Food Microbiology Lab Report Example | Topics and Well Written Essays - 2750 words

Food Microbiology - Lab Report Example Results indicate the overall standard in terms of hygiene of food processing and the food chain. The microbial levels permitted for food to be determined safe are regulated by law. The study is carried out in three stages performed as three experiments. In the first experiment, aerobic plate count is done for E.coli count and coliform count on given food item (Roberts, D, 2003, Gilbert et al, 2000). It is evident that coliforms and E.coli are present in human faeces. Their presence in food items can indicate post processing contamination. The aerobic count is used to determine the overall level of microbial contamination of food items and provides an indication for poor processing or post processing techniques especially where the count exceed the legal permitted levels. In the second experiment pre-cooked food is observed for faecal contamination. In the third experiment the quality of milk samples (pasteurized and raw) are checked for the presence of fecal contamination. The Petri dish with colonies between 15 and 300 were selected to be significant in number whereas Petri plates with TMTC (too many to count) were not considered to be significant. Calculation is performed with the formula mentioned. Plates with dilution factor of 10-8 showed no growth and hence it is reported as Discussion: The serial dilutions, or successive dilution of a specimen e.g. 1:10 dilution equals 1 ml of sample plus 9 ml of diluents, a 1:100 dilution equals 1 ml of a 1:10 dilution plus 9 ml of diluents. This is the process to enhance the probability of finding the most probable microorganism even at higher dilution. If the microorganism is present in the highest dilution then this is depicted when inoculated on the medium solidified on Petri

Research method Assignment Example | Topics and Well Written Essays - 2500 words

Research method - Assignment Example The bank presents different offers to Super Cars; the option to receive payment after three months of entering the deal, or receiving the payment after one year. By unleashing these contrasting offers, the bank wants to also shield itself from the effects of uncertainties in the international market, thereby offering Super Cars minimum cushioning from the same. The Super Cars’ resolve to opt for the three-month payment duration presents better value for the firm, and subsequently affirms greater exposure to risk for HSBC. Finally, HSBC evaluates two options with the foreign currency it acquires: to either convert the currency to dollars immediately or after one year. This is done through examining strategies to mitigate effects of currency value fluctuations that the bank could use. The USA Super Cars sells luxury sports cars to buyers in different destinations around the world. Over the next one year, the firm will be expected to supply the UK, Japanese, Canadian, South African and the local US markets with sports cars. In order to determine the expected prices of the products at the time they will be shipped to requested destinations (the cars will be required exactly one year from now), the firm has taken forecasted estimates of the dollar’s exchange rates against the foreign currencies in the target markets. This way, it is possible to fairly estimate the amount of revenue expected from the sales, considering both the lower and upper bounds for the same. This report examines the value of the offer presented by HSBC to USA Super Cars, its ability to cushion the latter from expected risks and the ability to generate a profit for HSBC. Note: In these calculations, the totals are subsequently divided by n = 27 (the number of cars that have been ordered by the domestic and foreign buyers) in order to work with the formula for z-scores. = (81,481.48 – 113,011.1) / 16,491.40 = -1.912, equivalent to the

Regulatory Effects on the Transportation Industry Essay Example for Free

Regulatory Effects on the Transportation Industry Essay Economic effects on freight and passenger services Transportation Management, to the government, is the agency oversight of the movement of people and goods. That includes oversight of the economic practices of the companies that perform these services. The economic effect of such regulation is complex. Service industries, which include the various forms of transportation of freight and passengers, are subject to a wide array of regulations. These regulations affect the economies of transportation services in differing ways. Regulations are imposed on these industries to achieve various social and economic goals. Whether they achieve these aims is a separate question. The most obvious effects of regulation are economic. Well-crafted, appropriate regulations can be an asset both to industry and the consumer. They can move resources toward socially productive uses and away from negative ones. They can also ensure public safety and foster competition. Over regulation, however, can have the opposite effect. Transportation, like any industry, is resistant to regulation. Evidence exists that shows the negative economic effects of regulation. Over regulation or regulations that are poorly written can unnecessarily stunt economic activity in situations where the free market could have regulated more effectively. It is up to policy makers to find a balance that achieved social aims yet allows business to thrive. The freight transportation industry and the passenger transportation industry have some similar concerns about regulation. There are also regulations that are distinct to each industry; therefore the economic effects will likely differ. Regulation can result in a higher cost of doing business which is passed down the line to consumers. This is true in both the freight and passenger sectors. The increased price to consumers has a ripple effect on the economy on the whole. Each sector contains complex economies, though, in which the effects of regulation may not always be clear. Oversight-The mission, in general Federal oversight of both the freight and passenger industries is managed by the General Services Administration. It is concerned with both regulatory cooperation and promoting the economic heath of the industries involved. The GSA works collaboratively with businesses to develop flexible regulatory policies and incentives.In both sectors, the GSA is working to smooth the process to electronic forms of transportation. The GSA is working to support the initiatives put forward in the President’s Management Agenda (PMA). They include: the expansion of electronic government, the integration of performance and budget, strategic management of human resources and improved financial performance. The Economic Theory of Regulation The creation of governmental bodies to oversee and regulate certain industries has prompted efforts to measure the effects of such regulation on the overall economy. In 1971, George Stigler proposed the Economic Theory of regulation, or ET, for short. This model measures regulatory effects on the supply chain, prices and costs, among other factors. Elements of this theory have been used to develop some of the more recent regulatory efforts. The model has since been revised. Critics of this model argue that it is successful for academic purposes, but is incomplete in an always changing business environment. Comparing economic effects directly between the freight and passenger transportation industries is difficult because of the differing nature of regulation. Creating regulations for these industries, or removing them, is a trial and error process. The Freight Industry Regulation in the freight industry traditionally has focused more on business structure than in the safety and price conscious passer industry. As in passenger service, the trend in freight has been toward gradual deregulation. Monopolistic practices have been a concern, particularly in the United States, since the beginnings of the modern transportation industry. The question is to whether assertive government regulation is better than the free markets alone for creating competition. The Interstate Commerce Commission (ICC) was created after the Interstate Commerce Act was signed into law in 1887. This organization exercises broad regulatory powers over surface transportation industries. The ICC can not only review rates upon complaint, it can replace them with new rates. Many passenger and freight service companies protested, or tried to evade altogether, the reach of the ICC. Regulation introduced an unnecessary variable into the theory of consumer behavior, they felt. If prices are not solely the function of demand and cost, the outcome for the business is unpredictable. Regulation, they feared, would also make market entry more difficult. Competition could be reduced and the consumer could suffer in the end. Early actions of the ICC benefited producers of raw materials and goods. At the same time, their actions hurt manufacturer and decreased national economic efficiency. Rate manipulation by the ICC prompted factories to locate closer to final markets in order to minimize transportation costs. Railroads also challenged the ICC in court or found ways around the regulations. Even if it is not specifically quantifiable, it is obvious that regulations affected the economy. The reverse is also true. Changes in the overall economy have prompted changes in regulation. The Great Depression and its negative effect on the rail industry prompted the appointment of a Federal Transportation Coordinator and the passage of the Motor Carrier Act of 1935. A 1960 report by the United States Senate highlighted the effect of over regulation of the freight industry. It stated that the railroads and other transportation industries under direct federal regulation were at a distinct economic disadvantage to those that were not. The rail industry, in particular, was unable to set competitive rates under ICC control. Meanwhile, the less regulated motor carrier industry prospered. As that industry became more regulated, efficiency began to drop. In response, deregulation of both industries began in the late 1970’s and early 1980’s. As carriers were allowed to eliminate unprofitable activities and set their prices based on demand, revenue and investment increased. In the mid-1980’s, the ICC was replaced by the Surface Transportation Board, a regulatory agency that is reduced in size