Chinese Internet Firms Face Harsh Road Ahead

From Economic Observer Online:

Funding from venture capital firms has dried up in the wake of the global credit crunch, affecting Chinese internet-based startups, which depended heavily on foreign funding.

Fund managers and internet-startup executives told the EO that the new climate will squeeze out smaller, cash-strapped firms, bring more conservative valuations and thorough due diligence, while also bringing new opportunities to healthy firms seeking bargain acquisition targets.

Gu Yongqiang, CEO of Chinese video site Youku, told the EO that the credit crisis had already begun to affect how venture capitalists value companies and create exit strategies. “The US stock markets are looking at the pale expressions on Wall Street, and the venture capitalists are watching the stocks,” he added.

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