unique, not only the form of public relations appear.

Another is the word customization, we can see the word, now sometimes joking search engine, a search Jiangnan spring, sometimes search out is Jiangnan spring, sometimes is a spring festival is Jiangnan, is this search engine understand my needs? I think a lot of search in the constant trend of intelligence, and constantly understand the needs of the searcher, according to the results of long-term search to determine whether you want to search the media is the Jiangnan spring, or the Spring Festival Jiangnan. When it has a better understanding of your search, a database of your interests, judgments and hobbies will eventually form a Web site that helps you search the Internet and pull the content you want onto the desktop to form your personal desktop, which is a very powerful trend.

Eighth is the charging of content, which is a huge market. I've done one thing in 1995 years, the introduction of Tyson's game against Holyfield, when China did not spread, I asked my partner to call Don to ask if they can spread, they do not know how big China's communications market, the result to the whole China's copyright is 50,000 U.S. dollars, all the things to China's more than 10 television stations, On Sunday morning broadcast this advertisement, the only request is to insert the advertisement in the film, each turn below has two or three minutes, all is inserts our advertisement, the opening film tail television station own broadcast, we sold to a chest sign casual clothes, this race probably has 100 million people to look. In 1995 that morning I earned 500,000 yuan, 100 million people see if someone gives money, each person only receive 5 cents, will be the number of horror. The direct charging mode of the individual to the consumer I think will become the leading mode of the future, the audience joked that actually make money with advertising, I think many investors have cast a lot of advertising mode, my own private investment is very little investment advertising mode, because I know how difficult advertising, I think there's probably a lot of good ideas about advertising, I always do not have too much hope for advertising, the media at the right time and the resulting things let me start again is very difficult, today's television if the consumer fees from that year, CCTV will not only 9 billion of the income. The World Cup received 8 billion of the advertising is already a big number, everyone watching the World Cup ordinary field a person 2 yuan, the final 10 dollars, how many people will not look at it? As with the phone bill, at the end of the month, one months you spend 30 dollars to watch the World Cup, I think this middle of the income will be very scary. We see very clearly that the future of content charges is far beyond the prospects of the advertising market, I think China's IPTV market is good or PTV their potential, some people say that the traditional TV station has gone down I think not, I think the traditional television station after the digital transformation, become a digital pay TV station. We want to customize our program, pay 88 dollars a month, as long as there is a paid channel, as long as there is such a platform, and finally gradually become a habit, it brings the benefits of the transformation of the TV station, they will not rely on advertising, but rely on the PTV market fees, for the niche of the company larvae it is not very able to enter the content market But it is not a bad thing, the high-end users can only see PTV, no ads, there is no way out only to our home, for the PTV of the imaginary space point of view I think than today's China's advertising much more.

The last word is hypermedia structure, when China's 七、八千家 personal website form a form of alliance, when the site by a specific technology management, traffic is unified after the words, if the largest traffic in China, in fact, 七、八千个 people flow is the largest. Does not form a brand, but if you can put this software on the back to identify the time, you can pick the ads related to you when the advertisers are also formed, you on which site is not important, it is beyond your media structure, may be in the seven or eight site anytime you come in, I just recognize your number, For you to pick ads, advertisers just want to impress the target audience, this one-on-one form is the future trend. At the same time can also be the last click or the final production of the consumption action to charge, according to the results of charges, I think this mode is irresistible, this is my future in the field of communication may occur in nine directions of the comprehensive exposition, thank you.

Moderator: Thank you very much for Jiang's wonderful speech. Below we want to ask is Mr. Gavin, he is the founder of the Qing Branch group, President and CEO, know Guang People said he is not like from the people, but very scholar temperament. In the past six years, he has led the Qing branch team, the Qing Branch group into China's most influential venture capital institutions, and the establishment of the most powerful entrepreneurial relationship network. Let us welcome Mr. Gavin with a warm applause.

Gavin: Hello all friends, welcome again to join us today's meeting, six years, I as the CEO of the sixth year of this report, the annual figures are changing. We've also made some improvements this year, hoping this data will better reflect the market, so I think I'll take a brief look at the investment from January to November this year, not the January to December investment, which is a one-month-long survey. In addition, we have a lot of VC and PE separate, so we see the data is adjusted, another VC cast a part of VC inside, the PE cast in PE, better reflect the market response.

I think in fact these two years actually LP to China many many, I met the top LP in the United States and the best LP in Europe, and when I spoke to them, they said that we had already invested in the six fund in China, which in the last two years was a 4 billion dollar new fund this year, a new fund close to 4 billion dollars, A total of about 8 billion. The total of this year is 40 funds, and about 20 new funds are set up each year. This is the current situation of the market to raise funds. From the investment point of view, our forecasts are relatively accurate, I remember a few days ago, about half a month some media said this year's investment is 170 million yuan, the research department is very face, the number is 169 million U.S. dollars, 1-November total investment in 305 projects, two figures are the all-time high, relative to last year's growth of nearly 50%. Last year was 1.17 billion dollars, and we made some adjustments every year to the end of 2006, like the 2005 revision. The investment in this industry I think is the audience, now it is accounted for about 60%, the service industry accounted for 12%-13% (investment of the Money department), the traditional industry is 10%. Here I would like to explain what service industries are, including the media, traditional industries including education, traditional manufacturing, energy, including automobiles. The biggest feature of VT is the decline in the IT ratio, which is the case throughout the year.