and scope. Today’s oversight of the industry has changed in nature. Security and safety concerns are paramount after the events of 9/11. Freight carriers are incurring more expenses for security either directly because of regulation or on their own. These costs are passed down the line to consumers. The question has arisen as to whether economic reregulation is necessary as the number of railroad companies shrinks. It appears as if that is not likely in the short term. As long as the motor carrier industry is competitive, it will serve to hold rail rates down. Market entry, however, is more difficult for railways. Opening that market may be a goal of future regulation. Security has become a primary focus of government regulation. There is a great deal of pressure for companies to do more thorough screening of cargo and implement more stringent security practices. This will inevitably increase cost to both the industry and consumers. The shipping industry is inherently international. Many laws exist, to protect domestic carriers and to ensure safety and security. Domestically, all goods must travel on approved U.S. flag vessels. Separate restrictions apply for HAZMAT or classified materials. For all shipments, the shipper must check for any contracts or rate tenders that may apply. In selecting a provider, the shipper must demonstrate no preferential treatment toward any one provider. Insurance may also be required. Incentives may exist for selecting a provider that uses alternative fuels. In that sense, regulation indirectly benefits the alternative fuel industry. The government can mandate that certain international shipments be performed by a U.S. flag carrier. Cargo preference laws regulate the international shipment of property by water. In this situation, a U.S. flag carrier must be used whenever available. Waivers can be obtained, but they must be approved in advance. The Maritime Commission is the agency that monitors compliance to these and other laws. These laws, and similar ones by other countries, limit the amount of competition and may affect the efficiency of domestic businesses. The Passenger Industry Air travel is the most popular non-automotive mode of travel in the world. In recent years there has been a drive toward deregulating the industry. Service agreements have been liberalized, especially in the United States. Open Skies agreements loosen restrictions on market entry and airport usage between the U.S. and other countries. Price and route scheduling in the air industry are for the most part deregulated but other parts of the industry are not. Deregulation of the air industry began in 1979. Since then, there has been vast growth in the industry. Competition has also increased, allaying the fears of some that monopolies would develop. Prices, adjusted for inflation, have also fallen since the 1980’s in the United States. They have remained constant in Canada and other more regulated economies. Competition has not benefited every consumer but, on average, it has had a positive effect. Demand has increased to an all-time high, even as airlines continue to recover from the effects of 9/11. The basic structure of the airlines has changed since deregulation. Most airlines have instituted a â€Å"hub and spoke system† in which a traveler can travel efficiently through â€Å"hub† cities to their destination. This also allows airlines a more cost-efficient organization of their fleet. As airlines eliminated non-profitable destinations, other specialty carriers have moved in to meet demand in those cities. A significant amount of study has been done on the economic effect of regulation on the airline industry. It should be noted that determining exact cause and effect is not a straightforward process. Prices and industry efficiency are dependent on regulation and a multitude of other factors. Profits fluctuate wildly in passenger industries. A deregulated environment is effective for such industries because the fluctuations attract new investment and can actually facilitate market entry. The airline industry is inherently global, and regulation has global effects. In this sense, the passenger industry has to deal with economic realities that most surface freight industries do not. For example, United States regulations allow Canadian airlines to land or pick up at U.S. airports. They cannot, however, have both ends of the flight within the U.S. This reduces competition because Canadian air cannot form a complete hub and spoke system to efficiently serve passengers. This may have the end result of raising prices for consumers in certain markets, or, it may prompt other airlines to enter in order to serve that market. In this regard, the effect of regulation is somewhat uneven and unpredictable. Another source of regulation fro the passenger industry is the issue of foreign ownership. Theoretically, allowing foreign ownership of U.S. airlines could create more competition and lower prices. However, officials fear that allowing foreign ownership could create a situation where airlines are less accountable to regulatory power. An emerging focus of regulation in the passenger industry is security. Many new measures affecting airlines, airports and surface carriers are in the process of being implemented. The economic effect of these measures has not been studied and is not yet well known. Some of the expense is being absorbed by the federal government, such as in the case of the federalization of airport screeners. In the passenger ship industry, restrictions are fewer regarding international ownership and usage of U.S. ports. There is pressure on congress, however to provide greater oversight of this industry. It is unclear at this point if regulation will increase and what effect it will have on the economy of that industry. Deregulation Theory and the Critics In the passenger service industry, the seemingly successful deregulation of the airlines has prompted deregulation efforts in other sectors. The theory behind deregulation is simply that free markets work. Free markets will solve most of the problems that regulation seeks to remedy, as long as there is a competitive market. Demand, or lack of it, will control prices and force healthy competition. The Herfindahl index is a measure of industry concentration in certain markets. Proponents of deregulation in the air industry, for instance, cite that the Herfindahl has remained relatively stable since the initial shake-out of firms after the 1979 deregulation. In other words, competition is healthy and the consumer is being served at reasonable prices. Some of the effects that critics feared have apparently not come to pass. In the airline industry, research shows no significant decline in safety levels, and no decreases in service to smaller communities sine deregulation. Past experience shows that there is a negative linkage between regulation, market structure and service. There are some concentrated markets, proponents concede, but this is not necessarily bad. Some concentration allows the airlines to create bigger, more complete networks that serve more consumers. Regulation in both the freight and passenger industries now focuses away from business structure and price control. Regulations are more directed toward safety and security issues. Oversight in the freight industry still has a somewhat wider scope. Deregulation is not without its critics. Some point to the power industry as an example of deregulation gone too far. In the wake of deregulation, huge entrepreneurial companies such as Enron surfaced. Monopolistic practices were ushered in, and ultimately the needs of the consumers were not fulfilled. Deregulation proponents in the transportation industry, however, do not see this as a relevant example. The corruption at Enron was not created by deregulation, and economic factors in transportation are not the same. Conclusions The economic effects of regulation on both the freight and passenger service industries are many and varied. Difficulties exist in quantifying exact effects. Government attempts to regulate price, in particular have not always produced the intended result. The lack of knowledge on exact economic effects of regulation can be improved upon. More comprehensive studies can be undertaken in future years to clarify how these restrictions help or hurt the economy. Sophisticated technology is in development that can replicate various scenarios, a tool officials need before attempting to write policy. Regulations on transportation affect not only the transportation industry itself, but also any company that uses that industry. It is estimated that for the average company, transportation accounts for 3% to 7% of the total company costs. Therefore, regulation can have a significant effect on the economy as a whole. For the individual business, regulation can have ripple effects that influence inventory control, warehousing, accounting, customer service and a host of other area. It is not necessarily a negative effect, though. Efficient business combined with well thought out policy can provide a positive result for the economy. The way business is conducted is undergoing a rapid overhaul. New technologies are being introduced at a blinding pace. Future regulatory efforts will have to take this into account. A well-intentioned regulatory action could have the effect of slowing down a business in a climate where fastest is best. The safety and security measures that are necessary in the 21st century will inevitably have an economic effect. The money, however, is well spent. In future years, companies with good track records on security and safety will reap the financial benefits. For the freight and passenger industries, the trend has been toward deregulation in the economic sphere. The government will still take action if it perceives that there is a constraint on competition. It still holds veto power over large mergers, for example. Comparison of the economic effects of regulation between the passenger and freight industries suggests that a limited regime of regulation is necessary for safety and, to a lesser extent, for the economic health of the industries themselves. There are different regulatory focuses for each industry. What they all share is that they all produce a ripple effect that branches out to all sectors of the business, the consumer, and the larger economy. That effect can be negative, or, with well written policy, it can be positive.

