Public/Private Venture Public/Private Venture Capital Investment Capital Investment

PartnershipsPartnerships

2005 Guangzhou Investors Delegation2005 Guangzhou Investors DelegationMay 13, 2005May 13, 2005

John Chock, PresidentJohn Chock, PresidentHawaii Strategic Development Hawaii Strategic Development

CorporationCorporation

Jeffrey Au, Managing DirectorJeffrey Au, Managing DirectorPacificap Group, LLCPacificap Group, LLC

Mahalo toMahalo to

►Canton Venture Capital CompanyCanton Venture Capital Company►Canton Venture Capital AssociationCanton Venture Capital Association►Guangzhou Municipal Board for Guangzhou Municipal Board for

International InvestmentInternational Investment

                                             

            

Hawaii’s EconomyHawaii’s Economy

► Population: 1.25MPopulation: 1.25M► Gross State Product 2004: RMB 400B , +3.2%Gross State Product 2004: RMB 400B , +3.2%► Tourism: 7M visitors, 29% of GSPTourism: 7M visitors, 29% of GSP► Other major sectors:Other major sectors:

MilitaryMilitary Construction/Real estateConstruction/Real estate Financial servicesFinancial services

► High Tech: 6% of economyHigh Tech: 6% of economy

Need to Need to diversify!diversify!

Hawaii’s Growth SectorsHawaii’s Growth Sectors

►Life sciencesLife sciences►Dual use industriesDual use industries

Remote sensingRemote sensing TelecommunicationsTelecommunications

►Ocean sciencesOcean sciences►Diversified agricultureDiversified agriculture►Renewable energyRenewable energy

Venture Capital in HawaiiVenture Capital in Hawaii

►State has been catalyst for vc industryState has been catalyst for vc industry Real estate economy: no venture capitalReal estate economy: no venture capital Indirect investment policy: fund of fundsIndirect investment policy: fund of funds Private sector investment managementPrivate sector investment management

Results: 1995-presentResults: 1995-present

Goals: Develop tech sector, make a Goals: Develop tech sector, make a profitprofit

$16 million committed to 9 vc funds$16 million committed to 9 vc funds $500M leveraging with private co-investment$500M leveraging with private co-investment 60+ companies funded60+ companies funded 2 IPOs, 4 acquisitions, 1 IPO in registration2 IPOs, 4 acquisitions, 1 IPO in registration Networks created with vc’s entrepreneurs, Networks created with vc’s entrepreneurs,

support groupssupport groups

Investment ParametersInvestment Parameters

►Market DrivenMarket Driven ?? HighHigh

►ControlControl HighHigh LowLow

►Cost of due diligenceCost of due diligence HighHigh LowLow

►Profits sharedProfits shared LowLow HighHigh

►ExposureExposure HighHigh LowLow

Direct Inv. Indirect Inv.

China-Hawaii PartnershipChina-Hawaii Partnership►State business office in BeijingState business office in Beijing►Tech incubator relationship with Tech incubator relationship with

ZhongguancunZhongguancun►DragonBridge Merchant BankDragonBridge Merchant Bank

Prepare Asian companies for US market entry, Prepare Asian companies for US market entry, fundraising, listing on US/China exchangesfundraising, listing on US/China exchanges

Backed by banks, HSDC Backed by banks, HSDC Success based, not fee-basedSuccess based, not fee-based Management team: Management team:

►Barry Weinman, Allegis CapitalBarry Weinman, Allegis Capital►Po Chi Wu, Advisor Guangzhou Municipal Gov’t,Po Chi Wu, Advisor Guangzhou Municipal Gov’t,

Allegro Capital, China Venture ManagementAllegro Capital, China Venture Management

RecommendationsRecommendations

►““Carve out” portion of portfolio for Carve out” portion of portfolio for commitment to private vc funds willing commitment to private vc funds willing to invest in GZto invest in GZ 5-15%5-15% Pool resources with other government Pool resources with other government

entitiesentities Require investment in GZRequire investment in GZ Allow some of the funds to be invested Allow some of the funds to be invested

outside GZ to allow for syndicationoutside GZ to allow for syndication

Back-up InformationBack-up Information

Investor B

Investor B

InvestorA

InvestorA Govt.Govt.

Limited Partnership

Company2

Company2

Company1

Company1

Company3

Company3

VENTURE CAPITAL LIMITED PARTNERSHIP STRUCTURE

GeneralPartner

Limited partners

Portfolio companies

Investor B

Investor B

InvestorA

InvestorA Govt.Govt.

Limited Partnership

Company2

Company2

Company1

Company1

Company3

Company3

VENTURE CAPITAL LIMITED PARTNERSHIP STRUCTURE

$ $ $

GeneralPartner

MGT.

FEE

Limited partners

Portfolio companies

Investor B

Investor B

InvestorA

InvestorA Govt.Govt.

Limited Partnership

Company2

Company2

Company1

Company1

Company3

Company3

VENTURE CAPITAL LIMITED PARTNERSHIP STRUCTURE

$ $ $

GeneralPartner

MGT.

FEE

Limited partners

Portfolio companies

Investor B

Investor B

InvestorA

InvestorA Govt.Govt.

Limited Partnership

Company2

Company2

Company1

Company1

Company3

Company3

VENTURE CAPITAL LIMITED PARTNERSHIP STRUCTURE

$ EQUITY $ EQUITY $ EQUITY

GeneralPartner

MGT.

FEE

Limited partners

Portfolio companies

Investor B

Investor B

InvestorA

InvestorA Govt.Govt.

Limited Partnership

Company2

Company2

Company1

Company1

Company3

Company3

VENTURE CAPITAL LIMITED PARTNERSHIP STRUCTURE

IPO$$$$$

IPO$$$$$

$$$ ROI $$$ ROI $$$ ROI

EQUITY

GeneralPartner

MGT.

FEE/ROI

$ $

Limited partners

Portfolio companies

Investor B

Investor B

InvestorA

InvestorA Govt.Govt.

Fund of Funds(LP or LLC)

Venture Fund2

Venture Fund2

Venture Fund1

Venture Fund1

Venture Fund3

Venture Fund3

VENTURE CAPITAL FUND OF FUNDS STRUCTURE

GP/Mgr.

Portfolio CompaniesPortfolio CompaniesCo. A

Co. B

Co. C Co. D