Into the Unknown Ventures on Tech and His Could’Ve Been Pop Career Placement Agents Look Beyond Sovereign Funds to Asia’S Emerging Lps Page 7 Page 15

Asia’s Private Equity News Source avcj.com April 29 2014 Volume 27 Number 15

EDITOR’S VIEWPOINT Asia-based PE firm goes public, well not quite Page 3 NEWS Ardian, Baring Asia, CDH Cerberus, China Everbright, ClearVue, CVC, Fosun, INCJ, Kedaara, KIC, Matrix, New Horizon, PEP, TPG, Sequoia, Zephyr Page 4

DEAL OF THE WEEK Second-time lucky for J-Star on auto parts Page 12 VC-backed Liepin takes the battle to LinkedIn Page 13

PROFILE Andrew Chung of Khosla Into the unknown Ventures on tech and his could’ve been pop career Placement agents look beyond sovereign funds to Asia’s emerging LPs Page 7 Page 15

FOCUS DEAL OF THE WEEK

Backdoor bonanza? Marketing master China PE investors target reverse mergers Page 10 Campaign Monitor seals record Oz VC deal Page 12 15th Annual Private Equity & Venture Forum Japan 2014 26-27 June, Conrad Tokyo

GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjjapan.com Book before Prospering in the New Japan 16 May to save up to Confirmed speakers include: US$400

Shigeki Kimura KEYNOTE Kazushige Kobayashi Tatsuya Kubo Managing Executive Officer Managing Director Managing Director (Global Head of Industry CAPITAL DYNAMICS HARBOURVEST PARTNERS Finance Group) (JAPAN) LIMITED JAPAN BANK FOR INTERNATIONAL COOPERATION Soichi Sam Takata Kosei Terami Richard Folsom Head of Private Equity Investment Officer and Deputy Representative Partner TOKIO MARINE ASSET Representative, Tokyo Office, ADVANTAGE PARTNERS, LLP MANGEMENT CO. LTD INTERNATIONAL FINANCE CORPORATION (IFC)

Tamotsu Adachi Tomotaka Goji Hirofumi Hirano Managing Director, Co- Managing Partner Member and Chief Executive Representative THE UNIVERSITY OF TOKYO Officer CARLYLE JAPAN, LLC EDGE CAPITAL KKR JAPAN

Megumi Kiyozuka David Lewis Anthony Miller Managing Director Partner, Transaction Advisory Partner & Chief Executive Officer CLSA CAPITAL PARTNERS JAPAN Group PAG JAPAN KK KPMG TAX CORPORATION JAPAN

William Saito Yuji Sugimoto Katsuyuki Tokushima President & CEO Managing Director, Chief Pension Consultant, Hideaki Sakurai INTECUR, K.K. BAIN CAPITAL ASIA LLC Pension Research Centre Director and Partner NLI RESEARCH INSTITUTE J-STAR CO., LTD 櫻井秀秋, 取締役パートナー, J-STAR株式会社 … and many others!

For the latest programme and speaker line-up, please visit avcjjapan.com Contact us Registration Enquiries: Carolyn Law T: +852 3411 4837 E: [email protected] Sponsorship Enquiries: Darryl Mag T: +852 3411 4919 E: [email protected] Speaker Enquiries: Sarah Doyle T: +852 3411 4842 E: [email protected]

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Simultaneous translation between Japanese and English will be available throughout the event 開催言語：日本語および英語通訳同時あり Join your peers

Tweet #avcjjapan Scan the QR code with your phone to access avcjjapan.com 7,506 avcjjapan.com 15th Annual Private Equity & Venture Forum EDITOR’S VIEWPOINT Japan 2014 [email protected] 26-27 June, Conrad Tokyo Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 PE firms and Winnie Liu (852) 3411 4907 Creative Director Dicky Tang Designers Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjjapan.com IPOs – again Senior Research Manager Helen Lee Research Associates Book before FIFTEEN MONTHS AGO THIS SPACE WAS won regulatory approval and planned to raise Herbert Yum, Isas Chu, Prospering in the New Japan 16 May used to pour water on the notion of Asian private RMB3.54 billion ($567 million) by selling shares Jason Chong, Kaho Mak to save up to equity firms going public. to 142 investors, of which 138 are classified as Circulation Manager Rumors had been circulating for several years institutional players. Sally Yip about CDH Investments pursuing an IPO. Several To be clear, China’s OTC market, otherwise Circulation Administrator US$400 Prudence Lau Confirmed speakers include: bankers claimed to have pitched the idea to the known as the New Third Board, is a platform for Subscription Sales Executive Chinese GP and, of all the firms in the region, it transferring shares in non-public companies. Jade Chan KEYNOTE Market capitalization requirements and trading Shigeki Kimura Kazushige Kobayashi Tatsuya Kubo seemed like a good fit: enough funds raised to Manager, Delegate Sales Managing Executive Officer Managing Director Managing Director give the semblance of a track record; multiple volumes are low. It is primarily intended to Pauline Chen (Global Head of Industry CAPITAL DYNAMICS HARBOURVEST PARTNERS strategies covering private equity, venture capital, serve as a direct-financing channel for small and Finance Group) (JAPAN) LIMITED Director, Business Development JAPAN BANK FOR real estate and listed equities; and an embryonic medium-sized enterprises – predominantly in the Darryl Mag INTERNATIONAL COOPERATION regional presence. tech space – that don’t meet the listing criteria Manager, Business Development Soichi Sam Takata Kosei Terami Richard Folsom However, CDH was noticeable as the high for a full IPO. Anil Nathani, Samuel Lau Head of Private Equity Investment Officer and Deputy Representative Partner water mark in a shallow ocean. While its structure An interesting move, though. JD said in a Sales Coordinator TOKIO MARINE ASSET Representative, Tokyo Office, ADVANTAGE PARTNERS, LLP to a certain extent mirrored that of the large statement that it was turning to the OTC market Debbie Koo MANGEMENT CO. LTD INTERNATIONAL FINANCE global buyout firms that have gone public – in order to diversify its financing channels. CORPORATION (IFC) large and consistent fee streams spread over Perhaps other domestic private equity firms Conference Managers Jonathon Cohen, Sarah Doyle, Tamotsu Adachi Tomotaka Goji Hirofumi Hirano several asset classes are preferable to sizeable should consider the same. Conference Administrator Managing Director, Co- Managing Partner Member and Chief Executive but unpredictable carried interest hits – it was a Renminbi-denominated fundraising has been Amelie Poon Representative THE UNIVERSITY OF TOKYO Officer minute replica. Apparently CDH management on the slide for more than two years. It peaked Conference Coordinator Fiona Keung, Jovial Chung CARLYLE JAPAN, LLC EDGE CAPITAL KKR JAPAN never took the prospect seriously. at $12.1 billion in the third quarter of 2011 and Saratoga Investama Sedaya was dismissed by the same three-month period of 2013 it had Publishing Director on the same grounds when very sketchy details fallen to just over $2 billion. High net worth Allen Lee Megumi Kiyozuka David Lewis Anthony Miller Managing Director Partner, Transaction Advisory Partner & Chief Executive Officer of its impending IPO emerged. Saratoga Capital, individuals largely responsible for inflating the Managing Director CLSA CAPITAL PARTNERS JAPAN Group PAG JAPAN into its second fully institutional fund, didn’t bubble are reluctant to re-up. And if they do Jonathon Whiteley KK KPMG TAX CORPORATION seem a likely listing candidate. And indeed, it was come back, the regulatory regime will surely be JAPAN not. The vehicle that listed was separate from tighter, potentially restricting fund sizes. the private equity firm, used by the founders to Has JD found a viable alternative? William Saito Yuji Sugimoto Katsuyuki Tokushima Incisive Media President & CEO Managing Director, Chief Pension Consultant, achieve a liquidity event for some legacy assets. Unit 1401 Devon House, Taikoo Place Hideaki Sakurai INTECUR, K.K. BAIN CAPITAL ASIA LLC Pension Research Centre And now? JD Capital – formerly known as 979 King’s Road, Quarry Bay, Director and Partner NLI RESEARCH INSTITUTE Jiuding Capital, the poster child of China’s pre-IPO Tim Burroughs Hong Kong J-STAR CO., LTD T. (852) 3411-4900 boom – is listing on the over-the-counter (OTC) Managing Editor F. (852) 3411-4999 櫻井秀秋, 取締役パートナー, J-STAR株式会社 … and many others! E. [email protected] market. The firm last week announced that it had Asian Venture Capital Journal URL. avcj.com

