The energy-related environmental protection sector has even greater business opportunities, according to Luh. China's rapid economic development drive costs it substantially in environmental terms, and the government has shown tremendous resolve to make some changes. Accordingly, with attention and support from the authorities, investments made by either entrepreneurs or by venture capitalists in the environmental sector can proceed more smoothly and encounter less risk.

"Lastly, the medical equipment sector has maintained its pace of growth and renewal. Some large medical instruments such as CT scanners and MRIs have shown to be problematic in terms of real use, making it necessary for continuous research and development of new equipment," said Luh. "In addition, China relies heavily on imports for its large medical equipment at high costs. The government has always hoped for some breakthrough in this area, leaving opportunities for venture capitalists.

"In 2007, we'll invest in nearly 10 projects in the above-mentioned sectors and try as much as possible for early-stage investment in amounts of between $500,000 and $2.5 million each, with terms of three to five years. We'll exit through an approach of going public or merger and acquisition," Luh beamed with excitement when talking about this year's plans for the DFJ Dragon Fund.

"The DFJ Dragon Fund will build its own brand," said Luh. "China is a gigantic economic power, however, Chinese enterprises with substantial brand influence are few in number. In China, only those with a creative mind and brand awareness have the potential to emerge as an international brand. The DFJ Dragon Fund will intensify its investment in these enterprises. While ensuring maximum success and the revenue of the fund, we will also endeavor to build our own brand and rank ourselves alongside the top investment institutions in international venture capital circles."

Choosing smart entrepreneurs

"When we have a bunch of entrepreneurs brief us about a project, the smart ones are the preferred choice," said Luh. "But I don't want to invest just in high IQ scores. IQ is the mother of wisdom, but the two vary drastically, with the latter being far more important.

"Oftentimes, a company can have very good products, industry outlook, innovative technology, market and development potential, but problems with execution. Should there be any deviation in the course of execution, the people are accountable for such failure," Luh explained. "One with inadequate capability can still grow to be capable, but nothing can be done if he is found wanting morally. That is how wisdom is different from IQ."

Luh offered an example to illustrate his idea.

In 2000, the DFJ Dragon Fund extended investment to a few companies started by graduates of Tsinghua University. They presented clear and accurate schemes in every aspect. Luh was particularly impressed by the team leader, a former student who had experience and outstanding achievement overseas, and a deep knowledge at home and abroad. Soon after the investment arrived, however, the leader started to disagree with his partners and threw himself into an internal fight for power.

"Plus his personal integrity was also in question," Luh explained.

The guy bought a car for himself and registered it under his own name with the raised funds. When asked about the issue, he showed no regret and made up excuses.

"The case cost us a lot of money and much time," said Luh. "So we now attach great importance to the personal integrity of the entrepreneur. We always want to put our investment in the hands of smart entrepreneurs, who care about corporate culture, credit standing and branding.

"Of course, most of the entrepreneurs are very young, and age is related in some ways to wisdom," said Luh. "It is impossible to expect these young entrepreneurs to have too much wisdom. But wisdom can be nurtured step by step and it will grow in practice just as Buddhism refers to the root of wisdom. In most cases, given a little help, people will come to an understanding."

(Xinhua Finance)

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