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Bank Snubs Dotcom Startups
Japan-based Softbank, one of the world's biggest Internet investors, will no longer provide capital support for "pure dotcom start-ups" in China, because of increasing worries about the country's Internet bubble.
But, the company will focus on China's non-Internet firms which are capable of being turned into on-line enterprises, said Chauncey Shey, managing partner of Softbank China Venture Capital (Softbank CVC).
"We retain our commitment to investing in China's burgeoning Internet industry, but our focus has shifted to helping restructuring off-line companies," said Shey.
Softbank has established two Chinese investment funds with a total value of US$300 million. One fund with capital of US$1 million will focus on Internet companies and the other will target off-line companies.
Shey said Sofbank CVC will only consider companies backed by strong managements with a commitment and the ability to improve and expand their businesses by utilizing the Internet.
The company has provided capital support to Jiangsu-based Good Baby Corp to help the company expand business coverage onto the Internet.
The Good Baby Corp is one of the country's leading child utilities producers.
Softbank CVC has taken an equity position in more than 20 Internet start-ups in China, including Alibaba, Chinaquest, Precom and China Guardian.
Alibaba, a new e-commerce operator that specializes on the business-to-business model obtained the biggest single capital injection from Softbank CVC at more than US$20 million.
Shey denied that Alibaba is a pure dotcom company, and spoke highly of its well-designed business strategy and quality off-line partners.
Softbank China Venture Investments, the company's other fund in China, has also invested in Chinese Internet start-ups, led by Sina.com and 8848.net.
Global stock market setbacks for Internet companies have forced venture capital investors to reduce their investment budgets for Internet start-ups and to prudently select prospective targets.
Gary Rieschel, executive managing director of Softbank Venture Capital, predicted that most of China's Internet content providers will go bankrupt in the near future.
"More than 90 per cent of them will die because of a lack of capital support, " Rieschel said last week in Beijing.
However, Rieschel still has high expectations for China's Internet industry since the Internet bubble exists worldwide.
"We believe that China is a tremendously exciting market and one which will grow very fast in the coming years," said Rieschel.
"We are committed to providing all the support we can to ensure promising Internet start-ups have the help they need to turn great ideas into reality."
The company recently set up an office and training centre in Shanghai and another office in Beijing.
"What makes Softbank CVC different is that we are committed to helping companies with capital support but also by establishing strategic relationships and advising on technologies, business and other areas, said Rieschel.
He pledged Softbank-supported Chinese companies will enjoy its worldwide resources which consist of more than 300 Internet companies.
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