For the latest programme and speaker line-up, please visit avcjjapan.com Beijing Representative Office No.1-2-(2)-B-A554, 1st Building, China renminbi fundraising No.66 Nanshatan, Contact us Registration Enquiries: Carolyn Law T: +852 3411 4837 E: [email protected] Chaoyang District, Beijing, Sponsorship Enquiries: Darryl Mag T: +852 3411 4919 E: [email protected] 15,000 People’s Republic of China T. (86) 10 5869 6203 Speaker Enquiries: Sarah Doyle T: +852 3411 4842 E: [email protected] F. (86) 10 5869 6205 12,000 E. [email protected]

9,000 Asia Series Sponsor Co-Sponsors 6,000 The Publisher reserves all rights herein. Reproduction in whole or US$ million in part is permitted only with the written consent of 3,000 AVCJ Group Limited. ISSN 1817-1648 Copyright © 2014 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014

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TPG, Fosun raise Chindex producer Smithfield Foods, is set to reduce the GLOBAL size of its Hong Kong IPO size and delay pricing take-private offer of the deal. It is reported the offering may be Ardian raises largest ever A consortium comprising TPG Capital and Fosun reduced by more than half to a maximum of Industrial has agreed to privatize NASDAQ- $1.9 billion. Existing investors including CDH global secondaries fund listed Chinese healthcare provider Chindex Investments and Goldman Sachs will not sell any Ardian, known as Axa Private Equity until it International in a deal worth $461 million. The shares in the IPO. spun out last year, has raised $9 billion for its consortium increased its offer from $19.50 latest global secondaries fund. The total eclipses per share, exceeding the $23 per share offer JD Capital approved to the $8 billion raised by the firm for its fifth submitted last week by an unspecified financial secondaries fund, which closed in June 2012. It is bidder. The bidder has decided against re-raising. trade on OTC board also the largest secondaries pool of capital ever JD Capital, formerly Jiuding Capital, has won accumulated for secondary investments. regulatory approval to list on China’s over-the- counter (OTC) board. It will be the first private NYSTRS confirms $100m equity firm to list on the National Equities Exchange and Quotation (NEEQ), which is also CVC Asia commitment known as the New Third Board. JD plans to issue New York State Teachers’ Retirement System 5.8 million shares at RMB610 apiece, raising (NYSTRS) has confirmed a $100 million RMB3.54 billion ($567 million) from 142 investors, commitment to CVC Capital Partners’ fourth including 138 institutional investors. Asia buyout fund. The PE firm launched its fund last year with a target of $3 billion and a hard Everbright backs $332m cap of $3.5 billion, including a $200 million GP commitment. Industry sources suggest the iSoftstone privatization vehicle will close above its hard cap. The TPG consortium intends to finance its Chinese IT services provider iSoftStone Holdings offer through cash from TPG, a combination of has accepted a take-private offer from its cash and equity from Fosun Industrial, and equity chairman and CEO in collaboration with China AUSTRALASIA contributed by CEO Roberta Lipson and other Everbright Investment Management that values management members. Post-transaction, TPG the company at approximately $332 million. PEP-owned Spotless targets Asia VI would control 47.6% of Chindex, Fosun ChinaAMC Capital Management was leading the Industrial would hold 48.1%, and Lipson would deal but pulled out in February. $928m IPO have 3.21%. Spotless Group, the Australia and New Zealand- Fosun Industrial must obtain shareholder New Horizon leads $70m focused cleaning and catering contractor bought approval from it parent, Shanghai Fosun by Pacific Equity Partners (PEP) in 2012, is seeking Pharmaceutical, for its cash contribution to the Series C for Arrail Dental to raise approximately A$1 billion ($928 million) deal. If this is not forthcoming TPG will cover the New Horizon Capital has led a $70 million Series through an IPO. The proceeds will be used to shortfall. Fosun Industrial’s overall commitment C round of funding for Arrail Dental Clinic, a repay debt, create a liquid market for Spotless is $159 million, of which around $75.8 million is Beijing-based dental service provider. Other shares and allow partial realizations for existing thought to be in cash. participants included Dalian Wanda Group’s investors. Chindex runs a network of private primary Prometheus Capital, US-based CommonFund, care hospitals and affiliated clinics in China Elite Capital, GL Capital, KPCB China and Qiming through United Family Healthcare. The Venture Partners. GREATER CHINA brand operates in Beijing, Shanghai, Tianjin and Guangzhou, and also provides medical Fosun launches VC arm in CVC completes South equipment and products through Chindex Medical, a joint venture with Fosun Pharma. Silicon Valley Beauty acquisition Chinese conglomerate Fosun International CVC Capital Partners has completed its has launched a venture capital arm operated acquisition of a majority stake in Chinese million on its third China-focused fund. The firm in Silicon Valley. The firm, Kinzon Capital, has restaurant chain South Beauty. Financial details was set up in 2008 and now has more than $1 received $100 million from Fosun to invest in US- were not disclosed but when the investment billion in capital under management. Its first based start-ups. Guo Guangchang. was first reported last autumn the price was said vehicle raised $275 million in 2008, beating its to be around $300 million. Lan Zhang, South target of $250 million. Fund II reached a final Perfect World joins Shanda Beauty’s founder, remains a shareholder in the close of $350 million three years later. business. Games take-private PE-backed WH Group to Chinese online game developer Perfect World Matrix closes third China has joined a consortium of investors – including scale back Hong Kong IPO Primavera Capital – seeking to privatize its rival VC fund at $350m WH Group, the PE-backed Chinese meat Shanda Games in a deal that values the company Matrix Partners has reached a final close of $350 processing company that acquired US pork at $1.9 billion. Perfect World will pay $100 million

