Scott Gelbard on the Reevaluation of China as a Venture Capital Investment

An entrepreneur and business consultant, Scott Gelbard works to facilitate international business development for his corporate clients. Scott F. Gelbard has more than 10 years of experience in developing and managing the operations of a variety of start-up businesses.

Venture capital investment in firms based in mainland China decreased by 40 percent in 2012, largely due to the lackluster initial public offering (IPO) performance by emerging Chinese companies over the past two years. Although venture capital firms based in the United States put more than $3.5 billion into Chinese start-ups in 2012, the amount represents slightly more than 10 percent of the funds acquired by emerging American companies. Both information technology and consumer-focused companies in China saw a decline.

As recently as 2010, American venture capitalists were eager to pay top price for a variety of Chinese IPOs, many of which were unable to match performance to potential. In the peak year of 2011, venture firms poured more than $6 billion into 362 deals in China. Yet in 2012, only two Chinese firms went public in the American market. In early 2013, many financial professionals stated that an unpredictable Chinese economy and the unwillingness of some Chinese executives to sell their firms make continued investment less attractive in today’s marketplace. The situation has not improved due to China’s uncertain and haphazard regulatory system, particularly in the area of intellectual property rights.