Smart Answers

Find Chinese Venture Capital for Your Business


I have a project to develop 12 to 15 small lodges along a jaguar preservation corridor in Latin America. Can you direct me on connecting with Chinese venture capital or private equity firms? —J.H., North Miami, Fla.

After decades of distrust, the past several years have seen efforts to encourage business partnerships across the Pacific. The formal and informal connections being made capitalize on the flourishing Chinese economy, which is rewarding business owners and spurring them to seek investments, says Steven Shen, chairman of the China-U.S.Business Summit, a nonprofit in Long Beach, Calif.

Traditional Chinese investments have been focused on short-term gains in Asian real estate and the stock market, where there are easy exits, says Ben Walters, founder of Ospop, a 3-year-old Shanghai company that markets utilitarian Chinese footwear and accessories internationally. Of course, those investments may have lost some of their luster recently because of worries about a real estate bubble in Asia. Wealthy Chinese, worried about their country's long-term political stability and the wisdom of amassing fortunes in China, continue to seek safe foreign investments, Shen says.

Yet even in our globalized era, making financial connections across vast differences in culture and geography is still difficult. "If Chinese investors don't see anything concrete here, they get worried, especially if someone is asking them to put in money," Shen says. "They still don't know much about the system and the ideology here in the U.S., and they have grown up hearing a lot of criticism of America from their state media."

Organizations like his seek to bridge that gap. He predicts that in the next 10 to 15 years, Chinese-U.S. business ventures will increase dramatically. In your situation, it's probably best to seek help from one of the many new organizations that have sprung up to promote business cooperation between the two countries. Along with the China-U.S. Business Summit, here are a few places to start: The Hong Kong Trade Development Council, The North American Representative Office of Shenzhen, and The Shanghai Foreign Investment Development Board.

Another way to go would be partnering with a sophisticated Chinese investor or Chinese-American entrepreneur, Walters says: "Personal relationships continue to play a more significant role in business here than in other parts of the world. Introductions from a well-networked individual would go a long way."

Kerry Bonner, who works to promote U.S.-Chinese business ventures at California Centers for International Trade Development, says that a partner or professional familiar with Chinese law and culture would be extremely helpful. Not only could that person help with the language and introductions, but he or she could also perform due diligence on would-be investors. "Someone might say they have important ties to the Chinese government, but it turns out they've got a relative in middle-management in a provincial office. It's not always as solid as it sounds," she says. "A lawyer on our advisory board was suspicious about a company. When she visited the address, she found an empty office where the business name and logo were just stickers that could be put up or removed from the door and walls" to make it look like a legitimate company headquarters.

Evan Chuck, managing partner of law firm Bryan Cave's Shanghai office, works with leading U.S. brands that are beginning to expand into Chinese markets, as well as Chinese investors who want to acquire assets in the U.S. He recommends that you seek out Chinese hospitality companies and hotel chains. Many are eager to expand their properties outside Asia and may be interested in an opportunity to appeal to eco-tourists from around the globe.

Another target would be Chinese corporations or state entities looking to increase their presence and influence in Latin America because of the area's natural resources. "We've had clients make investments in Ecuador, Chile, and Brazil," Chuck says. "An idea might be a joint government-to-government pet project that you could facilitate as a means of bringing good will to both agencies."

There is interest among the Chinese public and private organizations in preserving wildlife and wilderness areas. A group called Save China's Tigers, has attracted celebrity endorsements. That's another tactic you might take to lend credibility and garner publicity for your venture.

Karen_klein
Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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