4 avcj.com | April 29 2014 | Volume 27 | Number 15 NEWS

in cash to acquire 30.3 million Class A Shanda Singapore government fund’s allocation to the asset class to 20% out of a Games shares at $3.30 apiece. backs six local VC funds total corpus of $72 billion. ClearVue leads $10m round The Singapore government has committed S$10 million ($7.9 million) apiece to funds run SOUTH ASIA for Japanese restaurant by Jungle Ventures, Golden Gate Ventures, SBI ClearVue Partners has led a $10 million round Ven Capital, Walden International, New Asia India’s Kedaara seals of funding for Akasakatei, a Japanese cuisine Investments and Monk’s Hill Ventures. restaurant chain in China. The new funding will The capital is intended to facilitate S$120 debut deal be used to accelerate the company’s growth in million in VC fundraising, with the government India-focused GP Kedaara Capital has made its Shanghai, Beijing and the provinces of Zhejiang contribution matched on a 1:1 basis by first investment, taking a 23% stake in Mahindra and Jiangsu. It plans to open restaurants in 15 to other investors. The funds are mandated to Logistics for INR2 billion ($32.7 million). The 20 cities this year, with the overall aim of opening invest in early-stage local high-tech start-ups. company, which is part of the $16.2 billion a total of 40 locations. They collectively cover the information and Mahindra Group, will use the capital to make communication technologies, meditech, strategic acquisitions and expand its business. VC-backed Chukong files cleantech and industrial applications spaces. This is the second batch of funds supported Zephyr targets $60m Sri for US IPO through the Early Stage Venture Fund (ESVF) Chukong Holdings, a Chinese mobile game initiative run by the National Research Lanka fund developer backed by several VC investors, is Global emerging markets investor Zephyr planning to raise up to $150 million through Management is looking to raise up to $60 a US IPO. Nothern Light Venture Capital owns million for a Sri Lanka-focused private equity 23.7% of the company, while Steamboat Ventures fund. The firm is provisionally targeting a first owns 12.6%. GGV Capital and Sequoia Capital close by the end of June and a final close in have 12.5% and 8.9%, respectively. New Horizon September.. Capital owns 7.7%, having led a $50 million Series D round of funding in October. GE invests $24m in India solar plant NORTH ASIA GE Energy Financial Services (GEEFS), the energy- focused investment unit of General Electric, has Baring Asia exits Net Japan committed $24 million to India’s largest solar Foundation (NRF). The first batch of ESVF power project operated by Welspun Renewables to Orix commitments in 2008 has resulted in S$38 Energy. The 151-megawatt solar photovoltaic Baring Private Equity Asia has sold its stake in million being pumped into 24 start-ups. However, power project went into operation in August last jewelry recycler Net Japan to Japanese financial industry participants were not particularly year, eight months ahead of schedule. services group Orix Corp. The value of the enthused by the initiative, arguing that the transaction was not disclosed, but a source infrastructure required to take companies from Sequoia provides Series A familiar with the matter said Baring Asia sold the seed phase to a scale at which they were viable business for 8x EBITDA. Net Japan’s operating investment targets for ESVF funds was not for SirionLabs income for the year ended December 2013 was present. Sequoia Capital has agreed to provide $4.7 JPY2.77 billion ($27 million), which implies a In recent years the government has million in Series A funding to SirionLabs, a valuation in the region of JPY27 billion. taken steps to fill the gap, and with the seed software-as-a-service (SaaS) provider based infrastructure now in place, attention has turned in India and the US. The business develops INCJ-backed JV acquires NZ to the Series A space. technology aimed at improving the efficiency of packaging business outsourcing contracts. A Japanese joint venture - 40% owned by the stock rise 11% on its trading debut in Tokyo. The Innovation Network Corporation of Japan (INCJ) company’s scaled back IPO - which prompted SOUTHEAST ASIA - has acquired the pulp, paper and packaging Cerberus to abandon plans to exit nearly half (PPP) unit of New Zealand-based forest products of its stake - raised JPY547 billion ($5.3 billion) SingTel Innov8, Foxconn company Carter Holt Harvey (CHH) for just over after pricing shares at JPY1,600 apiece. The stock NZ$1 billion ($857 million). Oji Holdings holds the ended its opening day at JPY1,770. back KAI Square other 60% of the joint venture. KAI Square, a Singapore-based video analytics KIC targets 20% firm, has obtained S$4 million ($3 million) in Cerberus-backed Seibu Series B funding from Foxconn Technology alternatives allocation Group and SingTel Innov8. Innov8 is investing gains 11% on trading debut Korea Investment Corp. (KIC) will double its S$1.95 million in the round, raising its stake to Seibu Holdings, which counts Cerberus Capital investments in alternative assets over the next 39.15% from 19.08%. It supported the start-up’s Management as its largest shareholder, saw its 10 years. This would take the sovereign wealth Series A round in 2012.

Number 15 | Volume 27 | April 29 2014 | avcj.com 5 13th Annual Private Equity & Venture Forum China 2014 10-11 June • Park Hyatt, Beijing

GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjchina.com Early confirmed speakers include: Linbo He KEYNOTE Managing Director and Head of Private Equity Investment Dept., THE TOP CHINA INVESTMENT CORPORATION (CIC) PRIVATE EQUITY CONFERENCE IN Peter Cook Toshiyuki Kumura Senior Investment Officer Co-head of Private Equity CHINA IFC VENTURE CAPITAL Investments TOKIO MARINE ASSET MANAGEMENT CO., LTD. Pak-Seng Lai Hiro Mizuno John Qu Managing Director and Partner Vice General Manager Head of Asia COLLER CAPITAL CHINA RE ASSET AUDA MANAGEMENT CO., LTD.

Sally Shan Jixun Foo JP Gan Managing Director Managing Partner Manager Partner HARBOURVEST PARTNERS GGV CAPITAL QIMING VENTURE (ASIA) LIMITED PARTNERS

Richard Hsu Robert Hu Roy Kuan Managing Director Managing Director Managing Partner INTEL CAPITAL INFINITY GROUP CVC CAPITAL PARTNERS

Hurst Lin David H. Liu James Mi General Partner Member & Head Co-Founder and DCM CHINA KKR CHINA Managing Director LIGHTSPEED CHINA PARTNERS

Gordon Shaw Weichou Su Registration Enquiries: Managing Director, Shanghai Partner BARING PRIVATE EQUITY STEPSTONE Pauline Chen Enquiry ASIA T: +852 3411 4936 E: [email protected]

Alex Zheng Jonathan Zhu Sponsorship Enquiries: Chairman Managing Director Darryl Mag SHENZHEN COWIN BAIN CAPITAL ASIA, LLC VENTURE CAPITAL CO. T: +852 3411 4919 … and many others! E: [email protected]

For the latest programme and speaker line-up, please visit www.avcjchina.com Asia Series Sponsor Co-Sponsors

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avcjchina.com 13th Annual Private Equity & Venture Forum COVER STORY China 2014 [email protected] 10-11 June • Park Hyatt, Beijing Tomorrow’s investors Asian LPs are a small but increasingly conspicuous part of the global institutional investor community. How can placement agents nurture pockets of growth in a potentially lucrative yet hugely imbalanced market?

