Doll Capital Management, the Silicon Valley venture firm, has hired Hurst Lin, co-founder of the major Chinese Internet portal SINA, as partner in its Beijing office.
Lin is one of the highest profile poaches by a foreign venture capital firm in China yet.
It is the latest in a series of hires by U.S. firms as they realize the huge opportunity afforded by the fast-growing Chinese market, and the relative dearth of full-fledged, experienced venture capital firms on the ground over there.
Doll Capital Management (DCM) has been a roll in China, with several successful investments there and in Japan over the past few years.
Lin announced his resignation Friday as chief operating officer position at SINA. Lin will join the board.
“SINA is falling apart,” one Chinese entrepreneur told us when…
he heard the news, seeing the loss of Lin as one more sign of Sina’s struggles as other, younger companies, such as Shanda emerge.
During our visit, the folks over at the Chinese newspaper, 21st Century Business Herald, led by editor Xu Zhiqiang, showed us the results of an eye-opening statistics about the local VC landscape. They found only 204 VC professionals in China, and only 37 percent of those had a business background, according to a survey done two years ago. Their term for the U.S-Chinese VC industry mismatch was “Elephant and the Ant.” Also, local Chinese firms were stunted by almost total reliance on government funding, lack of management experience and no way to liquidate their investments (the local stock market has been very weak), they said.
But as of this year, several regulatory changes are supposed to be implemented, they told us. Beijing is apparently lowering the barrier for a public listing, to allow smaller companies to partake of the public markets. Until now, you’ve needed three years of consecutive profits. Now you only need three years of operations. Venture investors were prohibited from selling shares for three years. Now it is only one year, they told us.
So expect to see the U.S. venture capital expansion to continue, and the poaching wars to rage.
DCM formed a “strategic partnership” with another Chinese firm, Beijing-based Legend Capital — but DCM is building up its own team in China too.
David Chao, partner and co-founder at DCM said he’d been eyeing Lin to be a partner of his firm for sometime, having known him for over 12 years. They went to business school at Stanford together. And so, as we’ve said before, things come down to Guanxi, or the deep personal connections that many say are even more important in China than they are here.
DCM is also hiring an associate, bringing its team in China up to four, from two.
Chao credits Lin for the decision by SINA to acquire Memestar, a mobile content provider, when Sina was struggling with an all-advertising model. SINA’s mobile messaging service is what returned SINA to a reasonable valuation of about $1.3 billion, says Chao.
Chao said the investment frenzy in Chinese companies close to going public is cooling somewhat from white-hot conditions during the second half of last year. “People are realizing it’s more or less bubbly,” he said, referring to the slew of companies hoping to go public this year. “A lot of companies are going to be disappointed.”
In part, that’s because Nasdaq investors are getting savvy about China, and no longer treating it as a “momentum play,” he said. Most public companies are now trading at reasonable valuations again, he added.