As China’s middle class grows and urban migration increases at an unprecedented rate, venture capital funds are seeing a vast potential in its consumer base. But China is a risky investment on many levels, especially in the areas of law and regulation, and particularly intellectual property protection.
At a recent Wharton event held in San Francisco, Wharton professor of insurance and risk management Kent Smetters moderated a discussion between Ted Schlein, a partner with Kleiner, Perkins, Caufield & Byers (KPCB), and Andrew Metrick, a Wharton professor of finance who specializes in venture capital and is author of the book, Venture Capital: Finance and Innovation. Their discussion covered the ins and outs of venture capital investing in China, the VC models that are common there, and why innovation isn’t a top priority in the Chinese market. The conversation was followed by audience questions about KPCB’s approach to China and other VC-related topics. An edited version of the discussion follows.
Smetters: Our first speaker tonight is Wharton’s Andrew Metrick, who will focus on developments in venture capital. Then, Ted Schlein, who joined Kleiner Perkins in 1996, will talk more specifically about China.
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