TUCK FURUYA AND HIS COLLEAGUES In a market where it is estimated at least three The first two categories number around 50, GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjchina.com are on an advocacy drive. As the team behind quarters of the capital entering global private they only invest in Asia, and their clients still Ark Alternative Advisors, a boutique Japanese equity comes from less than a quarter of the predominantly hail from developed markets. Early confirmed speakers include: placement agent firm set up in late 2010, their LP base, dominated by a handufl of sovereign The third category invests globally and is harder mission is educate domestic pension funds wealth funds, developing relationships in smaller, to quantify – it ranges from Japanese banks and Linbo He KEYNOTE on the virtues of private equity. Last year, they less exposed segments offers no immediate Singaporean sovereign funds that have been Managing Director and Head of Private Equity Investment Dept., THE TOP did approximately 1,300 one-on-one external pay-off. It can also be a challenging and costly investing in PE for over a decade to the more CHINA INVESTMENT CORPORATION (CIC) PRIVATE EQUITY meetings, most of them with a stable of 300 endeavor, involving numerous partners, cultural nascent pockets of capital. pension fund targets, plus a string of seminars. and language barriers, and a still developing Javad Movsoumov, executive director of UBS’ CONFERENCE IN With the $1.26 trillion Government Pension regulatory landscape. private funds group in Asia Pacific, says there are Peter Cook Toshiyuki Kumura Investment Fund (GPIF) exploring opportunities But for many it is a necessity. Getting ahead of approximately 100 LPs in the third category that Senior Investment Officer Co-head of Private Equity CHINA IFC VENTURE CAPITAL Investments in infrastructure and private equity, there is the game means putting yourself in front of the his practice actively tracks and pursues. TOKIO MARINE ASSET renewed interest in this constituency of potential groups thinking about entering the asset class The Asia investor relations (IR) head of a mid- MANAGEMENT CO., LTD. LPs. Should GPIF make the jump, smaller size global PE firm puts the number of investors counterparts could follow, opening up a pension actively committing to the asset class at 150 – Pak-Seng Lai Hiro Mizuno John Qu Managing Director and Partner Vice General Manager fund market that currently has a less than 1% “The 80-20 approach compared to 700-800 in the US – and estimates Head of Asia COLLER CAPITAL CHINA RE ASSET allocation to private equity. he has covered about 60% of the market. Having AUDA MANAGEMENT CO., LTD. A lack of familiarity can lead to might serve you well said that, about 90% of the capital he has raised misconceptions. “When pension funds hear the in the region comes from the largest 5-10 LPs. Sally Shan Jixun Foo JP Gan word ‘alternatives’ they usually think real estate, for the next five years, The implication is that the market is as large Managing Director Managing Partner Manager Partner hedge funds and then private equity. And a lot of but you do need to as a group’s remit and resources allow. HARBOURVEST PARTNERS GGV CAPITAL QIMING VENTURE people still believe private equity equals venture One independent agent divides his category (ASIA) LIMITED PARTNERS capital,” says Furuya, co-founder of Ark. “They hear develop relationships three universe into sovereign wealth and stories about people losing money in VC and say government-controlled pension funds in China, Richard Hsu Robert Hu Roy Kuan they don’t want to invest. We have to tell them and some level of Korea, Hong Kong, Singapore, Brunei, Malaysia Managing Director Managing Director Managing Partner there are more strategies to it.” and Australia; small to mid-size insurance INTEL CAPITAL INFINITY GROUP CVC CAPITAL PARTNERS comfort with these new Some of Ark’s meetings are the start of more companies in Taiwan, Japan, Korea and Hong meaningful relationships; others arouse no investors” – Conrad Yan Kong; superannuation funds in Australia; and interest on the LP side and offers of follow-up asset managers and other financial groups in Hurst Lin David H. Liu James Mi General Partner Member & Head Co-Founder and briefings on the market are politely declined. Hong Kong and Japan. With the exception of DCM CHINA KKR CHINA Managing Director These 300 pension funds occupy a layer tomorrow as well as those active today. With this Japan and Australia, there may be no more than LIGHTSPEED CHINA of the LP market to which few international in mind placement agents might not follow the a couple to a handful of targets in each market. PARTNERS placement agents have exposure, perhaps with standard rule of spending 80% of their time with There is a meaningful family office presence in good reason. Yet they also represent one end of a the 20% largest clients; the focus on business Hong Kong and Singapore, but it doesn’t figure Gordon Shaw Weichou Su Registration Enquiries: Managing Director, Shanghai Partner sliding scale of institutional investors in Asia that development would put it closer to 60-40. so strongly; other placement agents have more Pauline Chen Enquiry BARING PRIVATE EQUITY STEPSTONE are either untapped and one day feasibly could “The 80-20 approach might serve you well for of an appetite for the high net worth segment. ASIA T: +852 3411 4936 E: [email protected] be tapped, or actively looking to add to their the next five years, but you do need to develop private equity investments. relationships and some level of comfort with A good fit? Alex Zheng Jonathan Zhu Sponsorship Enquiries: these new investors,” says Conrad Yan, a partner The extent to which a placement agent deals Chairman Managing Director Darryl Mag Be the bridge at Campbell Lutyens. “If you are just focusing on with different groups depends on the kinds of SHENZHEN COWIN BAIN CAPITAL ASIA, LLC Placement agents can clearly play an important 20% of the clients today you will end up behind products being marketed. The very large private VENTURE CAPITAL CO. T: +852 3411 4919 … and many others! E: [email protected] role in helping these groups develop their the curve constantly.” equity firms have sufficient in-house IR resources exposure to the asset class while at the same Broadly speaking, Asia-based institutional that they require little if any third-party support. For the latest programme and speaker line-up, please visit www.avcjchina.com time advising international and regional GPs investors with a remit to do private equity fall With some honorable exceptions, placement Asia Series Sponsor Co-Sponsors on what the LPs are looking for and how best into three categories: the regional offices of US agents tend to steer towards the middle market. to approach them. Every major agent AVCJ and European groups such as fund-of-funds and Accessing the Asian LP base is now a routine spoke expects headcount to grow as the region a smattering of pension funds; indigenous Asian agenda item for GPs of this size from the US and becomes more significant as a GP client base and fund-of-funds; and local institutions, including Europe but they are not always a good fit for a distribution market. The question is how and at sovereign wealth funds, insurers, banks, family the big name LPs that appear on wish lists. For Legal Sponsor VC Legal Sponsor 关注我们： what pace this expansion is managed. offices of reasonable size and a few endowments. example, a number of Asian sovereign funds avcjchina.com Number 15 | Volume 27 | April 29 2014 | avcj.com 7 COVER STORY [email protected]

have a minimum check size in the region of strategies and pick their desired level of helpful is in introducing to them opportunities in $100 million but at the same time don’t want to involvement in due diligence prior to presenting agriculture, hard assets, infrastructure, and credit account for more than 10% of the total corpus, a proposal to the investment committee. – strategies that are less pervasive in an LP’s which rules out anything below $1 billion. Other “It is not a standard US-style gatekeeper portfolio and where the marketing process is less investors might be just beginning their programs relationship – very steady, very long term \ and efficient,” says Enrique Cuan, managing partner at and the tendency is to go for big brand names very collaborative – because the market is not Mercury Capital Advisors. that are easier from a due diligence perspective. as mature, it’s only in the last couple of years But he admits that the universe of institutional Robert Mast, managing director at Monument that some of these people have been allocating quality LPs is finite and appetite for non-Asian Group, recalls competing for a global mandate capital. Here it can be more one-off. They say, products in Asia is limited, with many of the before his company set up in Asia this year. ‘Who can help us? Raise your hand,’” says Weichou larger LPs already running offices in Europe Monument told the manager that while it could Su, a partner at StepStone Group. and the US. It brings the debate back to how deal with Asia out of Boston, it thought most of One GP adds that gatekeepers and LPs placement agents can expand their target the capital would be raised out of the US and sometimes give different answers when asked markets for distribution. Europe. The firm ended up losing the mandate how much discretion there is over a portfolio. Ark’s Furuya argues that a local presence is to a rival that had emphasized its on-the-ground His general view is that Asia is moving towards essential when addressing the Japanese market, capabilities in Asia. The fund ended up raising no advisory relationships that serve as a check and not only to surmount culture and language capital out of the region. barriers, but also to show a “You have to manage their Top Asia-based investors with a preference for PE commitment to the country and expectations as to what Asia its investors. He compares it to the is really about and help them Investor Assets (US$b) PE allocation (US$b) emphasis Japanese LPs place on a understand the LP base and its China Investment Corporation (China) 575 13 GP having a local presence. demand,” adds Vincent Ng, partner “I see a lot of foreign GPs with National Social Security Fund (China) 179 4.3 at Atlantic Pacific Capital. “There offices in Japan – they are not has been a lot of hype about large Hong Kong Monetary Authority (Hong Kong) 372 3.7 necessarily top quartile but they Asian LPs, particularly sovereign Employees' Provident Fund (Malaysia) 175 3.5 can still raise money because they wealth funds, but many of them State Bank of India (India) 243 3.1 have a presence here,” he says. “If might not be set up to do a fund a placement agent just flies into Asian Development Bank (Philippines) 164 2.0 of a certain GP’s size or strategy.” Japan to spend a day or two after Intermediation is another Korea Venture Investment Corporation (Korea) 1.8 1.8 trips to South Korea and Hong factor. The amount of time a Development Bank of Japan (Japan) 173 1.7 Kong, investors ask if they have placement agent or GP spends Pension Fund Association (Japan) 106 1.5 an office here, they say no, and it with the LP depends on the level doesn’t help.” Asahi Glass Company (Japan) 20 1.5 of discretion. If a government Steve Kim, CEO of Seoul-based pension fund awards a managed SBI Holdings (Japan) 13 1.4 asset manager Castling Group, account mandate to HabourVest Sumitomo Mitsui Trust Bank (Japan) 347 1.3 notes that the GP analogy no Partners, for example, a US Note: Based on current allocation to private equity longer holds true for Korea. There mid-market buyout fund and its Source: Preqin is a realization that understanding placement agent would spend the merits of a deal is more more time in Boston than in Asia. balance rather than a substitute for in house important than hearing it from a local, while With an advisory relationship there is more work, ultimately because many want to learn placement agents have proved successful leeway. “A US buyout fund would see my office how to do it on their own. despite lacking a true domestic presence in the US, me in Hong Kong, and the client,” says because they have a reputation for offering Juan Delgado-Moreira, managing director and Value proposition quality products. head of Asia at Hamilton Lane. “My clients are It is part of the placement agent’s job to know The challenges are twofold. First, some generally happy to meet GPs.” who to approach and how to approach them. Korean LPs still view placement agents as purely With the exception of Australia, where A US mid-market buyout with a small IR team salesmen and are therefore more skeptical about advisors play a hands-on role in shaping would find it difficult to function in Asia without the products they offer. Second, penetrating the superannuation funds’ programs, Asian LPs the assistance of a placement agent. But even a lower tiers of the domestic LP universe might are not seen to use gatekeepers in the same GP with resources in Asia might still need help. turn out to be more trouble than it is worth. formalized way as their US counterparts. An IR executive could be spending three in “Once you go into the second and third tiers, There are different approaches: Hong Kong four weeks on the road predominantly visiting you have to think about regulatory issues and Monetary Authority is said to channel funds existing investors. A placement agent can how to overcome language and cultural barriers. through an advisor if they fall below $3 billion in pitch in not only with coverage and project And the cost benefit isn’t really there. You are size; Malaysia’s Employees’ Provident Fund (EPF) management but also by contributing ideas adding all these barriers and bearing more costs reportedly used to deal with Asian GPs directly drawn from marketing funds across multiple but the level of potential commitments coming and relied on advisors for international coverage, strategies. This may result in meetings between out of these institutions is lower,” Kim says. although it is said to be increasingly willing to GPs and LPs neither of whom were previoulsly on “If you don’t have a dedicated focus and address more markets independently. eachother’s radar. long-term commitment, you are almost wasting Processes can be highly tailored across the “My role in marketing a mega buyout fund to time and money so a lot of people don’t bother region. LPs use different advisors for different a large sovereign is of little value. Where I can be to do it.”

