Silicon Valley Loves – and Fears – China

From The International Herald Tribune:

" Yet Silicon Valley's views of investment in China have tended to swing between wild optimism and deep anxiety - with the anxiety going beyond a fear of losing money. Some worry about helping Chinese start-ups move up the technology food chain. These days, the Valley venture capitalists are sharply divided in two camps: one rushing into China and one holding back."

"Still, last year, most of the Valley seemed to throw caution aside as venture firms invested nearly $1.3 billion in China, up nearly 30 percent from 2003, according to Zero2IPO, a venture capital research and consulting company based in Beijing. But in the first half of this year, investment slowed drastically after several changes in Chinese securities regulations. Those new rules caused "a decline of 50 percent in the first two quarters," said Dixon Doll, managing director of Doll Capital Management, based in Menlo Park, California.

But the lull is ending, in part because of the high-profile success of the initial public offering of Baidu, a Chinese search engine company that raised $86.6 million in August, and a securities rule change in October. In September, Sequoia Capital, a major backer of Google, was reported to be planning a $200 million fund and hiring several employees in China. That announcement followed a joint agreement this past summer by Accel Partners, a leading Silicon Valley firm, and International Data Group to set up a $250 million fund."

"Schoendorf, who is an Accel partner, sees benefits in helping China to become a fierce new competitor.
"The Chinese graduate more engineers than we do," he said. "They're smart, they work hard, and so the only way to compete with them is to remain more innovative.""