Analysis on Current Venture Capital Market in China

Analysis on Current Venture Capital Market in China Introduction The huge consumer market potential and booming economy in China attract enormous foreign direct investments to capitalize this unprecedented opportunity. Foreign venture capital is not exceptional from this trend. They, however, still have to face constant challenges from regulations, market practices and business cultures in China. To be successful in this marketplace totally different from their origin, foreign venture capitals need to adapt their previous strategies and experiences and test it through trial and error. This report is to get overall picture about current venture capital market in China. Then it will focus on the market position of foreign venture capitals. The report is followed by the analyses and summary on investment and exit strategies used by foreign venture capitals. Finally, the report will discuss the potential trend in China venture capital market. Key Objectives To get in-depth analysis on current venture capital market in China and foreign venture capitals market position in China. To analyze and summarize the investment strategies and exit strategies used by foreign venture capital in China. To make prediction on future market trend, especially foreign venture capital. Key Chapters General introduction on venture capital Historical development and current venture capital market in China Detail market position analysis on foreign venture capital in China Investment strategies of foreign venture capital in China Exit strategies of foreign venture capital in China Future trends in China venture capital market Introduction on Venture Capital Venture capital is source of funds to small firms that cannot establish credit relationships with bank or other financial institutions. As Gompers (2001) states: Companies that lack substantial tangible assets and have uncertain prospects are unlikely to receive significant bank loans. These firms face many years of negative earnings and are unable to make interest payments on debt obligations. Start-up high tech firms are exactly the type of firms that banks are least likely to lend to because of poor information availability and lack of tangible assets or assets that can be readily evaluated. Firms developing software or new technology for the communications or biotech industries are largely investing in human capital. In a nutshell, the VC firm is a relative small financial services professional organization that functions primarily to: (a) assess business opportunities; (b) provide capital; and (c) monitor, advise and assist the firms in its portfolio. By investing, the venture capitalists accept substantial tranche of illiquid equity that converts their status to something like partners to the entrepreneur. The goal of the venture capitalist is not only to increase the value of that equity but also to eventually monetize the investment through a liquidity event such as an initial public offering or sale to other investors. The other way of reaping the reward is liquidation due to the firm failure and bankruptcy. In all of these scenarios, the venture capitalist exits their investment to complete the VC process. The venture capital cycle is briefly visualized in below chart. Chart 1 Fund flow of Venture Capital Cycle Source: National Venture Capital Association Yearbook 2008 The National Venture Capital Association in the United States defines venture capital as money provided by professionals who invest alongside management in young, rapidly growing companies that have potential to develop into significant economic contributors. There are a number of key attributes associated with VC that distinguish it from other equity capital investments. Venture capital normally focuses on small firms that have great growth potential. These firms usually are not mature enough to be traded in public equity markets. Compared with public equity investment, venture capital investment has poorer liquidity with more severe information asymmetry and higher investment risks. Venture capital investment is also different from angel capital. Managers of angel capital use their personal money to invest. In contrast, investments professionals who raise money from other investors manage venture capital. Angle capital invests more often in the seed stage of the start up firms than venture capital does. Finally, venture capital is different from non-venture private equity investments (such as buyouts, restructure, and mezzanine funds). Firms backed by venture capital usually have considerable growth potential. For these firms, the cash flow generated from operations is usually insufficient to support finance growth and debt financing is usually not available. In contrast, private equity funds target more mature firms that have stable cash flows and limited growth potential. The Table 1 below summarizes the investment stages and types of funding for different investment styles. Table 1. Types of Funding and Investment Stage Source: A Guild To Venture Capital (3rd edition) by Irish Venture Capital Association There are five stages (BVCAPWC, 1998) in the development of venture-backed companies, which can be defined as: 1. Seed 2. Start-up 3. Other early stages (exploration) 4. Expansion 5. Maturity (exit). The definition of the company stage is different with the definition of the financing round. The negotiation of a VC investment is a time-consuming and economically costly process for all parties. Neither the VCs nor the portfolio firms want to repeat the process very often. Therefore VCs have to balance the cost of negotiation and potential risks from one time investment. Typically, a VC will try to provide sufficient financing for a company to reach some natural milestone, such as the development of a prototype product, the acquisition of a major customer, or a cash flow breakeven. Each financing event is known as a round. So the first time a company receives financing is known as the first round (or Series A), the next time the second round (or Series B), and so on and so forth. With each well-defined milestone, the parties can return to the negotiating table with some new information. These milestones differ across industries and depend on market conditions. A company might receive several rounds of investment at any stage, or it might receive sufficient investment in one round to bypass multiple stages. One special situation is the down round. It is when the company does not meet milestones and the VC still needs to invest but at a lower valuation than prior round of financing. Venture Capital in China Why invest in China? There are four major popular arguments behind for the investment rush to east. Reason 1: High Rate of Economic Growth Chinas impressive economic growth for the past 30 years, averaging between 8% to 10% real growth per year, has been the envy of the developing world. The size of Chinese economy by the end of 2006 reached US$2.62 trillion, 13 times larger than that in 1978 when measured in constant RMB (MasterCard Worldwide Insight, 2007). According to Goldman Sachs China economic research (2003), per capita GDP expect to grow from less than $5,000 at that time to more than $30,000 in 2050 (refer to Chart 2). China will have a middle class of more than 500 million by 2025 larger than the entire population of the United States. It represents a huge emerging demand for everything from integrated circuits to cars. 500M mobile users, 130M Internet users, 104M broadband users and 4.5M college graduates every year could all transfer into huge business opportunity (represented in Chart 3). Based on the estimation (Chart 4) from Mckinsey, there will be sustainable market growth to 2025 in every business that related with peoples life and daily consumption. Huge opportunities for venture capital are Internet (B2B, B2C, C2C, online gaming, website portal and web 2.0), semiconductors, technologies (clean energy, medical, biotech and traditional manufacturing), and consumer businesses (food, clothes, shopping and other entertainments). Chart 2 China GDP Growth Forecast (2000-2050) Source: Goldman Sachs 2003 Chart 3 China Energy/Material supply imbalance (2010) Source: Goldman Sachs 2003 Chart 4 Urban Chinese Consumers Demand Forecast (2004-2025) Source: National Bureau of Statistics of China; Mckinsey Global Institute Analysis Reason 2: Inefficient Capital Market In the United States and Europe, private and public capital markets compete as sources of capital. However, China does not yet have an equity culture despite the adoption of market-oriented policies. In China, the public equity market lists inefficient and unappealing state owned enterprises (SOE) most of the times. And government holds roughly 60-70% of share capital of most listed companies. Few private firms are listed in the stock market due to legal and policy hurdle. Chinas bond market is similarly underdeveloped. Chinese corporate bonds account for less than 2% of corporate financing. Thin trading between banks and investors makes issuing bonds unattractive for fundraising or investing. Insurers and fund managers therefore have few fixed-income securities to hedge against mid- and long-term risks. The corporate bond market just started to function in late 2007 by allowing public listed firms to issue corporate debts. Around 95% of financing for Chinese companies now is still provided by bank loans. The domestic banks, however, have tendency to provide loans to stated owned company rather than private firms, especially small and medium businesses (SMB). With the poor functioning financial markets and policy discrimination, venture capital and private equity become important sources of growth capital for private firms. It is one of the key reasons that venture capital is so popular among private firms in China across different industries even including traditional industries like food, hotel and travel etc. Reason 3: Creative Solutions/Early Adopting Consumers One of the most unexpected attributes of the emerging Chinese market economy is how consumer-savvy its entrepreneurs are. Even after decades of centralized economic planning, the Chinese remain consummate creators and marketers of interesting products. Definitely the creativity and innovations are only limited in certain business for talents availability and their professional capabilities. Online gaming, wireless instant messaging, and wireless value added services are just three markets that the Chinese more or less created out of thin air. Each of these businesses has growing customer bases (and have spawned successful public companies like Shanda, Netease, Tencent, and Linktone). But none of them has significant participants yet in the United States. Different consumer behaviors contribute to this phenomenon as well. In below case study on Tencent, it provides a great example on how to innovate the Internet product offerings to cater the needs of online generation. Case study: QQ of Tencent (Adapted from www.tencent.com) Tencent (listed in HK stock exchange) is the #1 Instant Messaging (IM) service provider in China. Tencents IM community counts over 270 million active accounts and is said to be covering 95% of Chinese Internet users and 70% of Chinas IM market (MSN/Yahoo account for the rest market). QQ is the brand for its IM. Same as other IMs, QQ is a free tool to use. Tencent, however, came up the idea to generate revenue stream by allowing users to buy and exchange virtual items (clothes and background image) online to