Turning matchmaking into moneymaking

Richard Heygate and Rob Wylie, two famous figures in the United Kingdom's venture capital industry, are spearheading an innovative project to unlock investment opportunities from China.

Their initiative relies on the power of trust, or guanxi as the Chinese call it, and connects investment opportunities through the accelerating number of Chinese students educated in the United Kingdom.

Central to the initiative is the fact that many Chinese students in the UK hope to stay and work after graduating but are unable to do so because of UK's strict immigration laws.

Those with capital would be able to remain in the country with the UK's entrepreneur visa, which requires an investment of up to 200,000 pounds ($318,000).

The idea would match the Chinese graduates with existing growth companies and help the students funnel their capital into these firms, where they then become employees and further their careers.

The new matchmaking company is called 88 Initiative and was established three months ago. About five potential investment opportunities have already been identified, with investments expected soon.

Heygate, a former partner at McKinsey and inventor of the online ATM, and Wylie, co-founder and chairman of the investment firm WHEB, have good connections in the UK venture capital world and feel they can select many investment choices for Chinese graduates.

The big picture is to use Chinese graduates' presence to attract investment into UK growth firms since a majority of the graduates willing to take this path tend to have wealthy parents and are incredibly well-connected in China's investment community, Heygate says.

Both say that if this wider Chinese investment channel opens up, it can become a game changer for UK companies that want to access the Chinese market and for the UK venture capital industry, which is starved of capital.

There are many risks involved in VC investments, especially in the early stages. Research may not deliver the desired outcomes, costs could escalate, the product may not receive the required regulatory approvals, or the product may prove unpopular with the market, Wylie says.

To reduce these risks, 88 Initiative has a strategy of selecting companies in a relatively stable growth stage, with products or technologies that have at least local market acceptance and that are ready to be promoted internationally.

"A lot of UK companies have given up looking for investment from China because they can't find someone who would do the deal," Heygate says.

"The first step is to have some Chinese staff, who can maintain relationships with Chinese investors for the long term, rather than relying on external advisers. Secondly, their presence adds a degree of security for the Chinese investors," he says.

Heygate says Chinese graduates can play a role in helping investors trust their investment and understand that the projects can bring in long-term stable revenue. Graduates can also inform investors that these technologies or products are what China needs to grow.

Heygate's team believes the matchmaking process should also focus on companies in specific sectors that the Chinese government is strategically focused on. These key sectors are clean technology; healthcare; advanced manufacturing; the technology, media and telecom industry; and new materials.

"It was amazing meeting these bright young Chinese people, and in the UK, there are so many such networks initiated by like-minded young Chinese people," Heygate says. "But this community is almost inaccessible to the British business community."

Lu Yingni, a director at 88 Initiative, says the program provides a growth platform for Chinese graduates to further their careers in the UK.

"We have selected companies with huge potential in China as well as experienced management teams. Graduates will get a well-rounded experience by being a part of these teams and leading the Chinese expansion, instead of starting their careers in an entry-level position in big corporations," Lu says.