8 avcj.com | April 29 2014 | Volume 27 | Number 15 COVER STORY [email protected]

The majority of the leading global placement agents currently use Hong Kong or Singapore as a regional hub with no more than three sub- Long arm of the law offices, usually covering the more developed institutional investor markets of Australia and uwait-based National Industries Group (NIG) lost $25 million when a mortgage-backed Japan. These can be supplemented through Ksecurities fund run by The Carlyle Group went bust in 2008 when the sub-prime mortgage well-established relationships with local players, market exploded. Feeling it hadn’t been fully briefed on the risks, NIG took legal action. while bank-owned agents are able to utilize However, it sought to have the case heard in Kuwait rather than Delaware – as per the distribution channels held by other divisions. investment agreement – arguing that the agreement was void because Carlyle was not licensed At present, only Eaton Partners has an by local regulators to market its products in Kuwait. Carlyle then sued NIC in Delaware over its office in Shanghai and the open question is refusal to comply with the agreement and, as of May 2013, a Delaware court ruled that the case whether others will follow suit, driven by the could he heard locally. expected flow of capital from Chinese insurance The situation amounts to an instructive lesson in the risks presented by local licensing regimes companies as they begin to build out PE for marketing PE funds should a GP not do its homework. programs. Several industry participants express Asia is a mixed bag when it comes to granting PE firms the private placement exemptions a desire to add to language skills as they add to required to approach qualified investors without making onerous public disclosures. headcount, but this doesn’t necessarily mean Most markets in the region have individual licensing systems and anecdotal evidence putting a person in every market. suggests that some placements agents have broken the rules at some point, either ignoring Mounir Guen, CEO of MVision, which claims cumbersome legislation or inadvertently treading on the wrong side of a very gray line. However, to have the largest team in the region with regulatory regimes are strengthening and agents must pay closer attention to compliance. 10 people in Hong Kong and two in Sydney, “Achieving the appropriate licensing and regulatory compliance in Asia can require significant questions why such an arrangement is necessary expenditures on legal advice from local counsel,” says Robert Mast, managing director at at this stage. He advocates strong centralized Monument Group, which recently opened offices in Hong Kong and Tokyo. teams within each region, passing on coverage There are several markets in which the rules are clear. Hong Kong, Singapore and South Korea to one another over the course of a day. all require placement agents or distributors to hold a securities broking license and maintain There is also skepticism as to whether markets a local presence. In Korea there is likely the added burden of registering a fund, which takes a in Southeast Asia or even Korea will ever be deep number of weeks. In Japan a license is required and a licensed local representative must attend all enough to make a dedicated private equity team LP meetings with GPs and send formal marketing materials. member cost effective. Movsoumov of UBS adds Elsewhere the regulations are non-existent or outdated, with plenty of detail on public the caveat that it is not just a question of having equities marketing but little or no guidelines as to how to qualify for a private placement feet on the ground, but feet that are able to get exemption. Malaysia is perhaps the extreme example, with industry participants saying the in the door. solution is to hold meetings in another country. Reverse solicitation is another workaround in “If you really want to make an impact in certain jurisdictions. certain LP markets like Korea, it’s very helpful to “I expect that with time, once there is a critical mass of interested parties of LPs and fund be able to have a senior dialogue,” he says. “You managers, they can give guidance to regulators to pass more appropriate legislation on private need to have senior people talking to senior placements,” says Javad Movsoumov, executive director of UBS’ private funds group in Asia Pacific. decision makers. Building up a track record In the meantime, agents that are part of banks can leverage their parent groups’ broader of obtaining commitments from these LPs is distribution channels while industry participants of all kinds work with local partners. For many, also important as it gives LPs higher degree of particularly in markets like Korea, local partners are a necessity, although sometimes a painful one. comfort with that placement agent. It is not “Placement agents must work with other local agents they don’t have longstanding enough having someone who knows the right relationships with for the sake of the law, and often times each party’s role is not clearly defined. number to call – that’s becoming a commodity.” From a working-relationship standpoint, this can create some challenges,” says Steve Kim, CEO of Seoul-based investment manager Castling Capital. “Also, a lot of the time, the domestic agents Beyond borders feel they should be more involved in the sales process, but the international agent may not; and Various evolutionary scenarios are plotted, with vice versa.” regulatory headwinds and client demand equally in mind. One prediction volunteered by two different GPs is that there will be more tie-ups between the very large and the rest to the point The business model might be the same – putting between global and local players, with the that they are playing a very different game. While the right product in front of the right person, and local partner offering cultural affinity, language the large GPs are becoming more customer- small and mid-market GPs will remain part of this skills and the physical presence that regulators focused, providing tailored solutions, the middle- process – but the methods of engagement will may increasingly require for private placement market players – and by extension the placement multiply. exemptions. Several agents are wary of such agents – are operating in much the same way as “The objective is to get the right exposure arrangements, noting that they like it when before. and it is hard work. Nobody is getting paid for partners defer completely to their processes. Rather than be disenfranchised by the a conference call any more, but for real chunks Change, when it comes, will be in line with larger end of the market, placement agents of volume that require global manpower,” market demand and this shouldn’t be seen in are expected to carve a niche in it, offering says Hamilton Lane’s Delgado-Moreira. “The purely geographical terms. joint ventures, co-investments or anything that days when a placement agent made rain by Both the GP and LP communities in Asia have presents direct deal flow to an institution that introducing a GP to a sovereign wealth fund in bifurcated in recent years, the gap widening no longer favors the co-mingled pool approach. Brunei are long gone.”

Number 15 | Volume 27 | April 29 2014 | avcj.com 9 FOCUS [email protected] In through the out door With China IPOs still stuttering, a number of private equity investors in need of an exit have opted to go public through reverse mergers. Is the risk-reward good enough for this to become the normal?