decorate his or her QQ head icon. Tencent even created its own cyber currency called Q Bi and 1 Q Bi = 1RMB (0.14 USD) to facilitate the transaction and reduce barrier of online purchasing. The estimated revenue generated from those Internet value added services in 2007 is around USD$360M. Reason 4: Risk-taking, Innovative Culture In the last fifteen years, the privatization reform is one of the critical forces in stimulating China economy growth. This privatization wave also generated tens of thousands entrepreneurs. The business culture is naturally comfortable with risks and with developing innovative ways to solve problems and create wealth both for individuals and for society at large. The successful stories of VC backed entrepreneurs further promote the risk taking culture in China and the awareness and popularity of venture capital. The Focus Media case below illustrates the power of business model innovation by its unprecedented expansion speed ever in Chinas business history. There is no doubt that foreign VCs played an important role in this story to make Focus Media successful. Case study: Focus Media China (Adapted from www.focus.com) Founded in 2003, Focus Media is Chinas largest Digital Media Group in China now. The founder, Mr. Jiang Nanchun, came up with an innovative approach in operating out-of-home advertising network using audiovisual digital displays. Basically, the idea was to display the LCD near or in the elevators in commercial centers (like office buildings and shopping malls). While waiting for or in the elevators, people would watch the contents advertised in those LCDs. By selecting and contracting with high quality commercial buildings, Focus Media was able to quickly build up its network scale and attract many advertising contracts. Tow foreign VC firms, Soft Bank and UCI, invested in the first round. And another five VCs, CDH, TDF, DFJ, WI Harper and Milestone, invested in the second round. Two years after operation, Focus Media was listed on Nasdaq with USD$172M IPO and now it is part of Nasdaq 100 index. Historical development Infancy stage: 1984 1995 In 1984, the Research Center of Science and Technology Development of the State Science Technology Commission (SSTC) (now the Ministry of Science Technology or MOST) cooperated with British experts to study how to develop high-tech in China. The British experts proposed that venture capital should be developed if China wanted to foster high technology. In 1985, the Central Commission of the Chinese Communist Party and the State Council pointed out in the Decision of Science-Technology System Reform that venture capital could be set up to support the work of developing high-tech with quick change and high risk. It was the first time that the concept of venture capital appeared in an official Chinese Government document. With the government decision to develop high technology industries, the Central Government and some local governments financed and set-up series of investment institutions that intended to pursue the venture capital business from 1985 to 1995. Examples are China New Technology Venture Capital Company, Shenyang Science-Technology Venture Development Risk Center, Shanxi Head Office of Science-Technology Fund Development, Guangdong Science-Technology Venture Capital Company, Shanghai Science-Technology Venture Capital Company, and the Science-Technology Venture Capita Company of Zhejiang Province. Moreover, venture centers (i.e., high tech incubators) were set-up in the majority of national high-tech parks. Simultaneously, some overseas investment banks, funds and venture capital institutions also started to expand their business into China. For example, the Pacific Technology Venture Capital Fund subordinate to IDG entered China in 1992. It cooperated with science-technology commissions in Beijing, Shanghai and Guangdong, and set-up a number of venture capital companies focused on investing in technology companies. Also, some foreign capital or joint stock investment institutions established venture capital businesses. Asia Venture Capital Journal (AVCJ, 2001) shows that $16 million was raised for venture capital investments in 1991. In 1992, the total funds raised jumped to $583million, a thirty-fold increase compared with the $16 million in 1991. The first wave reached its peak in 1995, with $678 million in investment (AVCJ, 2001).The first wave of venture capital investments was brought by international venture capitalists. The international venture capital firms accounted for more than 95% of the total fund raised in the early and mid 1990s. The absolute dominance of international venture capital funds in China in the early and mid 1990s was mainly due to Chinas strict regulations against fund-raising and the general lack of awareness of venture capital in China. Private fund-raising by individuals or private firms without government approval was strictly prohibited in China. This strict regulation essentially removed the possibility for venture capitalists to raise funds within China. It meant that only international venture capital funds and state owned enterprises (SOE) venture capital funds could operate. International venture capital funds could bypass the regulation because they were incorporated and they raised funds outside of China. SOE funds relied on government appropriation as funding sources and did not have this fund raising problem either. Early Growth: 1996 2001 From the mid-1990s, the perception of venture capital shifted from being a type of government funding to being a commercial activity necessary to support the commercialization of new technology. As there were still no laws or regulations about setting up foreign venture capital institutions in China, many overseas investment institutions established their branches in Hong Kong, aiming to invest in the mainland. They had also located representative offices in some major cities, primarily Beijing and Shanghai. Most of the VCs active in China in the early 90s were American firms. The VC industry in the U.S. had matured and attracted a significant amount of funds. Shortly after 1995 a sharp increase from US$5 billion to US$110 billion in funds raised created the phenomenon of money chases deals (Gompers Lerner, 1999). A cadre of experienced American VCs started searching the world for investment opportunities, attempting to replicate the Silicon Valley model. Since 1998, there had been a discernible recognition of the critical success factors necessary to create an environment in which venture capital could operate smoothly and flourish. Specifically, the Governments official decision to support the development of venture capital was the key factor that had allowed Chinas venture capital industry to come into being in a new and more positive environment. In Beijing, alone, there were about 30 independent venture capital institutions, whose capital amounted to an estimated $450 million. In Shenzhen, there were at least 20 independent venture capital institutions with capital amounted to over $500 million. After 2000, China also experienced hard landing in its young VC industry due to dotcom bubble burst and came with huge casualties. It took the VC community 3 years to recover. Fast Growth: 2002 present Although initial government-backed investment operations generally failed, there has been resurgence in venture capital activity since Chinas admission to the WTO (Kenny, Han and Tanaka 2002). Capital available for investment in Mainland China keeps a steady growth trend from 2002. The capital size was increased to US$21.32B by 2007 from US$10.50B in 2002. The average compound annual growth rate (CAGR) reaches 15.2%. Venture capital investment grew rapidly from $480 million in 2002 to more than $3,247 million in 2007, invested in 440 China mainland or mainland-related enterprises (Zero2IPO 2007). According to Zero2IPO report, USD$4B VC funds were raised each year in 2005 and 2006 for China investment. But Chinas annual consumption was no more than $2B. The money chasing deal phenomenon started to emerge in China. Many foreign VC funds, especially first-time funds raised after 2005, had the pressure to pour out investment quickly to avoid US dollar depreciation against RMB and to get better deals under fierce competition. While the funding supply multiplied, quality deal flows did not increase at the same pace. Under the simple supply and demand mechanism, valuations of the China deal kept at relative high level. However, considering the fact that a big portion of funding was focusing on local value-add service segments (i.e. internet, web2.0 and broadband etc.), the issue of funds over-supply was sector specific. To get higher return under the competition, VC firms started to invest in traditional business models such as hotels, travels and fast food chains beyond their core activities such as TMT (Technology, Media and Telecom) or Internet related businesses. It was the special phenomenon happened in China now that VCs were more like PE. Legal and Regulations According to Megginson (2004), the differences in the design and the degree of development of the PE/VC industry are due to institutional factors, with the countrys legal system being paramount. Two major factors are paramount in evaluating legal system: contract law enforcement and protection of shareholder rights through effective corporate governance. Cumming and Macintosh (2002) observed that PE/VC managers in high enforcement countries had a greater tendency to invest in high-tech SMBs, exit through IPOs rather than buybacks and obtain higher returns. Cumming et al. (2004) further examined legal system effects on governance structure. Under better legal systems: the faster the origination and screening of deals; the higher the probability of syndication; less frequently funds of the same organization used to invest in a given company; the easier the board representation of investors; the lower the probability that investors required periodic cash flows prior to exit; and the higher the probability of investment in high-tech companies. Lerner and Schoar (2005) show that in a bad legal environment, PE/VC managers tend to buy controlling stakes, leaving the entrepreneurial team with weaker incentives. Interestingly, valuations tend be positively correlated with the quality of the legal environment. Kaplan et al. (2003) go deeper into the contractual aspects and found that rights over cash flows, liquidation and control, as well as board participation vary according to the quality of the legal system, the accounting standards and investor protection across countries. However, more sophisticated PE/VC managers tend to operate in the U.S. style irrespective of local institutional concerns. The authors show that managers operating with convertible preferred stocks are less prone to failure (as measured by survivorship rate). The results suggest that the U.S. contractual style can be efficient in different institutional environments. Bottazzi et al. (2005) corroborate some of the previous results and obtain further evidence on the home-country effect (PE/VC managers operating abroad tend to maintain the investment style used at home). This is observed in managers based in both good and bad legal environments. The Chinese regulations governing foreign venture capital investment are chaotic and rapidly changing. In 2005, Chinese authorities issued new guidelines (effective in 2006) intending to foster domestic venture capital firms. There is no specific regulation to monitor and stimulate the VC activities