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Putting in the capital

By Zhang Ran (China Daily)
Updated: 2009-10-29 08:17

Of all the success stories expected to be generated by ChiNext, Liu Zhou will likely be the biggest winner.

Fortune Venture Capital, the company he runs, has been in high demand ahead of the market's launch tomorrow, having invested in three of the first 28 companies to be listed.

The firm based in Shenzhen, Guangdong province, owns 2 million shares - 2.2 percent - in EVE Energy Co, a Fujian province-based lithium battery manufacturer, which were priced at 28 yuan ($4) during the early subscription process.

It has also snapped up 3 million shares - 2.2 percent - in Aier Eye Hospital Group in Hunan province for 28 yuan, and more than 5.16 million shares - 6.6 percent - in Shanghai-based Internet firm ChinaNetCenter for 24 yuan a piece.

In all, 23 enterprises on the board have received investment from venture capitalists and private equities.

Established in 2000, Fortune Venture Capital is one of China's top-tier venture capital companies, managing seven funds with 3 billion yuan in total assets under management. It has also invested in 40 firms, two of which are listed on the SSE.

Liu, 40, first saw the potential of venture capital in 1999 when the company he worked for, Hunan TV and Broadcasting Intermediary Co Ltd, successfully went public.

"I was thrilled when I saw the power of the capital market and the future prospects of Hunan TV and Broadcasting's listing," he said.

In August that year, the central government announced plans to establish a board for startup firms, like the Nasdaq in the United States. Liu was reassigned shortly after and sent to Shenzhen with 100 million yuan from Hunan TV and Broadcasting to start a venture capital firm.

His dreams were quickly deflated, however, as the proposal was shelved after the Internet bubble burst in the US in 2001. Of the 196 venture capital companies in Shenzhen in 2000, just 10 were in operation by 2005. "But the good thing is we persisted and survived because I had strong confidence in the country's economy and China's capital market," said Liu.

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The first real success for Fortune Venture Capital came after the company bought a 10-percent stake in Coship Electronics, a Guangdong digital products and services manufacturer, which went public on the SSE's small and medium-sized enterprise board in June 2006.

Today, three of the companies it has invested in - Coship Electronics, Talkweb Information System and Fujian Sunner Development Co Ltd - have completed initial public offerings on the board.

Liu's investment model is strict. Before parting with any money he insists on meeting more than 90 percent of a company's shareholders and management, and investigating at least seven of its departments.

He added that he also meets with four or more of a company's clients, as well as looks into at least three of its direct competitors.