By Tiffany Wu
SAN FRANCISCO (Reuters) - Western venture capitalists say the flood of money to China is forcing financiers to overpay for investments, but most think they can find the rare bargain in the fast-growing Asian market.
Venture funding in China, estimated to have doubled in the second quarter to a 2-1/2-year high of $480 million, shows no signs of slowing despite growing wariness about a bubble, said financiers at the Reuters Venture Capital Summit in San Francisco this week.
Doll Capital Management co-founder David Chao said funds were pouring money into bad deals through "shotgun investing."
"I had one of our companies check into how many YouTube-like companies are there in China," he said, referring to the popular U.S. online video-sharing site. "There are 150 of them -- 150 -- and many of them, most of them, are being venture-backed today."
"If you ask me, 'are there bad deals done?' Most likely 148 of them are bad deals," he predicted.
Faced with moderate local returns, Silicon Valley financiers are flocking to China in search of higher yields, hoping to discover gems like Semiconductor Manufacturing International Corp. (SMI.N: Quote, Profile, Research, Stock Buzz) (0981.HK: Quote, Profile, Research, Stock Buzz) or advertising firm Focus Media Holding Ltd. (FMCN.O: Quote, Profile, Research, Stock Buzz).
Rising living standards in the world's most populous nation present tremendous opportunities, said Bob Grady, who runs the VC arm of Carlyle Group, the largest private equity firm.
"I don't see, frankly, a real dampening in enthusiasm on the part of investors," said Grady, who also serves as chairman of the U.S. National Venture Capital Association. Continued...
© Thomson Reuters 2008. All rights reserved.
| Global Environment | Oct 06 - 8, 2008 | Energy |
| Autos II | Sep 30 - Oct 01, 2008 | Hotels/Casinos |
| Restructuring | Sep 22 - 26, 2008 | Financial Services/Exchanges |
| Autos | Sep 15 - 17, 2008 | Autos |
| Russia Investment | Sep 08 - 9, 2008 | Country Summits |