in China. The new guidelines recommended that local governments provide financing assistance, favorable tax treatment, and direct investment in Chinese venture capital firms. They also provide less stringent capitalization, investment amount, investor qualification and regulatory requirements than those applicable to FICVEs (Guerrera, Yee and Yeh, 2005). FIVCEs instead are governed by 2003 regulations that include high investment and qualification thresholds, government approval requirements, and strict foreign exchange limitations on the ability to remit profits and dividends back to the investor (Hoo, et al 2005a). Substantial legal and de facto restraints on the ability of FIVCEs to access the stock markets in China and overseas for IPO listings make exit strategies extremely difficult. For these reasons, foreign venture capital firms investing in China usually do not use FIVCEs but rely on offshore holding companies created to receive their investments. Foreign venture capital firms (most of which are U.S. based) investing in China generally have done so through the restructuring of Chinese companies into offshore investment vehicles. These enable an easier exit from investments either by selling shares on international stock markets or through a trade sale to another foreign buyer. In January of 2005, Chinese authorities brought these transactions to a virtual standstill, however, with the issuance of new regulations preventing any onshore resident from establishing, controlling or owning shares in an offshore company without the approval of the Government, either directly or indirectly. The regulations were intended to stop managers of SOEs receiving venture capital investments from stripping state assets and selling them cheaply to overseas companies, and to preclude domestic companies from using the overseas vehicles to gain foreign investor tax exemption status. However, they choked off legitimate transactions as well. There were no government approvals of offshore investment transactions in 2005. With only limited exceptions for transactions in process, foreign venture capital financing through offshore investment vehicles screeched to a halt in 2005 (Borrell and Jerry, 2005). Then, in November of 2005, the Chinese authorities issued superseding regulations. These require registration of offshore investment vehicles with the State Administration of Foreign Exchange (SAFE), but do not require the agencys approval of the transaction. They also require repatriation of all distributions of income from the investment within a fixed time frame. Like the previous regulations, the new ones do not describe specifically the registration process, the procedures involved, the scope of review nor the time required for completion, creating substantial uncertainty for foreign venture capital investors (Hoo, et al 2005b). Despite this changing regulatory landscape, many U.S. based venture capital firms have active plans for substantial investments in 2006 spurred by Chinas high growth potential, the success of recent venture-backed startups on the NASDAQ including Baidu.com and China Medical Technologies and by pent up demand after the 2005 halt in new investments (Borrell, Jerry and Aragon 2005). Hidden risk and solutions Lagging legislation and inexplicit policies in China created many uncertainties and entry barriers for foreign VCs. Below are summary of the critical problems: Chinas lawmaking on VC investment remains stagnant Existing laws such as Corporation Law, Joint Venture Law, Patent Law, etc., in many aspects even contradict VC investment. Does VC investment count as foreign investment? What status and treatment should it enjoy? The concerned authorities cannot provide clear answers to these questions. Its not clear that the amount of shares that foreign venture capital is allowed to hold when partnering with Chinese enterprises, and the way foreigners to remit in/out of foreign exchange are poorly defined. There are three available approaches for foreign venture capital firms to enter China venture capital market legally. Establishing offshore venture capital fund focusing on China Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a legal person entity Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a non-legal person entity To avoid the legal and regulation barriers, foreign venture capital funds usually takes the offshore investment route. Foreign VCs will use offshore USD fund to invest into China deals offshore holding entities with all equity activities happening outside of Chinese jurisdiction. The distinction of USD offshore holding investment and RMB local entity investment is a particular phenomenon in China. Offshore holding arrangement is a preferred structure for Chinese entrepreneurs and VCs as it provides a feasible and practical route for funding, divestment and all equity events. Its advantage and attractiveness to Chinese entrepreneurs and VC communities: Go away from laws and regulations in China. Many of them are not friendly to venture activities, such as lack of preferred shares, stock options limitation, double tax etc. Bypassing capital account control on foreign exchange. More flexible and usually profitable divestment options by overseas IPO, MA or trade sales. Offshore route investment involves the following steps: The Chinese founders set up an offshore holding company in Cayman Island or BVI with the shareholding structure and management control mirroring those of their local company in China. With kind of swap scheme, transferring the equity they hold in the Chinese local company to the offshore holding. This will typically convert the local company into a WFOE (Wholly Foreign Owned Enterprise). The offshore holding company will then be the vehicle seeking VC investment, future funding as well as for listing or be merged. All equity events happen in offshore. Companies funding and IPO proceeds will be kept offshore, and remit into China as and when operation required. Chinese founders assets, rights and proceeds stay offshore. The whole exercise is carried out essentially with an IPO at an overseas stock exchange, such as NASTAQ or Hong Kong Stock Exchange in vision. (The concept and process is visualized in chart 5.) Chart 5 Foreign VC Offshore Investment Process Source: A legal perspective on Chinas venture capital rush, Mar 2006 Restrictions in Chinas corporate regulations and limitations at the domestic capital markets explain foreign VCs preference in taking offshore route to organize their China investment. VC investors rely normally on preferred stocks or convertible preferred stock to secure a preferential return. Chinese corporate regulations allow only one class of common stock for a FIVCE with investment in a Chinese portfolio company. Notably, local VC firms would have the possibility to arrange preferred stock scheme with their investee company according to a newly issued charter regulation applicable to domestic VC firms. This gives rise to concern on the principle of national treatment under WTO law. Moreover, China domestic stock market does not provide a ready access for venture-backed companies. The conditions for listing at Shanghai or Shenzhen main-board market are too stringent for high-tech start-up companies. Even if listing conditions could be met, the queue in the pipeline waiting for a listing window is at the moment frustrating. In fact, the two domestic stock exchanges have halted the IPO since two years in the call for addressing the notorious overhang of nontransferable legal person shares. The undergoing endeavor is focusing on floating all stock legal person shares. Since the value of stock legal person shares is roughly twice of those trading in the stock exchange, full floating of legal person shares at stock is imposing acute challenge on the market place. This would mean that the suspension on IPO of new shares would be expected for a rather extended term. By leveraging on an offshore holding structure, foreign VCs could take advantage of the corporate governance in a jurisdiction where they feel most comfortable and bypass the restrictions under Chinese corporate law. VCs could take the Analysis on Current Venture Capital Market in China Analysis on Current Venture Capital Market in China Introduction The huge consumer market potential and booming economy in China attract enormous foreign direct investments to capitalize this unprecedented opportunity. Foreign venture capital is not exceptional from this trend. They, however, still have to face constant challenges from regulations, market practices and business cultures in China. To be successful in this marketplace totally different from their origin, foreign venture capitals need to adapt their previous strategies and experiences and test it through trial and error. This report is to get overall picture about current venture capital market in China. Then it will focus on the market position of foreign venture capitals. The report is followed by the analyses and summary on investment and exit strategies used by foreign venture capitals. Finally, the report will discuss the potential trend in China venture capital market. Key Objectives To get in-depth analysis on current venture capital market in China and foreign venture capitals market position in China. To analyze and summarize the investment strategies and exit strategies used by foreign venture capital in China. To make prediction on future market trend, especially foreign venture capital. Key Chapters General introduction on venture capital Historical development and current venture capital market in China Detail market position analysis on foreign venture capital in China Investment strategies of foreign venture capital in China Exit strategies of foreign venture capital in China Future trends in China venture capital market Introduction on Venture Capital Venture capital is source of funds to small firms that cannot establish credit relationships with bank or other financial institutions. As Gompers (2001) states: Companies that lack substantial tangible assets and have uncertain prospects are unlikely to receive significant bank loans. These firms face many years of negative earnings and are unable to make interest payments on debt obligations. Start-up high tech firms are exactly the type of firms that banks are least likely to lend to because of poor information availability and lack of tangible assets or assets that can be readily evaluated. Firms developing software or new technology for the communications or biotech industries are largely investing in human capital. In a nutshell, the VC firm is a relative small financial services professional organization that functions primarily to: (a) assess business opportunities; (b) provide capital; and (c) monitor, advise and assist the firms in its portfolio. By investing, the venture capitalists accept substantial tranche of illiquid equity that converts their status to something like partners to the entrepreneur. The goal of the venture capitalist is not only to increase the value of that equity but also to eventually monetize the investment through a liquidity event such as an initial public offering or sale to other investors. The other way of reaping the reward is liquidation due to the firm failure and bankruptcy. In all of these scenarios, the venture capitalist exits their investment to complete the VC process. The venture capital cycle is briefly visualized in below chart. Chart 1 Fund flow of Venture Capital Cycle Source: National Venture Capital Association Yearbook 