BEIJING DIGITAL HORIZON TECHNOLOGY, announced plans to merge with Hangzhou New restructuring. A reverse merger goes through a mobile social networking provider, originally Century Information Technology. the asset restructuring committee and takes intended to list in Hong Kong. The company set After the Chinese Securities Regulatory 6-12 months to complete. I can’t see a proper up a subsidiary – the rather delightfully named Commission (CSRC) officially ended the IPO getting done in two years with so many E.T. Holding – in the territory five years ago as it 14-month embargo on new share offerings, applicants waiting.” plotted its move. Offshore funding poured into 43 companies went public in January and five It begs the question whether what is the new vehicle from Sequoia Capital, Lightspeed in February. There have been none since then, generally considered to be a non-reputable route China and Infinity Group. which means more than 600 companies remain to market will catch on as a shortcut for private Digital Horizon pulled the plug on its Hong on the waiting list. equity exits. Reverse mergers don’t come without Kong IPO last year and switched focus to a Digital Horizon is one example of a number risks, but in the current environment they might domestic listing. This plan also came to nothing of private equity-backed companies that have be deemed worth it. as the Chinese regulators kept the door shut to sought to bypass the gridlock through a reverse The CSRC has already moved to stop the new listings. merger on the A-share market. AVCJ Research trend becoming a craze. In November, it Earlier this year, Digital Horizon unveiled records a total of 10 cases last year and three stipulated that all reverse merger candidates another scheme: it would go public on the more so far this year. must meet the requirements set down for full domestic markets via a reverse merger with “Shell listings are subject to a different IPOs, arguing this would restrict speculation Shanghai-listed Jiangsu Sanfangxiang Industry. approval process from traditional IPOs,” says on poorly performing listed companies. The Another obstacle emerged as the parties couldn’t Leo Lou, a Shanghai-based partner at law firm regulator also banned prospective candidates agree on terms for the asset swap. However, Fangda Partners. “There are two listings review from acquiring listed shells on ChiNext. Digital Horizon got the terms it wanted with committees within the CSRC – one for new Previously, companies targeting reverse another shell in Shenzhen and two weeks ago shares issuance and the other for listed asset mergers needed to have been in operation for at least three consecutive years of operation and posted cumulative net profit of more than A-Share PE-backed reverse mergers, 2013-2014) RMB20 million over the past two years. An IPO Portfolio companies PE Investors Shell-listed companies requires three consecutive years of profitability. Shanghai Greenland CDH Investments, CDB Capital, SDIC Innovation Shenzhen Jinfeng Investment At least three companies – Wuhu Shunrong Group Investment Fund, Shenzhen Ping An Innovation Capital Auto Parts, Zhejiang Hangzhou Xinfu Beijing Digital Horizon F&G Ventures, Infinity Group, Lightspeed China, Sequoia Hangzhou New Century Pharmaceutical, and Xinjiang Korla Pear – have Technology Capital China, Shenzhen Oriental Fortune Capital, Information Suzhou Huahui Venture Capital seen their reverse merger applications rejected following the CSRC’s review. Sinoenergy Corp Mount Kellett Capital, Shenzhen Oriental Fortune ChangChun Department Capital, Shanghai Linghui Investment, Hubei Hi-Tech JiTuan Store Company Industrial Investment, GF Xinde Investment, Hangzhou Invisible risks Jincan Private Equity Fund These kinds of transactions often get aborted Beijing Xinwei Telecom Bonanza Investment, TDR Capital International, Beijing Zhongchuang Technology Shandong High-Tech Investment, Cybernaut Capital Telecom Test over suspicions of insider trading. In the past relatives of management team Heilan Home Garment TrustrBridge Capital Canal Scientific & Technology members involved in deals have bought shares in Zhejiang Jiahua Chemical JD Capital Huafang Textile listed shells prior to official announcements and Engineering then cashed out when the stocks subsequently Youzu.com Shenzhen Green Pine Capital, Shanghai Broad Susina Umbrella jumped. These situations usually end with Resources Management regulatory inspections, which can put paid tot Shannxi Automobile Shannxi Industrial Investment But One Information Corp. the reverse merger as well. Jiangxi Quality Shenzhen Capital, Everbright Capital Shenzhen Shandong Liaherd There is also some skepticism about the Microelectronics Chemical Industry availability of high-quality listed assets to serve Digital China Information Tianjin Xinrui Investment Partnership, Suzhou Ventures Shenzhen Techo Telecom as shells, especially now the regulator wants to Technology Service Group, Infinity Group encourage low-trading stocks to delist. Greatwall Film & Media Hangzhou Rushan Venture Capital, Cybernaut Capital Jiangsu Hongbao Hardware “Whether the target company is a ‘clean shell’ Shanghai Zhongji Pile Beijing Capital, CCB International, Fosun Capital, Shanghai Chenghai or not matters,” explains one Chinese investment Industry Haitong-Fortis Private Equity, Tonglian Venture Capital Enterprises Development banker. “Debt-ridden assets might not be easy to Jiangsu T.Y. Environment ABC Capital, Shenzhen Ping An Innovation Capital, China Kejian identify before the transaction is conducted. It Protection & Energy Fortune Synergy Investment happens when the listed shells aren’t transparent Source: AVCJ Research enough to disclose their financial documents.

10 avcj.com | April 29 2014 | Volume 27 | Number 15 FOCUS [email protected]

This be a problem when the company later receive approval from the Ministry of Commerce profits, why wouldn’t it do a new share issuance?” wants to raise money from the public.” (MofCom) and the CSRC. A-share reverse mergers will inevitably drop Fees are expensive for reverse mergers in Applicants must meet the requirements to off once the regulators manage to work through China can also be unacceptably high, anything be classified “foreign strategic investors” and the IPO waiting list and the listing process from RMB10 million to RMB100 million. On top then they must buy at least 10% of the total becomes more predictable in terms of how of compensating existing shareholders in the shares of the listed company and are subject to a long it takes. In January, the CSRC announced listed shell, candidates must purchase publicly- 36-month locked-up on their holding after listing. a registration-based system for IPOs to replace traded stocks based on the market price. For PE The lock-up period is the same for renminbi fund the current approval-based system – which is investors, the returns are inevitably lower than mangers if they are controlling shareholders; if expected to improve transparency – although those from an IPO. they are minority investors, it is just 12 months. details of the plan have yet to be announced. “Of course, the best scenario is when a There have been cases of reverse mergers Furthermore, investors do have another private equity investor exits at a high price,” says overseas. A recent high-profile example was liquidity option, the over-the-counter (OTC) Frank Han, executive director of Bohai Industrial CITIC Group, one of China’s largest state-owned market for trading shares in non-public Investment Fund Management. “However, companies, announcing plans to list through companies. This bourse is intended for smaller sometimes it’s more important for PE investors an asset injection into Its Hong Kong unit, CITIC companies that don’t meet the criteria for a full to exit rather than sitting on the investment, Pacific. As such the company no longer needs IPO and so the requirements are lower than regardless of a lower return. Backdoor listings are to go ahead with the $10 billion Hong Kong IPO the main boards. There is also the possibility of one of the exit routes. It will remain active.” that has been mooted for years. transferring to the main board at some point in Domestic reverse mergers are most common the future, regulations permitting. among renminbi-denominated fund managers. Passing fad “Reverse mergers will not become a prevalent The process is simply too difficult and time- However, CITIC is an exception to the rule, not trend for companies to list given the costs. consuming for US dollar funds, which are treated a precursor to a wave of Hong Kong reverse Moreover, the CSRC chairman said his agency as foreign investors. mergers by PE-backed Chinese companies. would release the draft documents on the new Under Chinese law, a foreign investor is “High-quality shell companies in Hong Kong IPO system by the end of the year, which will make allowed to invest in A-share market through an are even more expensive than in China,” the new shares issuance easier,” Fangda’s Lou says. asset swap – injecting their equity interest in a investment banker says. “Financial requirements “But it will happen only if they make their Chinese company into a listed entity in order to are equivalent to a public listing and reverse words work. Otherwise, shell listings will be still exchange it for public traded shares. However, as mergers are highly regulated by Hong Kong active in the market in order to get quick access the equity is held onshore, the transaction must exchange. If a company is generating substantial to liquidity.”

