The First National Modern Agriculture Technology and Service Start-up Competition (Part IV of IV)

In mid 2010, China Agricultural Technology Innovation Fund, sponsored by eight State Ministries, including Ministry of Science and Technology (MOST), Ministry of Agriculture (MOA), Ministry of Education, Ministry of Finance (MOF), China Security Regulatory Committee and China Banking Regulation Committee of the People's Republic of China (PRC), has launched the first "National Modern Agriculture Technology and Service Start-up Competition". It's the first of its kind for China to nurture the start-ups in the modern agriculture technology, service and rural finance areas which are in jointed favor by the government's industry policy and private capital's need. Mr. Li Ji (李骥), the Chairman of the fund has since invested more than 20 finalists from this competition and they will all have priority to go public within years.

Over 1,700 companies joined. It's national-wide mobilization! Under Mr. Li's guidance and instruction, the local government helped select and conduct total 7,000 times due diligence, 1200 face-to-face interviews by flying every corners all over China. More than 100 semifinalists made to the state level. And Mr. Li can comfortably select from these 100 to eventually invest into 20 of them. Total time spent was less than 10 month. And the government covered all the cost itself. The government also has the commitment of babysitting the companies they nominated to the end (final IPO). The competition has attracted very positive feed backs and will expand its coverage to high tech, IT, consumer industries in 2012.

As Many U.S investors have concluded that to successfully invest in China, in addition to professional expertise, you need to lever on the Chinese government, the most effective, efficient, and powerful organization in the world and mobilize on its unlimited resources. And if the investment strays off the course, the Chinese government will be obligation to remedy it. Any Western investors who wanted to have his investment protected, he needs extra assistance like what is having with the Chinese government.

To illustrate the "edge":
1) Lever on Chinese central and local government. They are committed to using their unparallel resources to source, select and conduct due diligence to the most prospective companies in China
2) Favorable policy, economic, and administrative support. The fund is sponsored by eight State Ministries and the companies invested are nominated by local governments. They will direct the favorable policy to their prospective companies and provide 100% financial and administrative supports whenever necessary, e.g. interest-free loan, equity financing (exit with 8% premium if successful), free land, 5-yr tax exemption, direct and indirect subsidies, machinery purchase rebate (up to 60%), and green-light and priority to the capital market, e.g. to get the priority to get listed on Enterprise Board of China.
3) Eliminated investment risk. The government is responsible for their nomination and due diligence results. If anything goes wrong, the government will help the recourse.
4) The fund is managed by the most experience private equity investors who have a proven track record, know China and the industry, and have formed a trusting relationship with the government.

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Science & Technology

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• part4