2008 The National Venture Capital Association in the United States defines venture capital as money provided by professionals who invest alongside management in young, rapidly growing companies that have potential to develop into significant economic contributors. There are a number of key attributes associated with VC that distinguish it from other equity capital investments. Venture capital normally focuses on small firms that have great growth potential. These firms usually are not mature enough to be traded in public equity markets. Compared with public equity investment, venture capital investment has poorer liquidity with more severe information asymmetry and higher investment risks. Venture capital investment is also different from angel capital. Managers of angel capital use their personal money to invest. In contrast, investments professionals who raise money from other investors manage venture capital. Angle capital invests more often in the seed stage of the start up firms than venture capital does. Finally, venture capital is different from non-venture private equity investments (such as buyouts, restructure, and mezzanine funds). Firms backed by venture capital usually have considerable growth potential. For these firms, the cash flow generated from operations is usually insufficient to support finance growth and debt financing is usually not available. In contrast, private equity funds target more mature firms that have stable cash flows and limited growth potential. The Table 1 below summarizes the investment stages and types of funding for different investment styles. Table 1. Types of Funding and Investment Stage Source: A Guild To Venture Capital (3rd edition) by Irish Venture Capital Association There are five stages (BVCAPWC, 1998) in the development of venture-backed companies, which can be defined as: 1. Seed 2. Start-up 3. Other early stages (exploration) 4. Expansion 5. Maturity (exit). The definition of the company stage is different with the definition of the financing round. The negotiation of a VC investment is a time-consuming and economically costly process for all parties. Neither the VCs nor the portfolio firms want to repeat the process very often. Therefore VCs have to balance the cost of negotiation and potential risks from one time investment. Typically, a VC will try to provide sufficient financing for a company to reach some natural milestone, such as the development of a prototype product, the acquisition of a major customer, or a cash flow breakeven. Each financing event is known as a round. So the first time a company receives financing is known as the first round (or Series A), the next time the second round (or Series B), and so on and so forth. With each well-defined milestone, the parties can return to the negotiating table with some new information. These milestones differ across industries and depend on market conditions. A company might receive several rounds of investment at any stage, or it might receive sufficient investment in one round to bypass multiple stages. One special situation is the down round. It is when the company does not meet milestones and the VC still needs to invest but at a lower valuation than prior round of financing. Venture Capital in China Why invest in China? There are four major popular arguments behind for the investment rush to east. Reason 1: High Rate of Economic Growth Chinas impressive economic growth for the past 30 years, averaging between 8% to 10% real growth per year, has been the envy of the developing world. The size of Chinese economy by the end of 2006 reached US$2.62 trillion, 13 times larger than that in 1978 when measured in constant RMB (MasterCard Worldwide Insight, 2007). According to Goldman Sachs China economic research (2003), per capita GDP expect to grow from less than $5,000 at that time to more than $30,000 in 2050 (refer to Chart 2). China will have a middle class of more than 500 million by 2025 larger than the entire population of the United States. It represents a huge emerging demand for everything from integrated circuits to cars. 500M mobile users, 130M Internet users, 104M broadband users and 4.5M college graduates every year could all transfer into huge business opportunity (represented in Chart 3). Based on the estimation (Chart 4) from Mckinsey, there will be sustainable market growth to 2025 in every business that related with peoples life and daily consumption. Huge opportunities for venture capital are Internet (B2B, B2C, C2C, online gaming, website portal and web 2.0), semiconductors, technologies (clean energy, medical, biotech and traditional manufacturing), and consumer businesses (food, clothes, shopping and other entertainments). Chart 2 China GDP Growth Forecast (2000-2050) Source: Goldman Sachs 2003 Chart 3 China Energy/Material supply imbalance (2010) Source: Goldman Sachs 2003 Chart 4 Urban Chinese Consumers Demand Forecast (2004-2025) Source: National Bureau of Statistics of China; Mckinsey Global Institute Analysis Reason 2: Inefficient Capital Market In the United States and Europe, private and public capital markets compete as sources of capital. However, China does not yet have an equity culture despite the adoption of market-oriented policies. In China, the public equity market lists inefficient and unappealing state owned enterprises (SOE) most of the times. And government holds roughly 60-70% of share capital of most listed companies. Few private firms are listed in the stock market due to legal and policy hurdle. Chinas bond market is similarly underdeveloped. Chinese corporate bonds account for less than 2% of corporate financing. Thin trading between banks and investors makes issuing bonds unattractive for fundraising or investing. Insurers and fund managers therefore have few fixed-income securities to hedge against mid- and long-term risks. The corporate bond market just started to function in late 2007 by allowing public listed firms to issue corporate debts. Around 95% of financing for Chinese companies now is still provided by bank loans. The domestic banks, however, have tendency to provide loans to stated owned company rather than private firms, especially small and medium businesses (SMB). With the poor functioning financial markets and policy discrimination, venture capital and private equity become important sources of growth capital for private firms. It is one of the key reasons that venture capital is so popular among private firms in China across different industries even including traditional industries like food, hotel and travel etc. Reason 3: Creative Solutions/Early Adopting Consumers One of the most unexpected attributes of the emerging Chinese market economy is how consumer-savvy its entrepreneurs are. Even after decades of centralized economic planning, the Chinese remain consummate creators and marketers of interesting products. Definitely the creativity and innovations are only limited in certain business for talents availability and their professional capabilities. Online gaming, wireless instant messaging, and wireless value added services are just three markets that the Chinese more or less created out of thin air. Each of these businesses has growing customer bases (and have spawned successful public companies like Shanda, Netease, Tencent, and Linktone). But none of them has significant participants yet in the United States. Different consumer behaviors contribute to this phenomenon as well. In below case study on Tencent, it provides a great example on how to innovate the Internet product offerings to cater the needs of online generation. Case study: QQ of Tencent (Adapted from www.tencent.com) Tencent (listed in HK stock exchange) is the #1 Instant Messaging (IM) service provider in China. Tencents IM community counts over 270 million active accounts and is said to be covering 95% of Chinese Internet users and 70% of Chinas IM market (MSN/Yahoo account for the rest market). QQ is the brand for its IM. Same as other IMs, QQ is a free tool to use. Tencent, however, came up the idea to generate revenue stream by allowing users to buy and exchange virtual items (clothes and background image) online to decorate his or her QQ head icon. Tencent even created its own cyber currency called Q Bi and 1 Q Bi = 1RMB (0.14 USD) to facilitate the transaction and reduce barrier of online purchasing. The estimated revenue generated from those Internet value added services in 2007 is around USD$360M. Reason 4: Risk-taking, Innovative Culture In the last fifteen years, the privatization reform is one of the critical forces in stimulating China economy growth. This privatization wave also generated tens of thousands entrepreneurs. The business culture is naturally comfortable with risks and with developing innovative ways to solve problems and create wealth both for individuals and for society at large. The successful stories of VC backed entrepreneurs further promote the risk taking culture in China and the awareness and popularity of venture capital. The Focus Media case below illustrates the power of business model innovation by its unprecedented expansion speed ever in Chinas business history. There is no doubt that foreign VCs played an important role in this story to make Focus Media successful. Case study: Focus Media China (Adapted from www.focus.com) Founded in 2003, Focus Media is Chinas largest Digital Media Group in China now. The founder, Mr. Jiang Nanchun, came up with an innovative approach in operating out-of-home advertising network using audiovisual digital displays. Basically, the idea was to display the LCD near or in the elevators in commercial centers (like office buildings and shopping malls). While waiting for or in the elevators, people would watch the contents advertised in those LCDs. By selecting and contracting with high quality commercial buildings, Focus Media was able to quickly build up its network scale and attract many advertising contracts. Tow foreign VC firms, Soft Bank and UCI, invested in the first round. And another five VCs, CDH, TDF, DFJ, WI Harper and Milestone, invested in the second round. Two years after operation, Focus Media was listed on Nasdaq with USD$172M IPO and now it is part of Nasdaq 100 index. Historical development Infancy stage: 1984 1995 In 1984, the Research Center of Science and Technology Development of the State Science Technology Commission (SSTC) (now the Ministry of Science Technology or MOST) cooperated with British experts to study how to develop high-tech in China. The British experts proposed that venture capital should be developed if China wanted to foster high technology. In 1985, the Central Commission of the Chinese Communist Party and the State Council pointed out in the Decision of Science-Technology System Reform that venture capital could be set up to support the work of developing high-tech with quick change and high risk. It was the first time that the concept of venture capital appeared in an official Chinese Government document. With the government decision to develop high technology industries, the Central Government and some local governments financed and set-up series of investment institutions that intended to pursue the venture capital business from 1985 to 1995. Examples are China New Technology Venture Capital Company, Shenyang Science-Technology Venture Development Risk Center, Shanxi Head Office of Science-Technology Fund Development, Guangdong Science-Technology Venture Capital Company, Shanghai Science-Technology Venture Capital Company, and the Science-Technology Venture Capita