China VC Market Update

iD TechVentures (iDT)
April 16, 2009
 Table of Content

• Top 10 VC, 2008 (by ChinaVentures)

• Growth Enterprise Market (GEM)
• Macro Economy in China
• RMB Investment & Local Stock Market
• China VC 10 Years

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 Top 10 VC, 2008 (by ChinaVentures)
Score of Score of Score of Deal Score of Score of Total
Score of Score of Ranking
VC Organization Weighted Weighted Flow Portfolio Team
Ranking Exit Case Exit Value Score in 2007
ROI IRR Capability Mgmt Stability

1 Shenzhen VC 10 4 10 6 9 5 8 7.05 5

2 SAIF 4 10 6 4 10 6 9 5.66 1

3 Legend Capital 6 8 4 2 10 8 10 5.46 2

4 Fortune VC 2 10 8 2 9 7 8 5.36 50

5 iD TechVentures Inc. 4 4 4 6 5 6 10 5.30 20

6 Oriental Fortune 2 2 10 8 4 3 4 5.25 -

7 China Science & Merchants 2 2 10 8 3 3 4 5.15 -

8 Orchid Asia 6 10 4 2 8 8 8 5.07 23

9 IDGVC 2 2 8 2 10 3 9 4.99 3

10 Cowin 6 4 4 8 4 3 4 4.45 -

Full report in Chinese:

http://events.chinaventure.com.cn/sh2009/cvawards/list_2.html
 Top 50 VC, 2008 (by ChinaVentures)
Rank 2008 VC Rank 2007 Rank 2008 VC Rank 2007

1 Shenzhen VC 5 11 Intel Capital 9

2 SAIF 1 12 Sequoia 4

3 Legend Capital 2 13 SIG Asia 6

4 Fortune VC 50 14 Sino Wisdom -

5 iD TechVentures 20 15 AsiaVest 27

6 Oriental Fortune - 16 JAFCO Asia 18

Capital
17 Green Pine Capital 30
7 China Science & -
Merchants Investment
18 Morningside 29
8 Orchid Asia 23
19 Northern Light 16
9 IDG VC 3
20 Shenzhen GTJA -
10 Cowin Capital -

Top 10 VC, 2008 (by ChinaVentures)

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 Top 50 VC, 2008 (by ChinaVentures)
Rank 2008 VC Rank 2007 Rank 2008 VC Rank 2007
21 China Renaissance 7 36 Orica Capital -
22 DCM 41 37 Infotech Pacific 33
23 Fidelity 13 38 Jiuding Capital -
24 CDH VC 8 39 ZSVC -
25 NewMargin 10 40 BlueRun 28
26 Tsinghua VC 17 41 SoftBank China 34
27 DT Capital 15 42 CID 45
28 KPCB China 21 43 Govtor 11
29 LIghtSpeed 36 44 Suzhou VC 19
30 Qiming VC 24 45 GGV 32
31 Capital Today 25 46 DFJ Dragon 48
32 GSR 22 47 Matrix 47
33 Chengwei 14 48 Top Bridge -
34 Silicon Paradise 44 49 CDF Capital -
35 Walden International 12 50 Huaou -

Top 10 VC, 2008 (by ChinaVentures)

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 Growth Enterprise Market (GEM)
• After 10 years since the inception of the idea, the Provisional Administrative
Measures for Initial Public Offerings and Listing on the GEM (the “Measures”)
was finally published on March 30th, and will take effect on May 1.
• Criteria of listing on GEM: (source: Xinhua, March 31, 2009)
– Be profitable for consecutive 2 years with combined profits of at least
RMB10 million
– Be profitable of at least RMB 5 millions for the most recent year on
revenues of at least RMB 50 millions and annual revenue growth rate of at
least 30% in recent two years.
– Net asset of at least RMB20M
– Been in operation for more than 3 years
– Innovative business model with potential of high growth rate
• China Securities Regulatory Commission (CSRC) is still the central authority to
approve any IPO on GEM but it will invite more outside experts to review the
applicants’ qualification.

