The Evolving China VC Market

York Chen iD TechVentures Ltd.

Stanford Univ., May 24/25, 2010

(Non-confidential)

Panel: "Financing China 2.0: VC and IPO Outlook"

VC Investment Amount, ’02 to ‘09

2005 2006 2007 2008 2003

$3,247M 440

$1,777M

324

$1,173M

228

2004

$992M 177

$1,269M

253

Yearly Investment Amt. Yearly No. of Investment Deals

$518M

216 226

$418M

2002 2001 2009

607

477

$2,701M

YoY ： - 36% dollars

- 21% deals

$4,210M

Source: China 2009 VC Market Report, Zero2IPO, April, 2010

VC Inv. 2009: RMB vs USD Investment Amt.:US$2,701MNo. of Investment Deals: 477

US$M

Source: China 2009 VC Market Report, Zero2IPO, April, 2010

VC Inv. Sectors, 2009

Undisclose

d, 102.94 , 3.8%

Broad IT, 788.56 , 29.2%

Services, 346.27 , 12.8%

Bio/Healthc

are, 189.71 , 7.0%

Clean-tech, 355.84 , 13.2%

Traditional, 917.58 , 34.0%

3

1

2

Investment Amt.: US$2,701M No. of Investment Deals: 477

US$M

1

2 3

Source: China 2009 VC Market Report, Zero2IPO, April, 2010

VC Inv. in Broad IT, 2009 By amount, USD M

By deal

Source: China 2009 VC Market Report, Zero2IPO, Jan., 2010

VC Inv. in Internet, 2009 By amount, USD M

By deal

Source: China 2009 VC Market Report, Zero2IPO, Jan., 2010

VC Exits, 2009: Sectors and Routes By Industry: 123 By Option: 123

Source: China 2009 VC Market Report, Zero2IPO, April, 2010

Key Trends Under Developing: - Foreign Players “Go Onshore” - Diversifying from High Tech to High Growth - Convergence of Foreign and Local GPs

Project Project

1 2 3

Onshore Offshore

Model A (Sino-Foreign JV Fund)

(Offshore Holding)

3a

Route 1: invest into China projects’ offshore holding entities, mostly in Cayman Route 2: direct cross-border investment and turn a China entity into a JV Route 3a: to sponsor a locally registered RMB JV fund with foreign participation.

Project

1 2

3b

Model B (Pure RMB Fund)

(Offshore Holding) Onshore Offshore Route 1: invest into China projects’ offshore holding entities, mostly in Cayman Route 2: direct cross-border investment and turn a China entity into a JV Route 3b: to sponsor and initiate a locally registered pure RMB fund

3

Broad IT Investment (%) Dropping (Data Comparing ‘05 & ‘09)

Year Inv $ Broad IT % 05: 1.1B 60% 06: 1.7 62 07: 3.2 43 08: 4.2 36 09: 2.7 29

Source: Zero2IPO annual VC reports, 2005 to 2009

(2005)

(2009)

Undisclose

d, 102.94 , 3.8%

Broad IT, 788.56 , 29.2%

Services, 346.27 , 12.8%

Bio/Healthc

are, 189.71 , 7.0%

Clean-tech, 355.84 , 13.2%

Traditional, 917.58 , 34.0%

A.  Offshore USD Fund: �Parked offshore (Cayman Island)

B. Onshore RMB JV Fund:：�Invested by both foreign and local LPs, registered in China and denominated in RMB.

C. Onshore Pure RMB Fund:�Invested only by local RMB LPs.

Convergence of Foreign and Local GPs

A B C

Foreign GPs are “Going Onshore”, moving from A to B, and eventually onto C, while local GPs are “Going Abroad” trying to access foreign funding.

China VC 2.0 •  Since IDG operating in China in 1993, foreign VCs

dominate and play an instrument role in bring up China VC to today’s status.

•  The year 2009 marked three “Firsts”: –  RMB onshore inv. surpassed USD offshore’s –  Non-tech deals got more VC funding than tech’s –  RMB fund raising surpassed that of USD’s.

•  RMB onshore activities will continue to be active. But, it will take many years for local RMB onshore activities to assume the center stage.

yorkchen@idtvc.com www.idtvc.com

+86-13911735538 (SMS Preferred)

What’s expressed in this PPT highlights York’s personal observations. It serves for academic discussion only, and not representing iDT VC’s view point. �

VC Charity Yanxing China (雁行中国) MV: http://v.youku.com/v_show/id_XNTQ5OTE5MTY=.html