Company of Zhejiang Province. Moreover, venture centers (i.e., high tech incubators) were set-up in the majority of national high-tech parks. Simultaneously, some overseas investment banks, funds and venture capital institutions also started to expand their business into China. For example, the Pacific Technology Venture Capital Fund subordinate to IDG entered China in 1992. It cooperated with science-technology commissions in Beijing, Shanghai and Guangdong, and set-up a number of venture capital companies focused on investing in technology companies. Also, some foreign capital or joint stock investment institutions established venture capital businesses. Asia Venture Capital Journal (AVCJ, 2001) shows that $16 million was raised for venture capital investments in 1991. In 1992, the total funds raised jumped to $583million, a thirty-fold increase compared with the $16 million in 1991. The first wave reached its peak in 1995, with $678 million in investment (AVCJ, 2001).The first wave of venture capital investments was brought by international venture capitalists. The international venture capital firms accounted for more than 95% of the total fund raised in the early and mid 1990s. The absolute dominance of international venture capital funds in China in the early and mid 1990s was mainly due to Chinas strict regulations against fund-raising and the general lack of awareness of venture capital in China. Private fund-raising by individuals or private firms without government approval was strictly prohibited in China. This strict regulation essentially removed the possibility for venture capitalists to raise funds within China. It meant that only international venture capital funds and state owned enterprises (SOE) venture capital funds could operate. International venture capital funds could bypass the regulation because they were incorporated and they raised funds outside of China. SOE funds relied on government appropriation as funding sources and did not have this fund raising problem either. Early Growth: 1996 2001 From the mid-1990s, the perception of venture capital shifted from being a type of government funding to being a commercial activity necessary to support the commercialization of new technology. As there were still no laws or regulations about setting up foreign venture capital institutions in China, many overseas investment institutions established their branches in Hong Kong, aiming to invest in the mainland. They had also located representative offices in some major cities, primarily Beijing and Shanghai. Most of the VCs active in China in the early 90s were American firms. The VC industry in the U.S. had matured and attracted a significant amount of funds. Shortly after 1995 a sharp increase from US$5 billion to US$110 billion in funds raised created the phenomenon of money chases deals (Gompers Lerner, 1999). A cadre of experienced American VCs started searching the world for investment opportunities, attempting to replicate the Silicon Valley model. Since 1998, there had been a discernible recognition of the critical success factors necessary to create an environment in which venture capital could operate smoothly and flourish. Specifically, the Governments official decision to support the development of venture capital was the key factor that had allowed Chinas venture capital industry to come into being in a new and more positive environment. In Beijing, alone, there were about 30 independent venture capital institutions, whose capital amounted to an estimated $450 million. In Shenzhen, there were at least 20 independent venture capital institutions with capital amounted to over $500 million. After 2000, China also experienced hard landing in its young VC industry due to dotcom bubble burst and came with huge casualties. It took the VC community 3 years to recover. Fast Growth: 2002 present Although initial government-backed investment operations generally failed, there has been resurgence in venture capital activity since Chinas admission to the WTO (Kenny, Han and Tanaka 2002). Capital available for investment in Mainland China keeps a steady growth trend from 2002. The capital size was increased to US$21.32B by 2007 from US$10.50B in 2002. The average compound annual growth rate (CAGR) reaches 15.2%. Venture capital investment grew rapidly from $480 million in 2002 to more than $3,247 million in 2007, invested in 440 China mainland or mainland-related enterprises (Zero2IPO 2007). According to Zero2IPO report, USD$4B VC funds were raised each year in 2005 and 2006 for China investment. But Chinas annual consumption was no more than $2B. The money chasing deal phenomenon started to emerge in China. Many foreign VC funds, especially first-time funds raised after 2005, had the pressure to pour out investment quickly to avoid US dollar depreciation against RMB and to get better deals under fierce competition. While the funding supply multiplied, quality deal flows did not increase at the same pace. Under the simple supply and demand mechanism, valuations of the China deal kept at relative high level. However, considering the fact that a big portion of funding was focusing on local value-add service segments (i.e. internet, web2.0 and broadband etc.), the issue of funds over-supply was sector specific. To get higher return under the competition, VC firms started to invest in traditional business models such as hotels, travels and fast food chains beyond their core activities such as TMT (Technology, Media and Telecom) or Internet related businesses. It was the special phenomenon happened in China now that VCs were more like PE. Legal and Regulations According to Megginson (2004), the differences in the design and the degree of development of the PE/VC industry are due to institutional factors, with the countrys legal system being paramount. Two major factors are paramount in evaluating legal system: contract law enforcement and protection of shareholder rights through effective corporate governance. Cumming and Macintosh (2002) observed that PE/VC managers in high enforcement countries had a greater tendency to invest in high-tech SMBs, exit through IPOs rather than buybacks and obtain higher returns. Cumming et al. (2004) further examined legal system effects on governance structure. Under better legal systems: the faster the origination and screening of deals; the higher the probability of syndication; less frequently funds of the same organization used to invest in a given company; the easier the board representation of investors; the lower the probability that investors required periodic cash flows prior to exit; and the higher the probability of investment in high-tech companies. Lerner and Schoar (2005) show that in a bad legal environment, PE/VC managers tend to buy controlling stakes, leaving the entrepreneurial team with weaker incentives. Interestingly, valuations tend be positively correlated with the quality of the legal environment. Kaplan et al. (2003) go deeper into the contractual aspects and found that rights over cash flows, liquidation and control, as well as board participation vary according to the quality of the legal system, the accounting standards and investor protection across countries. However, more sophisticated PE/VC managers tend to operate in the U.S. style irrespective of local institutional concerns. The authors show that managers operating with convertible preferred stocks are less prone to failure (as measured by survivorship rate). The results suggest that the U.S. contractual style can be efficient in different institutional environments. Bottazzi et al. (2005) corroborate some of the previous results and obtain further evidence on the home-country effect (PE/VC managers operating abroad tend to maintain the investment style used at home). This is observed in managers based in both good and bad legal environments. The Chinese regulations governing foreign venture capital investment are chaotic and rapidly changing. In 2005, Chinese authorities issued new guidelines (effective in 2006) intending to foster domestic venture capital firms. There is no specific regulation to monitor and stimulate the VC activities in China. The new guidelines recommended that local governments provide financing assistance, favorable tax treatment, and direct investment in Chinese venture capital firms. They also provide less stringent capitalization, investment amount, investor qualification and regulatory requirements than those applicable to FICVEs (Guerrera, Yee and Yeh, 2005). FIVCEs instead are governed by 2003 regulations that include high investment and qualification thresholds, government approval requirements, and strict foreign exchange limitations on the ability to remit profits and dividends back to the investor (Hoo, et al 2005a). Substantial legal and de facto restraints on the ability of FIVCEs to access the stock markets in China and overseas for IPO listings make exit strategies extremely difficult. For these reasons, foreign venture capital firms investing in China usually do not use FIVCEs but rely on offshore holding companies created to receive their investments. Foreign venture capital firms (most of which are U.S. based) investing in China generally have done so through the restructuring of Chinese companies into offshore investment vehicles. These enable an easier exit from investments either by selling shares on international stock markets or through a trade sale to another foreign buyer. In January of 2005, Chinese authorities brought these transactions to a virtual standstill, however, with the issuance of new regulations preventing any onshore resident from establishing, controlling or owning shares in an offshore company without the approval of the Government, either directly or indirectly. The regulations were intended to stop managers of SOEs receiving venture capital investments from stripping state assets and selling them cheaply to overseas companies, and to preclude domestic companies from using the overseas vehicles to gain foreign investor tax exemption status. However, they choked off legitimate transactions as well. There were no government approvals of offshore investment transactions in 2005. With only limited exceptions for transactions in process, foreign venture capital financing through offshore investment vehicles screeched to a halt in 2005 (Borrell and Jerry, 2005). Then, in November of 2005, the Chinese authorities issued superseding regulations. These require registration of offshore investment vehicles with the State Administration of Foreign Exchange (SAFE), but do not require the agencys approval of the transaction. They also require repatriation of all distributions of income from the investment within a fixed time frame. Like the previous regulations, the new ones do not describe specifically the registration process, the procedures involved, the scope of review nor the time required for completion, creating substantial uncertainty for foreign venture capital investors (Hoo, et al 2005b). Despite this changing regulatory landscape, many U.S. based venture capital firms have active plans for substantial investments in 2006 spurred by Chinas high growth potential, the success of recent venture-backed startups on the NASDAQ including Baidu.com and China Medical Technologies and by pent up demand after the 2005 halt in new investments (Borrell, Jerry and Aragon 2005). Hidden risk and solutions Lagging legislation and inexplicit policies in China created many uncertainties and entry barriers for foreign VCs. Below are summary of