Advent of Corporate Investors

Although Silicon Valley is the birthplace of technologies, an increasing number of global technology giants are directing their attention to the Asian market to search for new technologies as part of their corporate expansion plans. In the beginning of the fourth quarter of the year, Motorola Inc. declared its interest in parking capital with more Asian venture capital funds, following Microsoft Inc.'s pledge of faith in an incubator programme in Malaysia. At the same time, Agilent Technologies Inc. revealed its allocation to the third fund managed by Acer Technology Ventures Asia.

In early October, Microsoft Inc., through its Malaysian subsidiary, announced a commitment of RM4 million (US$1.05 million) to the Cradle Investment Programme ('Programme') that is managed by Malaysia Venture Capital Management ('MAVCAP'). Under the agreement, the Programme will deploy Microsoft know-how to assist technological talent and researchers to commercialise their ideas.

Microsoft's commitment to the Programme is an endorsement of Malaysia's drive to promote the technological advancement of the country. For Mr Norazharuddin Abu Talib, the recently appointed chief executive officer of MAVCAP, the country's largest venture capital firm, the alliance with Microsoft is the first landmark partnership since coming to office. Microsoft has been actively scouting for opportunities to broaden its market share in Asia. It is planning to expand its presence in India. Its new development centre will bring the number of Microsoft's employees in the country to 800. In 1998 the world's largest software company chose India as its first Asian hub when it established offices in the state of Hyderabad.

Following Microsoft's modest commitment to MAVCAP's programme, Agilent Technologies became the next global technology firm to reveal an interest in an Asian venture capital initiatives. Agilent Technologies made an undisclosed payment to IPF III, a fund managed by Acer Technology Ventures Asia. It was also the first Asian venture capital partnership for Agilent Technologies.

The US$30 million IPF III is believed to have received somewhere between US$2 million to US$10 million from Agilent Technologies. Leveraging on IPF III, Agilent Technologies will access privately-owned technology companies in China.

Although Asia registered an unprecedented level of interest from corporate investors, so far only China and India have proven to be the magnetic centres. Earlier in the year, IBM committed an estimated US$10 million in Gobi Fund Inc., a China fund that focuses on early stage investments in digital media. The commitment represents IBM's first China-focused venture capital fund. Gobi Fund also received a US$10 million pledge from Japan's NTT DoCoMo. Operated by Gobi Partners Inc, the fund targets companies, primarily in China, that work with digital media content for industries, in telecommunications, internet and broadcasting. It is aiming to achieve a final closing of US$75 million.

Motorola Inc. had earlier committed to Asian venture capital funds. It invested an undisclosed sum in the Shanghai-based NewMargin Venture Capital Co Ltd ('NewMargin'), a venture capital firm that manages more than US$100 million in funds. This investment gives Motorola both a seat on the NewMargin board and on its investment committee. One of the very first domestic China venture capital management firm headed by western-educated Chinese nationals, NewMargin, focuses on high-growth companies in information technology, communications, bio-medicine, material sciences and other emerging growth areas. So far, global corporate investors prefer to invest directly, instead of committing in funds.

Intel Capital has been one of the most active corporate investors in the Asian venture capital market, although Qualcomm is catching up and has become the largest corporate investor in China so far this year. It has committed to no fewer than four transactions that amounted to an aggregate US$35.5 million.

Others are lifting their Asian resources thresholds. Nokia Venture Partners has recently chosen New Delhi as the location of its fourth Asian office. At the same time Cisco Systems also indicated that it is planning to set up a venture capital operation in India as part of its strategy to advance into the growing Indian market. According to market sources, Beijing will be the home of Siemens Venture Capital's Asian office. With corporate investors swamping the Asian market, technology companies and venture capital fund managers find themselves in demand again, a development that is reminiscent of those days when the technology bubble was full-blown (fig.9).

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