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Excessive official support for specific sectors, according to a top investor, may limit VC play in China.
Northern Light Venture Capital co-founder and managing director Jeffrey Lee (NLVC)
Eudora Wang contributed to this article.
9th of July, 2021
Premium
As China’s venture capital market continues to expand at a breakneck pace, fueled by Beijing’s efforts to achieve technological self-sufficiency, an investment veteran warns that excessive government funding could crowd out venture capitalists looking to profit from the country’s technological advances.
In an online interview with DealStreetAsia, Jeffrey Lee, co-founder and managing director of Northern Light Venture Capital (NLVC), said, “Broad [government] support has been the most beneficial gift that we’ve received as investors.” “When a regional or local government unduly pushes specific companies by giving too much funding, we identified regret as sometimes bad side effects.”
The expansion of China’s photovoltaic solar business, for example, is an illustration of this, according to Lee.
Over the last 20 years, the Chinese government’s direct investment, subsidies, and easy access to bank credit have helped to establish the world’s largest solar energy producer, driven by homegrown giants such as LONGi, Suntech Power, and Trina Solar.
“China’s solar panel industry has been a huge success story,” Lee remarked. “However, the huge quantity of funding supplied by the government to industry players made it very difficult for us as investors to benefit.”
Massive government spending, combined with capital market changes, is projected to continue as China strives to become a global leader in science.
Lee discusses the entire investment landscape as China changes to a consumption-led and innovation-driven economy, more regulatory control on consumer-facing sectors, and NLVC’s deal momentum and priority sectors in a wide-ranging conversation.
NLVC, which was founded in 2005 and today manages over $4.5 billion in total assets, invests in early-stage firms in China and the United States. Through six US dollar funds and four Chinese yuan funds, the business has invested in approximately 400 firms with an emphasis on TMT, advanced technology, and healthcare.
With $700 million in total capital commitments in the last two months, the firm was hoping to officially close its USD Fund VI and RMB Fund IV.
Excerpts from the interview that have been edited:-
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NLVC technology venture capital Jeffrey Lee
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