the critical problems: Chinas lawmaking on VC investment remains stagnant Existing laws such as Corporation Law, Joint Venture Law, Patent Law, etc., in many aspects even contradict VC investment. Does VC investment count as foreign investment? What status and treatment should it enjoy? The concerned authorities cannot provide clear answers to these questions. Its not clear that the amount of shares that foreign venture capital is allowed to hold when partnering with Chinese enterprises, and the way foreigners to remit in/out of foreign exchange are poorly defined. There are three available approaches for foreign venture capital firms to enter China venture capital market legally. Establishing offshore venture capital fund focusing on China Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a legal person entity Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a non-legal person entity To avoid the legal and regulation barriers, foreign venture capital funds usually takes the offshore investment route. Foreign VCs will use offshore USD fund to invest into China deals offshore holding entities with all equity activities happening outside of Chinese jurisdiction. The distinction of USD offshore holding investment and RMB local entity investment is a particular phenomenon in China. Offshore holding arrangement is a preferred structure for Chinese entrepreneurs and VCs as it provides a feasible and practical route for funding, divestment and all equity events. Its advantage and attractiveness to Chinese entrepreneurs and VC communities: Go away from laws and regulations in China. Many of them are not friendly to venture activities, such as lack of preferred shares, stock options limitation, double tax etc. Bypassing capital account control on foreign exchange. More flexible and usually profitable divestment options by overseas IPO, MA or trade sales. Offshore route investment involves the following steps: The Chinese founders set up an offshore holding company in Cayman Island or BVI with the shareholding structure and management control mirroring those of their local company in China. With kind of swap scheme, transferring the equity they hold in the Chinese local company to the offshore holding. This will typically convert the local company into a WFOE (Wholly Foreign Owned Enterprise). The offshore holding company will then be the vehicle seeking VC investment, future funding as well as for listing or be merged. All equity events happen in offshore. Companies funding and IPO proceeds will be kept offshore, and remit into China as and when operation required. Chinese founders assets, rights and proceeds stay offshore. The whole exercise is carried out essentially with an IPO at an overseas stock exchange, such as NASTAQ or Hong Kong Stock Exchange in vision. (The concept and process is visualized in chart 5.) Chart 5 Foreign VC Offshore Investment Process Source: A legal perspective on Chinas venture capital rush, Mar 2006 Restrictions in Chinas corporate regulations and limitations at the domestic capital markets explain foreign VCs preference in taking offshore route to organize their China investment. VC investors rely normally on preferred stocks or convertible preferred stock to secure a preferential return. Chinese corporate regulations allow only one class of common stock for a FIVCE with investment in a Chinese portfolio company. Notably, local VC firms would have the possibility to arrange preferred stock scheme with their investee company according to a newly issued charter regulation applicable to domestic VC firms. This gives rise to concern on the principle of national treatment under WTO law. Moreover, China domestic stock market does not provide a ready access for venture-backed companies. The conditions for listing at Shanghai or Shenzhen main-board market are too stringent for high-tech start-up companies. Even if listing conditions could be met, the queue in the pipeline waiting for a listing window is at the moment frustrating. In fact, the two domestic stock exchanges have halted the IPO since two years in the call for addressing the notorious overhang of nontransferable legal person shares. The undergoing endeavor is focusing on floating all stock legal person shares. Since the value of stock legal person shares is roughly twice of those trading in the stock exchange, full floating of legal person shares at stock is imposing acute challenge on the market place. This would mean that the suspension on IPO of new shares would be expected for a rather extended term. By leveraging on an offshore holding structure, foreign VCs could take advantage of the corporate governance in a jurisdiction where they feel most comfortable and bypass the restrictions under Chinese corporate law. VCs could take the

Depictions of Beauty in the Victorian Era :: British History Essays

Depictions of Beauty in the Victorian Era Missing Works Cited       "What is beauty anyway? There's no such thing." (Pablo Picasso) The Victorians' obsession with physical appearance has been well documented by scholars. This was a society in which one's clothing was an immediate indication of what one did for a living (and by extension, one's station in life). It was a world, as John Reed puts it, "where things were as they seemed" (312). So it is not surprising to find that the Victorians also placed great faith in bodily appearance. To the Victorians, a face and figure could reveal the inner thoughts and emotions of the individual as reliably as clothing indicated his occupation. There is abundant evidence of the pervasiveness of this belief in the literature of the period. According to Reed, "Victorian literature abounds with expressions of faith in physiognomy" (336). He quotes a passage from Charlotte Bronte's Jane Eyre to prove the point: "Jane Eyre, for example, trusts her initial perception of Rochester, whose brow 'showed a solid enough mass of intellectual organs, but an abrupt deficiency where the suave sign of benevolence should have risen'" (146; ch. 14, Reed 336). In the Victorian novel, physical appearance was a primary means of characterization (Lefkovitz 1). A hero or heroine's beauty (or lack thereof) was probably the most important aspect of his or character. As Lefkovitz points out, beauty is always culturally defined. How then, did the Victorians define it? For women, that definition is a strange mixture of ideals. The Victorians admired both the strong, hearty, statuesque lady (modeled on Queen Victoria herself) and the weak, fainting beauty, who Lefkovitz uses the French word mourante to define: "dying, languishing, expiring, fainting, fading" (36). The former type was most popular in the first half of the century, according to Federico: A woman's body in the first decade of the century was . . . under considerable scrutiny, and the ideal against which she was measured was tall and statuesque, stately, elegant, refined . . . nothing is considered so outre [excessive] as a slender waist, while the en bon point is the ne plus ultra [utmost point; meaning a towering, powerful-looking woman] of feminine proportions. (30) Many writers embraced this strong, sculpted, large-bodied female type, if only to use her as a comparison to the more delicate beauty that became popular later. According to Lefkovitz, the two conventions meet (and clash) in George Eliot's Adam Bede: "Bessy Cranage .

Power :: essays research papers

When a person has enough power in a society, it gives them a lot of control over certain things. When they have this control, they can have ownership over a person or a thing. By naming someone, or something, a person gains an unspoken ownership over him or her, they are now in control of him or her and it has created a new identity for them and erased their old identity. Power, naming and un-naming, control and ownership and identity are very important elements in â€Å"Mary† and â€Å"No Name Woman†. Both essays deal with power, identity, control and ownership, while â€Å"Mary† focuses more on naming and â€Å"No Name Woman† focuses on un-naming.   Ã‚  Ã‚  Ã‚  Ã‚  One’s power and position in a society can give them the â€Å"right† or ability to name or un-name a person. Someone can gain this right by his or her status socially, financially, and even racially. If it’s their own child, of course, they have every right in the world to name him or her. But in some cultures, as is evident in â€Å"No Name Woman†, they have the right to take away someone’s name if they have disgraced their family and/or community. A name is very significant because it gives a person a sense of who they are, an identity. In â€Å"No Name Woman†, Kingston’s aunt had no identity except for the story her mother told her and in â€Å"Mary† Marguerite’s new boss, Mrs. Cullinan changed her name to Mary which then, in a way, removed Marguerite’s original identity and gave her a new one, one she didn’t want.   Ã‚  Ã‚  Ã‚  Ã‚  By changing Marguerite’s name, Mrs. Cullinan proves how much power she has over a little black servant like Marguerite. A rich white member of the society, in which Marguerite grew up, has more power and control over things than someone of a poor background or a black background. Mrs. Cullinan wasn’t the first to incite the drastic change of Marguerite’s name, although she started it off by calling her Margaret, it was in fact, one of her friends who suggested that â€Å"the name’s too long. I’d never bother myself. I’d call her Mary if I was you.†(5) As if showing off to her friends, and proving that she really does have control and power over black people, she starts calling her Mary, much to Marguerite’s disgust. Marguerite soon learned that Mrs. Cullinan had changed Miss Glory’s name twenty years ago.

Minnesota Micromotors, Inc. Marketing Simulation Essay

As I get further and further along in this simulation, I have noticed that I am beginning to understand what it takes as a marketing manager in order to be successful. Careful considerations must be made to be sure that the right decisions benefit both Minnesota Micromotors, Inc., and our customers. Our success comes from our customers’ success and loyalty that they have with this company. In finding ways to incorporate the important factors that matter most to our customers is what will bring in new customers and keep our existing ones around for the long hall. My strategy for Minnesota Micromotors, Inc. that I have entered into the simulation game for 2015 Q2 were based on similar factors that I had used in the previous quarters. Like in prior quarters, I tend to base my decision strategy on the customers satisfaction of the overall product and pricing. I also find that it is important to base my decisions on the income statement from prior quarters as well to see where I co uld adjust things to work in my favor. I am still having issues discovering what needs to change in order to increase the weak areas and to find what is lacking to get this issue resolved. In 2015 Q2, I chose to change my sales force from 26% on Segments A and B down to 25% and increase Segments C and D from 24% to 25%. I think by giving all segments the same percentage may in fact even things out. I then made the decision to increase the power to size ratio from $47K up to $100K, and the thermal resistance feature from $48K up to $100K. In doing so, spending as much as $100K – $500K per year could result in both the power to size ratio and the thermal resistance after several years. I find this to be an important factor that can increase profitability for Minnesota Micromotors, Inc. in the future.