IFC to boost its VC in­vest­ment in in­no­va­tion star­tups

World Bank Group mem­ber wants to in­crease its ex­po­sure in the area on the main­land

China Daily (Hong Kong) - - BUSINESS - By JING SHUIYU jing­shuiyu@chi­nadaily.com.cn

In­ter­na­tional Fi­nance Cor­po­ra­tion, a mem­ber of the World Bank Group, will in­crease its ven­ture cap­i­tal in­vest­ments in China’s in­no­va­tive star­tups sec­tor next year, a se­nior com­pany ex­ec­u­tive said.

Nikunj Jinsi, who heads IFC’s ven­ture cap­i­tal global in­vest­ment group, said at a time when the mar­ket is slow­ing down and peo­ple are get­ting a bit ner­vous about it, this is an op­por­tu­nity for the com­pany to come in and in­crease its ex­po­sure in the area.

“We will in­crease (in­vest­ments) here, both to funds and to di­rect in­vest­ments,” he said.

Although his group did not have a fixed in­vest­ment al­lo­ca­tion for the fu­ture, Jinsi said he re­mains pos­i­tive about the main­land.

“China has al­ways been our largest mar­ket, for ev­ery­thing we do,” he said.

Jinsi said he sees great op­por­tu­ni­ties in the health­care, ed­u­ca­tion and e-lo­gis­tics sec­tors.

IFC’s two main strate­gic goals in China were first of all to look for more ad­vanced star­tups in need of se­ries B fund­ing or be­yond, and to find good ven­ture fund part­ners, ac­cord­ing to Jinsi.

In th­ese two cat­e­gories mil­lion IFC’s av­er­age an­nual in­vest­ments in China took 20 to 25 per­cent of its to­tal ven­ture cap­i­tal fund — or $200 mil­lion a year glob­ally of the to­tal fund­ing.

IFC is a ma­jor global de­vel­op­ment in­sti­tu­tion, fo­cus­ing on the pri­vate sec­tor in emerg­ing mar­kets.

In China, it has been shift­ing pri­or­i­ties from fi­nanc­ing that sup­ports tra­di­tional in­dus­trial sec­tors to be­ing a fi­nanc­ing cat­a­lyst for in­no­va­tions emerg­ing in the new econ­omy.

“Both la­bor force ex­pan­sion and cap­i­tal in­vest­ment are re­ced­ing as China’s two ma­jor sources of growth,” Vivek Pathak, IFC di­rec­tor of East Asia and Pa­cific, said at the China In­no­va­tion Fo­rum in mid De­cem­ber.

“In­stead, in­no­va­tion is emerg­ing as a new driver of growth and has the po­ten­tial to con­trib­ute two to three per­cent­age points of GDP growth — worth an es­ti­mated $1 tril­lion to $2.2 tril­lion per year — by 2025,” he said.

So far IFC’s ven­ture cap­i­tal port­fo­lios in China cover var­i­ous sec­tors such as e-lo­gis­tics, health­care, fi­nan­cial tech­nol- ogy, and re­source ef­fi­ciency.

For in­stance, IFC, to­gether with other in­vestors, led the lat­est fund­ing in Guiyang Huochebang Tech­nol­ogy Co Ltd, also known as Truck Al­liance.

Es­tab­lished in 2008, Truck Al­liance cre­ates a mo­bile ap­pli­ca­tion to con­nect Chi­nese ship­pers with truck­ers.

This on­line long-haul lo­gis­tics plat­form an­nounced on Thurs­day it had raised $115 mil­lion in se­ries B-1 fund­ing ex­er­cise.

This in­vest­ment, ac­cord­ing to IFC, aims to im­prove the ef­fi­ciency of the coun­try’s freight lo­gis­tics, in­crease truck driv­ers’ in­come and re­duce ship­ping costs.

“Big data will play a sig­nif­i­cant role in in­creas­ing lo­gis­tics ef­fi­ciency in the fu­ture,” said Richard Zhang, CFO of Huochebang.

Mi­crovast Inc, an­other IFC port­fo­lio in­vest­ment, is also tech­nol­ogy-ori­ented. The Huzhou-based com­pany fo­cuses on ul­tra­fast charg­ing and long-life elec­tric ve­hi­cle bat­tery sys­tems.

“There are a large num­ber of busi­ness-model in­no­va­tions (in China) so far, but its tech­no­log­i­cal in­no­va­tion is thriv­ing,” Nikunj Jinsi said.

“Tech­nol­ogy-driven in­no­va­tion is a key driver for con­tin­ued growth,” he added.

Jinsi said his cri­te­ria for deal sourc­ing in­cluded an en­tre­pre­neur’s am­bi­tions, the po­ten­tial size of mar­ket, what the team had ex­e­cuted so far, and a busi­ness leader’s dis­ci­pline on cash burn.

IFC’s av­er­age an­nual global ven­ture cap­i­tal fund

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