Growth Enterprise Market (GEM)

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 Growth Enterprise Market (GEM)

• The Measures is the first step. There are still a lot of work to do
before official launch. GEM still need more related regulations, for
example, list of application forms and material required; the
methodology of pricing…etc. It also takes time to train underwriters,
lawyers, and accounting firm.
• If the whole system is ready in May or June, considering that the
lead time of examining the application is at least 3 months, the
earliest IPO on GEM will be August. CSRC estimated at least 8
companies will be the first pioneer group.
• Currently, about 300 companies are qualified and preparing for list
on GEM

Growth Enterprise Market (GEM)

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 Growth Enterprise Market (GEM)

• In the past, many new companies or start-ups which have very

creative business model and high potential to grow cannot go IPO
on the main board due to their revenue / profit do not meet the
criteria. This situation more or less strangles VC’s interest in these
companies and cause the company suffering from capital shortage.
• GEM could be a Nasdaq-like market, spiriting up VC community,
enterprises, capital market and local investors.
• GEM could further improve the onshore divestment and encourage
offshore investors get involved in RMB investment.
• GEM is just an initial step of a long journey for local VC investors.
Before local VC environment further improve, China VC will still be
contributed by offshore funding and dominated by foreign VCs.

Growth Enterprise Market (GEM)

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 Growth Enterprise Market (GEM)
• GEM will NOT make A-share market less attractive or distract
capital from A-share. The reasons are:
– GEM is more appropriate for SMEs. Qualified companies are
not competent on A-share.
– A company can raise only about RMB100~300M on GEM. If
there are 100 listed companies on GEM, the capital raised is
only RMB10 billion to 30 billion, which will be just equal to the
capital raised by a big corporation on A-share main board.
– The scale of capital-raised on GEM is only 60% of Shenzhen
SME
– Hence, different stock markets serve different target company.
They are not competitors.

Growth Enterprise Market (GEM)

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 Growth Enterprise Market (GEM)
• New GEM launch and future listing still come with potential risks, mainly on
following six areas: (Source: http://news.xinhuanet.com/fortune/2009-
04/01/content_11110061.htm )
– Operation: These companies are still at expansion stage. It’s business
model and profitability are still under test.
– Integrity: How real are the information and material disclosed by the
company?
– Price fluctuation: A company’s scale is smaller so the price is easily
manipulated.
– Technology: It’s hard to identify the marketability of new technology
– “Blind investors”: Investors might create a hype and make GEM become
another “bubble” due to not well understand the new technology
– Underwriters: The underwriter might beautify an unqualified company to
IPO.
• GEM board is not panacea. In short term, both enterprises and investors
may just wait-and-see. GEM’s liquidity, valuation, and case quality will be
examined after launch.

Growth Enterprise Market (GEM)

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 Current Macro Economy
• Chinese government has a 4-trillion stimulus plan to help the economy.
The plan will be fully executed within 2 years. 4 trillions are 16% of
China’s total GDP.
• The stimulus plan covers 6 areas: 1) Infrastructure in rural regions; 2)
Overall infrastructure including railway, airport…etc.; 3) Education, health,
and other social issues; 4) Environmental protection; 5)Technical
renovation; 6) Recovering work in the earthquake areas (source:FJKX (东
南在线 ), March 6, 2009)
• The government also disclosed revitalization plans for 10 industries
including iron & steel, automobile, textile industry, equipment
manufacture, ship, electronic information, light industry, petrifaction
industry, nonferrous metal, and logistics.
• Among the 10 industries, equipment manufacture, logistics and electronic
information are already VCs’ focuses.
• The 4-trillion stimulus plan is expected to bring new investment
opportunity for VC industry.

