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China to create $6.5B venture capital fund to support start-ups

78 points by billconan 12y ago

free2rhyme214 12y ago
Oh cool. Now we can finally copy the Chinese.
Pro_bity 12y ago
What really happens with most government run investment where funds are allocated to outside investment people or groups (ex. EU funds), is that the investors have limited incentives to actually/help create successful companies. In fact, what often happens is that the investors manage to funnel a large portion of the funding back to their own pockets by requiring the startups to pay for bootcamps and trips that are run by the investor and mentors (i.e. investor's buddies) and pay for services and facilities that the state provides the investors for free. On top of this, the investors get very generous salaries and reimbursed for many if not all expenses (i.e. a great opportunity to double dip, see above). Finally, if the investor has any money at risk in the fund it is normally all but fully insured by the government and they get the lion's share of any returns, if there are any. All in all, it is a great deal for the investors with almost no accountability and little net benefit for the startups.
- Chronic30 12y ago
  Sounds like investment firms in Silicon Valley.
- nubela 12y ago
  By your definition, most state venture-funds are born to die. What you are describing is a structural issue, which while plausible, is not definitive the structure that a state VC will wield. Some very good examples of state VCs that did not fall into this trip are Temasek/GIC from my country (Singapore), as well as that of Norway. And yes, Termasek have a VC that does tech fundings too. They recently funded Snapchat.
  - Pro_bity 12y ago
    I would exclude from this explanation, state funded VCs or sovereign wealth funds that invest in later stages. They are most commonly investing for strategic reasons or just piling onto an already established leader.
bobjordan 12y ago
I just wish they would stop attacking google products. I have a China legal enterprise, we pay China taxes, employ 15 people, expect to double size again this year. But since January 1st I had to scramble and buy VPN service for all our employees just to continue using our email. I've dealt with a lot of frustration to get started over here in Chinese system but right now is probably the most pissed off I've been, this is ridiculous.
- edwinyzh 12y ago
  I have the same frustration as you as someone who is also using Gmail (Apps version) in China. Even you can get through using VPN, but Gmail web is slow. Sometimes I am even impulsed to make an email client that has all the Gmail features I love so that I can migrate to another IMAP-enabled email service like FastMail, but I know it's not easy even if I have already built http://ownmycopy.com http://ownmycopy.com which already does cloud-to-desktop backup for Gmail and has a viewer for Gmail labels and emails...... And sometimes I think, if I ever fight against the evil GOV, such a frustration is what make it happen. Well, this is just a thought, I'm putting me in danger if I wrote this in Chinese and on a Chinese website......
- westiseast 12y ago
  Yeah, it just seems to be getting ridiculous the last few months. I can watch streaming video from youku or iqiyi with no problems, but when I try to load anything outside of mainland, with or without VPN, it's like being back on 28k dialup again at best.
sidcool 12y ago
Communism with a side of capitalism.
sorpaas 12y ago
This national capital has already been set up since 2009, so there's not so much new things about it. If you can read Chinese, here's some "inner people" commenting about it: http://www.zhihu.com/question/24838323 http://www.zhihu.com/question/24838323
tn13 12y ago
Government funding of start-ups is a bad idea for everyone. It is like using the taxed money of successful entrepreneurs to fund doomed to fail entrepreneurs. It might make more sense for the government to give similar tax incentives to say employees, VCs and founders on the potential windfall they might make from their success. When government puts up such program, the people whose expertise in convincing government agents would end up getting such money. Convincing a VC and convincing a government agent are pretty much orthogonal because VCs are generally directly responsible for that money.
rebootthesystem 12y ago
I am going to China in a few weeks to meet about a fairly large tech project. China has grown an amazingly vibrant and potent culture of entrepreneurship that puts most nations in the world to shame.
238357 12y ago
Anybody knows how to apply to one of those funds?
bhouston 12y ago
I think this is scary for Europeans and North Americans. We've had a free ride in the startup space, a real dearth of competition from China, even though China has exceptionally skilled people (most heavily talented in technology, although the marketing talent is obviously getting better with the home grown successes like Xiaomi.) The one saving grace is that this is government run, which means it will likely be less efficient than privately run VCs. I've seen government run startup "accelerators" in action and it is usually pretty messy.
- zackmorris 12y ago
  From what I can tell, people often assume private funding works better than public funding because they conveniently disregard when private funding is inaccessible. I'm able to get something as basic as food stamps from the government (if I desired that) but I'm not aware of private small scale relief outside of religious organizations. I also benefitted from Pell grants and a first time home buyer grant with my girlfriend. I think public venture funding is compelling and could lead us in all kinds of new directions because funds would be more easily obtained for the public good than sole profitability. I'd even go as far as to say that the reason so many ventures have a vacuous (if not suspect) goal is that currently we are in an era where most of the world's liquid wealth is held by private institutions rather than the people or the commons. For example I don’t see something like the moon landing happening today, or even large public works like Hoover dam (whose cost/benefit analysis can be left to a later discussion).
- auganov 12y ago
  Even assuming that the govt fund behaves just like private Chinese VCs you'll see the bulk of the money going towards startups that try to replicate US/International innovation success stories domestically. Xiaomi is not a threat to startups. It's a threat to consumer electronics manufactures with higher cost bases that are slow at innovation. China is good at globalization plays, but still bad at innovation. Startups don't need to worry [yet].
- danmaz74 12y ago
  I think that, at least for "internet startups", the Great Firewall will be a Great Impediment to creating a healthy ecosystem.
maceo 12y ago
Yasheng Huang writes that China's economic system is not "Socialism with Chinese Characteristics", as the CPC proclaims. It is in fact capitalism with Chinese characteristics, and this move offers further evidence.