The geographical distribution of Beijing this year is still quite a lot of, about 700 million dollars invested in Beijing, 43% of the money invested in Beijing, 35% of the project in Beijing, Shanghai is 20% of the money invested in Shanghai, 27% of the project cast in Shanghai. This is a situation, the pattern is still more Beijing projects. The type of money, that is, who is the investor, this trend has not changed, the local yuan accounted for less than 20% of the money, foreign investment has been China's venture capital market leader. Early investment accounted for 1/3 of the market, the current situation, the average amount of investment early is 3.8 million yuan, medium-term is 6.8 million U.S. dollars, the latter is 11.5 million U.S. dollars, this figure a bit lower.

Let's look at what the private equity market looks like, and we surveyed 75 of the global funds invested in China, and about 35 of them raised 12 billion dollars in the year 1 to October, a part of which is in China. Now China's market is very interesting, VC and PE is very complementary.

PE has invested about 11.8 billion dollars in China this year, investing 110 projects, most of which are traditional, the second is service, and the third is (IT). The geographical view of Beijing 4.8 billion U.S. dollars of investment 30 projects, accounting for 40% of the investment share, so Beijing investment project is quite a lot, Chingko put the office in Beijing is also because the project a little more. In addition, from the type of industry, a lot of investment banks.

This year, VC and PE exit, this year a total of 144 projects out, the middle has 67 IPU, some new is IPU, some of the second year to sell shares, the third is mergers and acquisitions, from the industry to see it project exit more, accounted for 34% of the share, the second is the traditional, the third is

We look at the situation of Chinese enterprises listed overseas and the situation of domestic listing, this year with VC-related 28 new IPU, Canada Solar energy, People's communications, New Oriental, Mary, and some companies in Shenzhen SME board listing, Shenzhen, with bamboo electronics or there are many opportunities. There are relatively large banks listed, which I would like to add a sentence, in fact, 2006 years is not the VC harvest year, with VC-related exit a handful, the entire exit is not very active, we hope that 2007, 2008 market better, so much money dropped, If the future market is still the case, the fundraising will be affected.

Mergers and acquisitions, we look at TMT, such as three areas, 136 mergers and acquisitions, turnover is 10.6 billion U.S. dollars, the overall trend is growing, we are looking at cross-border mergers and acquisitions cross-border mergers and acquisitions is about 61, there are 7.8 billion dollar turnover, more active, see trends are increasingly active. TMT has 75 mergers and acquisitions, a total of 2 billion U.S. dollars, personnel have a 3 billion-dollar acquisition, a total of three areas of turnover in 5.3 billion yuan. In addition to see how much related to VC, 10 billion of dollars inside with VC-related limited, only about 14%, 27 project transactions in the amount of 1.4 billion dollars, is probably such a situation.

Finally, I would like to sum up that from the VC market, it investment is falling, this is obvious, China's VC more diversified, I think many companies have invested in agriculture, lighting, logistics, including flooring, paper, all aspects have investment, this year is very interesting things. The other is this year to create a record high, of course, the early investment is not to say that some people say no attention, in fact, is very active. In real estate funds with China's GDP growth is still linked, and the full flow of more funds to invest in China's shares, the country's new policy regulations may have some impact on foreign investment in China. And some of the mergers and acquisitions, cross-border mergers and acquisitions are very active, because foreign companies come in, China's big state-owned enterprises to buy foreign companies, the new domestic policy on cross-border mergers and acquisitions have a new impact on the 2007 words have some negative impact, TMT or the entire acquisition market is the most active, the number of total transactions to see. VC history of the largest overseas listed ICBC, which is related to some PE side, this is a relatively large feature. Then another is that tenth documents affect the listing of red chips, because of the improvement of domestic capital market, international overseas listing policy impact, so the domestic listing may be in the next two or three years will be more active. I participated in a large domestic securities industry in the last few days of the General Assembly, but also 500, 600 people, so the domestic capital market will also be very active, everyone here, whether foreign or domestic investment needs to arouse concern. There is also a point we also gradually want to see foreign VC to invest in domestic companies, in the domestic listing, this may be a future event.

So I think the overall assessment of VC this year why this theme is from fanaticism to rationality, we know that in the second half of 2005 and the first half of 2006 the whole market is very fanatical, I think our market is relatively good is China's VC after more than 10 years of time now has been very experienced, Also quickly adjusted, the market is very rational. China's VC market is relatively small, the U.S. VC accounted for 1% of GDP, China accounted for only 0.025% of GDP, so the market has a lot of room for growth. We do not because some industries have some small bubbles, the whole VC market is a bubble. Thank you.