Page 112 - How China Is Winning the Tech Race

and regulatory problems. Sequoia has made its stellar reputation by nurturing
young companies within a 50-mile radius—driving distance from its office. It
incubates promising start-ups upstairs, where the partners coach and mature
fast-growing tech seeds, working hands-on with immigrants, first-generation
Americans, and underdogs—Sequoia’s favorite kinds of people. As if on cue,
the young founders of a start-up team pass by the meeting room. They are
giggling. “I hear laughter,” says Valentine, “so it must be good.”
My meeting with Valentine was in spring 2003, and a lot has changed
since then.
Today Sequoia is deeply invested in China. It is searching there for the
next tech innovation that will thrill consumers, rock the public markets, and
enrich the firm with sales of skyrocketing shares—a hit on the order of the
Palm handheld digital organizer and its staggering opening-day valuation of
$53 billion in the hyped-up public markets of early 2000. Only about 8
percent of China’s gross domestic product comes from high tech now, but the
government’s latest five-year economic plan is ushering in change with its
emphasis on technology as a cornerstone of growth. Soon China—long
known as a low-cost manufacturer—could be respected for innovations too.
Digging for gems in China, Sequoia raised a $210 million China fund in
2005 and planted Sequoia Capital China in Beijing and Hong Kong. Two
more funds budded in spring 2007: $250 million for start-ups and $500
million for fast-growing companies. Suddenly, Sequoia had nearly as much
gold-digging money in China as in the United States. 1
In less than two years, Sequoia’s 13-member team led by two Chinese
prospectors, Fan Zhang and Neil Shen, has invested in 27 would-be digital
stars: streaming media broadcasters, online ad services, social networking
sites, and wireless search and video-sharing start-ups, among other software,
semiconductor, gaming, and Internet deals. Young, savvy, and arrogant, Shen,
a master’s graduate from Yale, took online travel portal Ctrip.com and Home
Inns economy hotel chain public onto Nasdaq, and Stanford MBA Zhang, a
former investor at DFJ ePlanet Ventures, financed the Nasdaq-listed search
engine Baidu and online game player KongZhong Corp. With nearly $1
billion to invest, Sequoia has one of the largest wads of cash of any U.S.
venture firm in the People’s Republic of China (PRC).
The money trail leads directly from once-parochial Silicon Valley to
China, with emerging market India another favorite destination in the $32

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