78 points by billconan 12y ago

Oh cool. Now we can finally copy the Chinese.

What really happens with most government run investment where funds are allocated to outside investment people or groups (ex. EU funds), is that the investors have limited incentives to actually/help create successful companies. In fact, what often happens is that the investors manage to funnel a large portion of the funding back to their own pockets by requiring the startups to pay for bootcamps and trips that are run by the investor and mentors (i.e. investor's buddies) and pay for services and facilities that the state provides the investors for free. On top of this, the investors get very generous salaries and reimbursed for many if not all expenses (i.e. a great opportunity to double dip, see above). Finally, if the investor has any money at risk in the fund it is normally all but fully insured by the government and they get the lion's share of any returns, if there are any. All in all, it is a great deal for the investors with almost no accountability and little net benefit for the startups.

Chronic30 12y ago
Sounds like investment firms in Silicon Valley.
nubela 12y ago
By your definition, most state venture-funds are born to die. What you are describing is a structural issue, which while plausible, is not definitive the structure that a state VC will wield. Some very good examples of state VCs that did not fall into this trip are Temasek/GIC from my country (Singapore), as well as that of Norway. And yes, Termasek have a VC that does tech fundings too. They recently funded Snapchat.
- Pro_bity 12y ago
  I would exclude from this explanation, state funded VCs or sovereign wealth funds that invest in later stages. They are most commonly investing for strategic reasons or just piling onto an already established leader.

bobjordan 12y ago

I just wish they would stop attacking google products. I have a China legal enterprise, we pay China taxes, employ 15 people, expect to double size again this year. But since January 1st I had to scramble and buy VPN service for all our employees just to continue using our email. I've dealt with a lot of frustration to get started over here in Chinese system but right now is probably the most pissed off I've been, this is ridiculous.

edwinyzh 12y ago
I have the same frustration as you as someone who is also using Gmail (Apps version) in China. Even you can get through using VPN, but Gmail web is slow. Sometimes I am even impulsed to make an email client that has all the Gmail features I love so that I can migrate to another IMAP-enabled email service like FastMail, but I know it's not easy even if I have already built http://ownmycopy.com http://ownmycopy.com which already does cloud-to-desktop backup for Gmail and has a viewer for Gmail labels and emails...... And sometimes I think, if I ever fight against the evil GOV, such a frustration is what make it happen. Well, this is just a thought, I'm putting me in danger if I wrote this in Chinese and on a Chinese website......
westiseast 12y ago
Yeah, it just seems to be getting ridiculous the last few months. I can watch streaming video from youku or iqiyi with no problems, but when I try to load anything outside of mainland, with or without VPN, it's like being back on 28k dialup again at best.

sidcool 12y ago

Communism with a side of capitalism.

sorpaas 12y ago

This national capital has already been set up since 2009, so there's not so much new things about it. If you can read Chinese, here's some "inner people" commenting about it: http://www.zhihu.com/question/24838323 http://www.zhihu.com/question/24838323

tn13 12y ago

Government funding of start-ups is a bad idea for everyone. It is like using the taxed money of successful entrepreneurs to fund doomed to fail entrepreneurs. It might make more sense for the government to give similar tax incentives to say employees, VCs and founders on the potential windfall they might make from their success. When government puts up such program, the people whose expertise in convincing government agents would end up getting such money. Convincing a VC and convincing a government agent are pretty much orthogonal because VCs are generally directly responsible for that money.

rebootthesystem 12y ago

I am going to China in a few weeks to meet about a fairly large tech project. China has grown an amazingly vibrant and potent culture of entrepreneurship that puts most nations in the world to shame.

238357 12y ago

Anybody knows how to apply to one of those funds?

bhouston 12y ago

I think this is scary for Europeans and North Americans. We've had a free ride in the startup space, a real dearth of competition from China, even though China has exceptionally skilled people (most heavily talented in technology, although the marketing talent is obviously getting better with the home grown successes like Xiaomi.) The one saving grace is that this is government run, which means it will likely be less efficient than privately run VCs. I've seen government run startup "accelerators" in action and it is usually pretty messy.

zackmorris 12y ago
From what I can tell, people often assume private funding works better than public funding because they conveniently disregard when private funding is inaccessible. I'm able to get something as basic as food stamps from the government (if I desired that) but I'm not aware of private small scale relief outside of religious organizations. I also benefitted from Pell grants and a first time home buyer grant with my girlfriend. I think public venture funding is compelling and could lead us in all kinds of new directions because funds would be more easily obtained for the public good than sole profitability. I'd even go as far as to say that the reason so many ventures have a vacuous (if not suspect) goal is that currently we are in an era where most of the world's liquid wealth is held by private institutions rather than the people or the commons. For example I don’t see something like the moon landing happening today, or even large public works like Hoover dam (whose cost/benefit analysis can be left to a later discussion).
auganov 12y ago
Even assuming that the govt fund behaves just like private Chinese VCs you'll see the bulk of the money going towards startups that try to replicate US/International innovation success stories domestically. Xiaomi is not a threat to startups. It's a threat to consumer electronics manufactures with higher cost bases that are slow at innovation. China is good at globalization plays, but still bad at innovation. Startups don't need to worry [yet].
danmaz74 12y ago
I think that, at least for "internet startups", the Great Firewall will be a Great Impediment to creating a healthy ecosystem.

maceo 12y ago

Yasheng Huang writes that China's economic system is not "Socialism with Chinese Characteristics", as the CPC proclaims. It is in fact capitalism with Chinese characteristics, and this move offers further evidence.