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Scan to find out more about the regional reports avcj.com DEAL OF THE WEEK [email protected] J-Star’s Kugami deal fits the mold

IF ANYTHING IS TO BE LEARNT FROM with a relatively low valuation of 5x EBITDA. The plan is to strengthen its operations in J-Star’s acquisition of Japanese plastic molded “With the capital market recovery in Japan, China and extend production to Southeast Asia auto parts maker Kugami, it is that when one expectations among entrepreneurs have grown, and Latin America. The business will also make door closes another opens. but Kugami was less concerned about a high new additions to its management and seek M&A The PE firm was one of several investors to valuation,” explains Satoru Arakawa, a partner at opportunities overseas. Arakawa explains that approach Kugami when its septuagenarian J-Star. “His expectations were primarily based on Japanese conglomerates operating overseas founder – Yasutaro Shimizu – needed to exit the finding the right person to succeed the business, still want access to local original equipment business, but was without an heir so we didn’t need to rely on manufacturers like Kugami. apparent. J-Star’s ability to speed our financial power but on the “Many of our target companies operating up the decision-making process solutions we could provide.” overseas have been suppliers to large companies and bring in a robust business Kugami produces plastic and there is still an opportunity to expand,” he plan and CEO to implement it, panels needed to house car says. “There still tends to huge gap in terms of helped the firm land exclusivity stereo and satellite navigation quality between local suppliers and Japanese and negotiate the deal before it systems, counting the likes of suppliers operating overseas, so an early-mover could go to auction. Sony, Panasonic, Kenwood, like Kugami has an advantage.” The circumstances were a Kugami: J-Star at the wheel Hyundai and LG among its The investment was made via J-Star No. vast improvement on another clients. One area in which J-Star 2, a JPY20.4billion ($205 million) fund, which potential deal. According sources familiar with will provide support is in the firm’s expansion reached a final close in July year. It is J-Star’s third the matter, months earlier J-Star had been overseas. Founded in 1965, Kugami already has a investment from the fund and the second in this among early bidders for another Japanese plastic pan-regional presence. In addition to factories in particular segment. In July, it invested JPY1-2 auto parts manufacturer, Sol-Plus Group. In that Nigata and Yokohama, it has been manufacturing billion in auto parts firm Tokai Trim alongside the case, there was no exclusivity and The Longreach in China since 1993 with facilities in Zhuhai, Supply Chain Support Fund, a vehicle backed by Group prevailed via a limited auction process. Suzhou, Dalian and Tianjin, as well as a trading the Japan Auto Parts Industries Association and J-Star bought Kugami for around $30 million, center in Hong Kong. Development Bank of Japan. Insight breaks records with Campaign Monitor

WHEN YOU CONSIDER THE SHEER SCALE Deven Parekh, a managing director with Parekh. “We think with prudent investment of the opportunity, it is perhaps no surprise Insight, explains that the business is unique in and scaling of the team, there is a fantastic to learn that Australia’s largest-ever tech VC that this sizeable investment round represents opportunity to build an even larger business.” investment to date – which took place earlier this CM’s first. “We had been in talks with CM for five In addition to bringing in new talent, the month – involved a software-as-a-service (SaaS) years and the company was profitable for that company will open its first US office. This will company. entire period,” he explains. “Then last year they address the mismatch that means two thirds According to research firm Markets&Markets, decided to raise capital and bring of CM’s staff is in Australia but Asia Pacific’s SaaS industry is expected to grow to in a partner to help take the 80% of its customers are in $4.32 billion by 2015, up from just $390 million business to the next level.” Europe and North America. six years ago. Australia accounts for much of CM has spent the last10 years New products are also planned, this; the same report shows that alongside New turning a comparatively simple including a new email designer Zealand and Singapore, it currently makes up marketing tool into a service that and a tool for automating online more than one third of the Asian SaaS market. now works across several social campaigns. In addition, it will Firms like Campaign Monitor (CM) – which networks, allows online marketers also selectively look at to make recently received $250 million from US firm to produce content for range Campaign Monitor: Email ace acquisitions overseas. Insight Venture Partners – have been the of mobile devices, and provides The company is one of two vanguard of this development. users with detailed analytics. Its headcount and in Australia currently backed by Insight, but it Formed in 2004 by two friends from footprint has also swelled. Today, the business represents familiar territory for the firm, which university, it is the classic start-up story. Founders has 65 employees across 19 cities and claims has backed more than 200 business covering Ben Richardson and Dave Greiner originally more than 100,000 paying customers in 170 e-commerce, the internet and data-services. developed the firm’s flagship software as way for countries. There SaaS portfolio is now around 20-strong. its users to run email marketing campaigns with “CM was able to build a global highly “We have invested in many SaaS businesses ease and little technical know-how. Their SaaS profitable business with no sales or marketing over the last 12 months,” says Parekh. “And we see solution proved popular and lucrative. because they built a fantastic product,” says many more opportunities in the area.”

12 avcj.com | April 29 2014 | Volume 27 | Number 15 DEAL OF THE WEEK [email protected] Warburg supports Liepin’s O2O expansion

EMBOLDENED BY A $70 MILLION SERIES call up candidates to update resumes and find internet is the fastest-growing segment of the C round of funding led by Warburg Pincus, out more about employment expectations, so internet economy, worth RMB55 billion in gross differentiation is now Liepin.com’s top priority. as to better brief corporate clients. Ba notes that merchandise value in 2012, nearly double the The Chinese online recruitment services provider corporates are already the main driver of revenue. previous year’s figure, according to iReserach. must set itself apart from rivals such as NASDAQ- Liepin has a database of more than 10 million “Warburg Pincus has been following the listed 51jobs and Zhaopin.com. professionals and 100,000 internet-based recruitment The company has vowed to adopt an online- registered headhunters. A client sector closely in recent years to-offline (O2O) business strategy, creating base of 100,000 companies pays and was impressed with Liepin’s a career development platform to connect an individual fee of more than unique business model and the corporate employers, headhunters, and job RMB10,000 ($1,600) per year, Rick disruptive change it has brought seekers. It is a departure from the traditional Dai, the company’s founder and to the sector,” says Julian Cheng, model of providing recruitment information and CEO, told local media. managing director at head of relying on online advertising fees for the bulk of Liepin, formerly Lietou.com, North Asia technology, media and income. Liepin wants to improve user experience. was founded in 2006 with an Liepin: Offline angle telecom investment at the firm. “We are not only a recruitment website, but ambition to become a social The Lietou to Liepin change also a career development platform, which media site for professionals along the lines happened earlier this year in order to compete means we create online forums for job seekers of LinkedIn. Two years later it switched to the with LinkedIn. The US player has launched a to share their experience of interviews, or we headhunter model. Matrix Partners China then local joint venture with Sequoia China and CBC provide industry views on certain professions,” put in about $10 million across two rounds of Capital; it also unveiled a simplified Chinese says Jessica Ba, general manager of branding and funding. It also participated in the latest round. site to connect with the more than 140 million marketing at Liepin. The new funding will be also used to provide Chinese professionals with its 277 million global In order to develop the offline business, the mobile services, following rivals 51job, Zhaopin member base. Asked about the competitive company plans to establish a data center of all and ChinaHR. Three quarters of China’s internet threat, Ba simply says, “[Linkedin] is not as familiar job seekers registered on the site and have staff users go online via mobile devices; mobile with the Chinese market as we are.”

