Pacific Enterprise Capital's Approach to Investing in China

Investment / Making the Right Choice
Pacific Enterprise Capital invests in private enterprise companies ready for first-round institutional funding. The candidate company has obtained all licenses and permits, installed key early-stage executives, commercialized its product or service, achieved significant early market presence and is receiving recurring monthly revenue. A typical investment range is US 2 million to US 8 million with a follow-on round in reserve.

The choice of funding amount is driven by two fundamental factors in China:

• First, China’s regulatory environment is substantially more open for companies funded in US 2 – 8 million range enabling them to quickly build operational momentum, ignite market share and accelerate high multiple value growth
• Second, a foreign direct U.S. dollar investment in China carries a “multiplier effect” whereby the purchasing power of one dollar invested in the U.S. has three to four times the purchasing power in China. A five million dollar investment in China has the impact of a 15 million to 20 million dollar investment in the U.S.

Management / Making the Difference
Implementation risk is the biggest challenge facing companies doing business in China today. To mitigate this risk Pacific Enterprise Capital embeds its own personnel in the day-to-day operations of the portfolio company. Post-funding management objectives include:

• Install internal controls that support good corporate governance and build a credible company record for future M&A or IPO
• Build-up key administrative areas such as human resources to keep the company fueled with top talent
• Develop and execute an effective sales and marketing plan that creates uncontested competitive advantage
• Install and manage an information platform to monitor financial performance and data-mine critical content for business development
• Develop aggressive, proactive intellectual property strategies
• Apply one or more of Pacific Enterprise Capital’s areas of domain expertise in wireless technologies, data storage systems and transactional security solutions to create operating efficiencies and drive competitive advantage

Quality over Quantity / Creating a Strategic Impact
Pacific Enterprise Capital stresses quality of companies over quantity of companies in which it invests. Each investment is expected to become a blue-chip success. The company’s portfolio inventory at any one time shall average six to nine enterprises.