Google’s Ex-China Head Kai-fu Lee Raises $180 Million for Technology Fund

In 2009, when Kai-fu Lee, the head of Google’s operations in China, announced his resignation, he also announced the formation of a new venture to fund Internet start-ups in the country. His company, Innovation Works, has just revealed that they have raised $180 million in investments, Bloomberg reports. Meanwhile, Kai-fu Lee is a rock star among China’s Internet generation and became the first business user to top one million followers on Sina Weibo, China’s most popular microblogging service. From the Bloomberg report:

Mr. Lee said in an interview Thursday that the nine companies raised an average of $8 million each and have an average valuation of $40 million. “The Chinese Internet will undoubtedly grow in usage, mobility, monetization, e-commerce—all faster than the U.S. market, so this is clearly one of the best investment opportunities,” he said.

But the sector has been confronted recently by growing concerns about a possible bubble in Chinese tech stocks, worries about the regulatory environment in China, and broader concerns over corporate governance practices at smaller Chinese companies.

A string of new Chinese Internet listings in the past year have performed badly. Shares in social-networking site operator Renren Inc. are now trading on the New York Stock Exchange around half their initial public offering price in May, and NYSE-listed stock in online-video company Youku.com Inc., which more than doubled on their first day of trading in December, are now back below their IPO price. Shares in Nasdaq-listed Tudou Holdings Ltd., a Youku competitor that listed last month, closed on Wednesday 10% below their offering price.

These companies, as well as China’s top Internet companies including Baidu Inc., Tencent Holdings Ltd. and Sina Corp., have multi-billion dollar valuations comparable to some U.S. Internet companies, despite competing for significantly less market revenue. Total revenue from online ads in China reached $4.3 billion last year, according to research firm Analysys International. The U.S. online ad market last year reached $26 billion, according to research firm eMarketer.


The Wall Street Journal blog points out
that Lee’s success in raising investment is all the more remarkable considering widespread concern that China’s Internet sector is experiencing a bubble:

Mr. Lee said in an interview Thursday that the nine companies raised an average of $8 million each and have an average valuation of $40 million. “The Chinese Internet will undoubtedly grow in usage, mobility, monetization, e-commerce—all faster than the U.S. market, so this is clearly one of the best investment opportunities,” he said.

But the sector has been confronted recently by growing concerns about a possible bubble in Chinese tech stocks, worries about the regulatory environment in China, and broader concerns over corporate governance practices at smaller Chinese companies.

A string of new Chinese Internet listings in the past year have performed badly. Shares in social-networking site operator Renren Inc. are now trading on the New York Stock Exchange around half their initial public offering price in May, and NYSE-listed stock in online-video company Youku.com Inc., which more than doubled on their first day of trading in December, are now back below their IPO price. Shares in Nasdaq-listed Tudou Holdings Ltd., a Youku competitor that listed last month, closed on Wednesday 10% below their offering price.

These companies, as well as China’s top Internet companies including Baidu Inc., Tencent Holdings Ltd. and Sina Corp., have multi-billion dollar valuations comparable to some U.S. Internet companies, despite competing for significantly less market revenue. Total revenue from online ads in China reached $4.3 billion last year, according to research firm Analysys International. The U.S. online ad market last year reached $26 billion, according to research firm eMarketer.

September 1, 2011 12:39 PM
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