Macro Economy in China

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 Outlook of Macro Economy
• China has been forecasted to be the first major economy to recover
from the global meltdown. The reasons: (source: China Economics, by
Merrill Lynch, 10 Feb. 2009)
– Massive FX reserves
– Low debt levels ensure financial institutions have enough capital to
support enterprises.
– Current account surplus
– Economy is mainly driven by domestic demand, instead of
external demand: China is still during the process of
industrialization, market-oriented, and urbanization. The consumer
based is continuously enlarging. Comparing with the U.S.,
personal consumption still accounts lower percentage and has big
potential to become the boost of economy situation. Hence, the
impact from contraction of China’s export is limited.

Macro Economy in China

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 Outlook of Macro Economy
• Some other indicators are showing light at the end of the tunnel.
– Shanghai A Share market have been on the rise, from as low as
1800 points last November to 2,439 as of April 7th, 2009.
– Export slightly bounced back in March.
– PMI in Feb has been in the lifting mode for 3 consecutive months.
(source: www.shihua.com.cn (世华财讯))
• In 2009, China could contribute half of world’s growth. Comparing
with the U.S., Europe and Japan, China is very strong to survive this
cold market. China has confidence to achieve keep 8% GDP growth
rate
• After the financial crisis, China will emerge as a stronger player in the
global economies.

Macro Economy in China

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 RMB Onshore Investment
• During 2008, US$1.4 billion was invested into RMB deals, up more
than 247% from 2007.
• New regulation releases the right of approving RMB fund set by join
venture of local and foreign VCs from Ministry of Commerce to local
provincial authority.
• Qualified RMB LPs are still not sufficient on the market.
• We expect RMB investment will surpass USD investment in the long
run.

RMB Investment & Local Stock Market

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 Local Stock Market
• Since Sept 18, 2008, there was no new IPO on A-share and
Shenzhen SME board.
• VCs see a light of hope of IPO market from the listing of
Singyes (iDT’s portfolio) on the main board of HKSE
(Zero2IPO 3Weekly, 2009-01-06)
• Until March 3, all 273 companies on Shenzhen SME board
unveiled their financial performance last year: Approximately
60% have profit growth comparing with 2007, about 30% with
lower profit than 2007 and less than 10% is loss.

RMB Investment & Local Stock Market

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 China VC 10 Years (1999-2008)
VC Investment

CAGR: +25% in investment amount (US$M)

+ 9% in the number of cases

No. of Inv.

Inv. amount

* Source: Zero2IPO research center

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China VC 10 Years
 China VC 10 Years (1999-2008)
No. of Inv. Cases : 3,176 Investment Amount: US$15B

Not
Not
Disclose,
Disclose,
Cleantech, 1310, 9%
304, 10%
163, 5% Cleantech,
806, 5%
Bio /
Bio / Health,
Health,
246, 8%
987, 7%

Broad IT, Broad IT,

1683, 53% Service,
Service, 293, 1847, 12% 7905, 53%
9%

Traditional
, 2158, 14%
Traditional,
487, 15%
• After 2006, the investment in broad IT has been decling in terms of number
of investment and investment amount
• The investment allocation in Broad IT in 2008 was only 38% and 36% in
terms of number of investment and investment amount
* Source: Zero2IPO research center
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China VC 10 Years
 China VC 10 Years (1999-2008)
Market Value of VC-Sponsored Companies has surpassed US$80B

No. IPO sponsored by VC

Overseas Market Domestic Market

Market Value of VC Sponsored (US$B)

* Source: Zero2IPO research center

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China VC 10 Years
 China VC 10 Years (1999-2008)
Comparison of Fund Raising between Foreign VC and Domestic VC

New Domestic Fund

New Foreign Fund

New Foreign Fund New Domestic Fund USD Million

* Source: Zero2IPO research center

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China VC 10 Years
 Thank You

Contact Window:

Hanne Chen Hui-

Hui-ju Chen
Investor Relations Investor Relations
email: HanneChen@idtvc.com email: HuiJuChen@idtvc.com
Tel: +886 2 3518 3902 Tel: +886 2 3518 3903

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Disclaimer:
The content contained in this presentation has been
prepared based on current information available.
These are outcomes dependant on future events, and
under no circumstances can they be treated as
commitments by iD TechVentures.
TechVentures.

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