The Seven Disciplines for Venturing in China

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China’s institutional private equity and venture capital market has similarities to that of the United States and Europe, but there are important differences. Many practices that are taken for granted in areas such as Silicon Valley have yet to become routine in China. To begin with, there is a lack of readily available information about opportunities, entrepreneurs and companies. In addition, Chinese entrepreneurs know little about finance, corporate structures and governance, thereby requiring investors to spend considerable amounts of time educating them and filling the gaps. The authors identify seven disciplines critical to successful investment in China: knowledge and appreciation of the importance of social capital networks, or guanxi; understanding of corporate governance and shareholder rights; the ability to manage intellectual property; the ability to adapt business models to local conditions; the ability to add managerial and technical value to young enterprises; knowledge of legal structure; and an ability to navigate complex regulatory environments.

Ajit Kambil is the global director of Deloitte Research and a director of Deloitte Service LP. Victor Wei-teh Long is an entrepreneur and investor in China and the United States. Clarence Kwan is the managing partner of Deloitte & Touche LLP’s China Services Group. They can be reached at akambil@deloitte.com, meiya@pacbell.net and clkwan@deloitte.com.

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