Global Themes

On Globalization & Venture Capital

On local markets etc

An interview by Cherry Zheng from last September (with a nice photograph to boot!):

*** INTERVIEW BEGINS ***

European venture capital firms universally hold a prudent attitude towards the entry into Chinese market. As a result, only a few of them entered China. On the other hand, quite a large number of them, which include Amadeus Capital Partners Limited (“Amadeus”), are always observing the Chinese market actively and forming relationships with local VCs and major corporations

Amadeus invests venture capital in new technologies from offices in London and Cambridge, UK.  Since its inception in 1997, Amadeus has backed more than 60 companies in the UK and continental Europe, covering computer hardware and software, mobile and fixed communications technologies and medical technologies. Amadeus manages a total of GBP288 million of assets, raised through five funds including two seed-stage funds.

In his role as Business Development Partner for Asia at Amadeus, Shantanu Bhagwat (“Shantanu”) has 18 years of broad international experience in the broad technology sector, in Europe as well as in Asia, where he once worked in Japan and India. Shantanu has already visited China several times and continues to find opportunities to get familiar with this country and understand the developments even better.

He frequently attends investment forums and seminars, which were held outside China by Chinese entities. For example, he attended Zero2IPO-organized China Venture Capital and Private Equity Forum, London in July 2007. He also often keeps in touch with venture capital investors and professionals who permanently reside in China. Consequently, he cultivated his interest in Chinese market.

Great potential exists in Chinese market

Shantanu is the Business Development Partner (Asia) for Amadeus. He joined the firm in 2001 but since January 2005 he has focused on supporting the efforts of Amadeus’ portfolio companies doing business in Asia, while also exploring the possibilities for establishing strategic venture capital partnerships in the area. At Amadeus, Shantanu has made his mark by shepherding a number of important investments for the firm. These include Red-M, a company that offers products and solutions in wireless security, and Power Paper, which produces thin and flexible batteries known as micro-power source technology.

Previously, Shantanu was a management consultant working for Monitor Company in London and earlier he developed Smith-Kline Beecham’s international e-business strategy. He also worked in the Indian Foreign Service for a number of years.

Shantanu holds an MBA from the London Business School, where he was a Chevening Scholar. He has a degree in Computer Engineering from India.

Shantanu is skilled at thinking. Particularly, he is deeply concerned about the economic development and investment progress in both China and India, two largest developing countries in the world. In order to give timely comments on latest news and classic articles that he read recently, he has built an individual blog, a blog updated every few weeks and focusing on venture capital and globalization. He gave his personal view on the problems in the development of India and China, in his blog writings, such as “US, China & India: The Innovation Race,” “The Last Frontier or Just Don’t Bother?” “India & China: So Different, Yet So Alike,” and “Doing Business in China and India – Opportunities and Challenges.” Meanwhile, he sought for comments or views from blog readers.

Born in India, Shantanu is a gifted linguist. He can fluently speak Japanese, Hindi, Marathi and English as well. “Although there is a strong interest in investing in Private Equity in China and India, interest in the Venture Capital sector (specifically early-stage technology) is still low. ”

“So far, I am not aware of any VC firm or team out of London – other than 3i and Atlas Ventures – that has shown an interest in VC in China,” said Shantanu. During the interview with Zero2IPO observer, he also mentioned that there is still no plan for Amadeus to enter China. “But quite a few companies from our portfolio have been focusing on China and some of them also have local representatives and offices there. We believe the Chinese market offers a very significant potential for many of our portfolio companies.”

Knowing local market is key

Library House, a data group under Cambridge University, recently released a survey on global venture capital investment. According to the survey, an aggregate GBP1.4B of venture capital for 2006 was invested in China, thus China replaced UK to become the second largest target country of global venture capital. Meanwhile, India became the fourth largest only after US, China and UK. When asked his views on these things, Shantanu said that he felt amazed at the pace of developments and mentioned that he will continue to show interest in them. “Six years ago, when I joined Amadeus, I would have been incredulous if someone had told me that China will rank ahead of Israel and UK as the No. 1 overseas destination for US Venture Capital by 2006. But that is exactly now. More interestingly, the investment sectors are getting increasingly sophisticated – and last year there were sizeable investments in software, advanced materials, and specialty chemicals. What’s next? Probably, investment in Shenzhen will overtake that in Massachusetts and/or Bangalore will attract more venture dollars than Texas?!”

As a graduate in Computer Engineering from India, Shantanu is one of the Charter Members of TIE (The Indus Entrepreneurs) and also a member of the Advisory Board at Asia-Silicon Valley Connection. To Shantanu, both China and India, two Asian developing nations, are the most attractive regions for global venture capital. The current situation of venture capital investment, on the other hand, has an obvious disparity between China and India. First, because the investment base of venture capital in India is smaller than that in China, India has a higher growth speed. According to the report from Library House, the venture capital investment volume for 2006 in India increased 90% compared to 50% to 60% in China. Second, there is a trend in China’s VC industry that more venture capital went into traditional industry sectors. However, venture capital investment in India was still led by TMT and Bio/healthcare sectors. For instance, the growth of online community is rather rapid in India, but this growth cannot match that of mobile phone users there. The consumption of downloaded ringtones there hit US$100 million per annum, however, not all Indian ringtone consumers are high-end users. Based on his observation, Shantanu anticipates that India will see online and mobile businesses keeping a fast-growth trend in the coming years. “As for the GDP in India, consumption represents about 67%, which was only behind 70% in the US. I think the bulk of consumption-driven expenditure will be put into online platform via Internet or Mobile Phone terminals.”

From his personal perspective, although there is some investment bubble in Chinese and Indian markets, China and India are still two potential regions that merit great attention from venture investors. On the other hand, there must be some bottleneck issues for Western investment institutions to address before entering Chinese and Indian markets. Commenting on this, Shantanu said, “The largest challenge for European venture investors to enter China or India is their lack of familiarity with the respective market. After their entry to these two markets, the ability to take the opportunities in China and India needs to be improved. However, in the long run, I believe these issues will be all addressed.”

*** END ***

May 18th, 2008 Posted by | China, Globalization & VC Firms, India, Interviews, Venture Capital in Europe | 2 comments

2 Comments »

  1. Hello there. I was sent a link to your blog by a friend a while ago. I have been reading a long for a while now. Just wanted to say HI. Thanks for putting in all the hard work.

    Jennifer Lancey

    Comment by Jennifer Lancey | May 18, 2008

  2. Great article. Very informative. I might suggest taking a look at John Assaraf’s and Murray Smith’s new book, “The Answer.” It highlights cracking the entrepreneurial code – something you have experience with and are probably interested in. I’d highly suggest the read. http://www.readtheanswer.com/index.php?rta=blog

    Comment by Ryan Mettee | June 18, 2008

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