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avcjusa.com 9th Annual Private Equity & Venture Forum PROFILE USA 2014 [email protected] 8 July • Harvard Club of New York City Tech idol Andrew Chung, a partner of Khosla Ventures, passed up a chance at becoming a Hong Kong pop star for a career in VC investing. Now he is helping start-ups commercialize new energy technologies in Asia

GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjusa.com IN 2002, 24-YEAR-OLD ANDREW CHUNG my passions,” Chung adds. “I haven’t always commercialize their technologies in the region. returned to Hong Kong from the US and began pursued the paths that I understand most, or Chung was tasked with leading these activities. plotting his career path. He applied for positions listened to what people thought was the ‘right “Our advantage is having a portfolio of the Register Online: with several consulting firms, including Bain & thing’ to do.” world’s best ‘black swan’ technologies that have avcjusa.com Company. He also entered a scalable singing While assisting an energy company client radical implications for solving survival-related Email [email protected] competition – New Talent Singing Awards. with its China expansion at Bain & Company, problems in places like China,” he says. “I help with Why Asia still matters booking ref. code:USA_AVCJ_PUB The awards are a Hong Kong institution. 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Even boss “I haven’t always Chinese state-owned carmaker First Auto Works Stephen Wesson Jim Hildebrandt [and Hong Kong entertainment mogul] Albert (FAW); it provides technology on a non-exclusive Managing Director Managing Director Yeung was involved,” says Chung. “It was a hard pursued the paths that basis while FAW has committed in excess of $200 AUDA BAIN CAPITAL ASIA decision. Even though the terms were much million in capital expenditure. less than ideal and I was worried about the risks, I understand most, or LanzaTech – which recently secured a I came shockingly close to signing. That’s how listened to what people $60 million round of Series D funding led by Robert Petty Igor Rozenblit much I love it.” Japan’s Mitsui & Co, with participation from Managing Partner and Private Equity Specialist, Ultimately entertainment’s loss was Bain & thought was the ‘right new investors China International Capital Corp. Co-Founder Asset Management Unit Company’s gain. He decided that a career in thing’ to do” and Siemens Venture Capital – follows a similar CLEARWATER CAPITAL PARTNERS SEC technology could ultimately contribute more to capital-light model with its joint venture partners the world than one spent performing. such as China’s Baoshan Iron & Steel. Taisuke Sasanuma Robert W. van Zwieten created by rapid industrialization in China. At the “In many cases, ego and emotion can get Representative Partner President & Chief Executive Officer Early starter time, few VC firms were interested in the space in the way of a Western start-up team and an ADVANTAGE PARTNERS, LLP EMPEA Chung’s passion for entrepreneurship and and so when he got his break as an investor – Asian partner working together,” Chung says. technology started aged five when helping his having returned to the US to complete an MBA “I’m a Chinese guy who grew up in the US but parents run a Chinese restaurant in California. – the remit was IT and the internet. speaks the languages, so I’ve played the role of … and many others! They taught him how to think about customers After stints at Bain Capital and TL Ventures, a bicultural intermediary to develop friendly, and one of those customers – a Princeton- Chung joined Lightspeed Venture Partners and sometimes familial relationships with partners.” For the latest programme and speaker line-up, please visit www.avcjusa.com educated scientist – provided extra tuition in helped set up the firm’s cleantech practice. He There are times at which Chung still has to mathematics and physics every weekend. participated in several successful investments, use his singing voice. He takes part in charity Sponsorship Enquiries: Chung went on to study mathematics at including Solazyme (listed on NASDAQ in 2011) events, recently giving a rendition of Jason Mraz’s Harvard and it was there he started his first and Nest (bought by Google in 2014). “I’m Yours” at the Silicon Valley Voice fundraiser. Darryl Mag T: +852 3411 4919 E: [email protected] business, creating database-driven websites for There was also a co-investment in And then there are also calls for impromptu local companies. After graduation, he turned QuantumScape alongside Khosla Ventures. It was performances from Chinese partners during down a job at Goldman Sachs to join enterprise Chung’s first contact with one of Silicon Valley’s dinners or even meetings. Co-Sponsors software start-up Trilogy. Using this platform, he leading authorities in next-generation energy “Singing and performing are more co-founded UberWorks, an e-commerce business technology. He joined the firm in 2011. culturally accepted in China as part of business that was subsequently acquired by US-listed Although Khosla doesn’t have office interactions,” Chung adds. “It can create a Network Commerce for $23 million. dedicated to investing in Asia, a number powerful impression with partners and reduce “Throughout my career I’ve always followed of portfolio companies are looking to barriers to building trust.” avcjusa.com Number 15 | Volume 27 | April 29 2014 | avcj.com 15 HKVCA 13th China Private Equity Summit 2014 June 13, 2014 (Fri) | N201, Hong Kong Convention & Exhibition Centre

The Hong Kong Venture Capital and Private Equity Association (HKVCA) is pleased to announce that the China Private Equity Summit (CPES) 2014 will be held on Friday, June 13, 2014. The China Private Equity Summit is the HKVCA’s flagship event, attracting more than 350 venture capital and private equity practitioners, leading corporates, and other industry professionals and participants from across the region. It is generally recognized as the preeminent, “must-attend” practitioners’ conference, featuring discussion and information on the latest developments and trends in the private equity market in China.

Opening Remarks: Opening Keynote: Professor K C Chan, GBS, JP, Zhirong Mao, Managing Director and Head of Mainland Secretary for Financial Services and the Treasury, Development, Hong Kong Exchanges & Clearing Hong Kong SAR Closing Keynote: Fred Hu, Ph.D., Chairman Primavera Capital Group

• André Loesekrug-Pietri, • Alvin Li, • Franky Chung, • Edan Lee, Founder and Managing Partner, Senior Managing Director and Vice President, Mainland Managing Director, A Capital Head of Direct Investments, Development & Special Olympus Capital Holdings Asia CCB International Asset Representative, Southern China, • Wendy Zhu, • Steve Wang, Management Hong Kong Exchanges & Clearing Managing Director, Managing Director and AlpInvest Partners • Paul Yang, • Conrad Tsang, Co-founder, Chairman and Co-founder, Chairman, HKVCA Pine Field Capital Partners • Kevin Zhang, CDIB Capital International Managing Partner, • Qiang Dai, • Martin Tornberg, Corporation Ascendent Capital Partners Managing Director, Executive Director, • Ping Wang, Jefferies Ping An of China Asset • Rebecca Xu, Rotating President, Management (HK) Co-founder & Managing Director, • Doug Coulter, China Mergers & Acquisitions Asia Alternatives Management Partner, LGT Capital Partners • Velisarios Kattoulas, Association (CMAA) Chief Executive, • Lawrence Wong, • YR Cheng, • Joseph Wan, The Poseidon Group Senior Vice President, Partner, Lunar Capital Partner, Auda Asia • Lorna Chen, Cinven HK • Ryan Law, Partner, Shearman & Sterling • Vinit Bhatia, Managing Director, • William Ho, Partner and Head of Private Morgan Stanley Asia • Li Huang, Partner, Greater China Team, Equity Practice in Greater China, Founding Partner, CVC Asia Pacific • Thomas Chou, Bain & Company (Hong Kong) Shenzhen Co-Win Venture Partner and Chair of the Asia • Terry Hu, Capital Investments • William Hay, Pacific Private Equity Practice, Co-founder and Managing General Counsel, Morrison & Foerster • Vincent Chan, Director, Baring Private Equity Asia CEO, Spring Capital Asia FountainVest Partners • Richard Barton, • Charlie Maynard, Managing Partner, • Brent Irvin, • SC Mak, Managing Partner, Newgate Communications (HK) Vice President and General Founding Partner, BDA Asia Counsel, Tencent Holdings Fuel Capital • Bonnie Lo, • Chris Leahy, Partner, • William Shen, Co-founder, NewQuest Capital Partners Senior Partner and Head of Blackpeak (Hong Kong) Greater China, • Susannah Lindenfield, Headland Capital Partners Organiser: Co-organiser: Media Partner: Managing Director and Head of International Compliance, The Blackstone Group

Information in this leaflet is correct at the time of publishing. The HKVCA retains the right to make changes as it deems necessary.

Hong Kong Venture Capital and Private Equity Association Tel: (852) 2167 7518 Fax: (852) 2167 7530 Email: [email protected] Website: cpes.hkvca.com.hk