Upstart Bank in China Rides High on Technology I.P.O. Crest
HONG KONG — When Alan Guo was chief strategist at GoogleChina, he would have leisurely conversations with Fan Bao, a Beijing banker, exchanging ideas about the future of the Internet in China and swapping gossip about industry personalities. Mr. Bao, who had been a strategist at a Chinese technology company before setting up his own boutique investment bank in 2004, would occasionally prod Mr. Guo about his plans.
“I asked him why he was still working for Google and not as an entrepreneur,” Mr. Bao recalled in a recent interview. “He didn’t say anything, but was giving the knowing smile. That moment I knew he had already caught the bug and would launch his start-up one day.”
Mr. Bao’s guess proved correct, and he later helped Mr. Guo raise money for his start-up, an online retailer called LightInTheBox. When Mr. Guo decided to take the company public last year, Mr. Bao’s bank, the China Renaissance Group, was his first choice to help with the deal, even though the firm had never worked on an initial public offering before.
“I had had a long relationship with Fan,” Mr. Guo said. He said he hired China Renaissance because “they really understand the China market. They are really steeped in the China market. And they really understood us.”
For Mr. Bao, winning friends in China’s budding start-up community has been a boon to business. Fourteen months after LightInTheBox listed in New York, Mr. Bao’s upstart bank has managed to leapfrog some of the biggest names on Wall Street. It ranks No. 2 on the list of underwriters of Chinese companies going public in the United States so far this year, according to Dealogic — just behind UBS, but ahead of Credit Suisse and Bank of America’s Merrill Lynch unit.
Mr. Bao’s rapid success reflects, in part, the shifting fortunes of Chinese I.P.O.s in the United States. The market for such offerings had been frozen since mid-2011, when a spate of accounting fraud scandals and attacks by short-sellers drove several Chinese companies to delist from United States markets.
But demand has returned this year because of a broad rally that has pushed United States stock indexes to benchmark highs and propelled valuations for technology companies. Chinese companies have raised $3.5 billion in new listings in the United States so far this year — more than the combined total from 2009 to 2013. Up next is Alibaba, the Chinese e-commerce giant that is expected to raise as much as $20 billion in one of the biggest I.P.O.s in the history of United States markets, perhaps as soon as September.
While China Renaissance did not get a piece of the Alibaba I.P.O., it has been cashing in on a flurry of recent Chinese technology listings. Those include Weibo, China’s answer to Twitter, which raised $285 million in April, and also JD.com, Alibaba’s closest competitor in the e-commerce space, which raised $1.8 billion in May in the biggest United States listing of a Chinese Internet company to date.
Here again, relationships have been critical. Mr. Bao first met JD.com’s founder, Richard Liu, in 2007, soon after he had closed a bunch of traditional electronics shops in Beijing to start his online venture.
“I didn’t see the incredibility when I first met him,” Mr. Bao said of Mr. Liu, who is now 41. “But he was so confident and convinced in his business that I thought, ‘He must know something I don’t.’ ”
Mr. Bao kept in touch and has worked with JD.com, formerly known as 360buy.com, on most of its fund-raising deals over the last seven years. That included a $215 million transaction in March of this year to sell a 15 percent stake in the company to Tencent, a giant Chinese social messaging and online video gaming company. Since going public in May, JD.com’s shares have risen about 45 percent, and Mr. Liu’s stake in the company is worth about $8 billion.
“The vision of China Renaissance is really to identify these top entrepreneurs and build a relationship with them early on and grow with them,” Mr. Bao said.
A diminutive 43-year-old who trains in mixed martial arts and prefers designer shirts open at the collar to ties, Mr. Bao was born in Shanghai to parents who worked in the government. “Nothing senior, I’m not one of the princelings,” he is quick to add, referring to the children of China’s political and business elite.
He left China in 1990 to earn a master’s degree in economics in Norway and worked at Credit Suisse and Morgan Stanley in London and New York before moving to Hong Kong in the late 1990s, where he focused on companies in the technology, media and telecommunications sectors.
In 2000, Mr. Bao left Morgan Stanley to become the head strategist at AsiaInfo, a software maker that became one of China’s earliest technology companies to list in the United States. At AsiaInfo, he immersed himself in the nascent start-up community that was beginning to emerge in China, expanding his circle of friends among budding entrepreneurs.
“These guys were smart, nimble and supermotivated, and a lot of that is carry-over from Silicon Valley culture,” he said. “They all had needs on the corporate finance front.”
“But they were too small, and the big banks couldn’t be bothered with them,” he added. “I saw an opportunity to befriend these entrepreneurs and get in bed with them early on.”
So in 2004, Mr. Bao decided to set out on his own and start China Renaissance, mostly arranging small private financing deals for companies attracting their early rounds of venture capital financing.
“The firm has hustled its way to a prominent position — not easy in the earlier days in the face of competition from the bigger banks,” said Duncan Clark, who worked with Mr. Bao in the 1990s at Morgan Stanley in Hong Kong and who is now the chairman of BDA China, a consulting firm in Beijing that focuses on the digital and consumer sectors. “But then, boutiques can find deals that are below the minimum size of the bulge-bracket firms and can be quite profitable,” he added.
Mr. Bao characterizes his firm’s focus as technology in a broad sense, concentrating on companies that will thrive in China’s “new economy” — one that is driven by the adoption of digital innovations that are shaking up traditional industries like retailing, education, health care and logistics, among others.
“If you want to invest in China, there’s nothing else to invest in other than these technology companies because everything else is dead,” Mr. Bao says. “Only the technology companies are growing.”
That includes companies like BitAuto Holdings, an online media company that provides nationwide information on car prices at different dealerships, as well as industry news and reviews. In 2007, China Renaissance helped the company bring in $15 million in financing from investors that included DCM, a venture capital firm based in Silicon Valley and Beijing. BitAuto went public in the United States in 2010, and its shares have since quintupled.
“Smart, intelligent, hard-working investment bankers are a dime a dozen — what sets him apart is his lively personality,” David Chao, a co-founder and general partner at DCM, who has known Mr. Bao for years, wrote in an email response to questions. “This is why his Rolodex is great, because he is well liked,” Mr. Chao said.
Mr. Bao’s affability can’t hurt when it comes to winning deals. But he dismisses the idea that there’s anything sudden or spontaneous to his current success in taking companies public.
“You could say we only started last year, but you could also say we started 10 years ago,” he says. “This is really a monetization of all the years of investment in our relationships.”
No comments:
Post a Comment
Comments always welcome!