Hearst Ventures, the investment arm of the American mass-media group Hearst Corporation, plans to raise its activities in China's telecommunication, media and technology sectors, despite the current high valuations of some targets.
Kenneth A. Bronfin, Hearst Ventures senior managing director, said it will build its national portfolio even though rising deal prices in the sectors had sparked worries about a potential investment bubble, after an exponential growth in startups in China.
"Some valuations are expensive, there's no question about that," Bronfin said in Beijing.
"We tend to shy away from premium-priced deals, and find entrepreneurs who may not be in the limelight but offer some great ideas and want to move forward," he said.
The firm is in the process of investing in a Chinese peer-to-peer online car rental company, he said, which if successful will be one of the largest direct investment since it entered China in 2006.
TMT startups have mushroomed in China, but only the best among them are hotly pursued by cash-rich domestic and international venture capitalists.
According to recent research from accounting firm PricewaterhouseCoopers, total investment in the sector was worth $15.6 billion in the first half of the year, nearly equal to last year's total.
But Bronfin said he had noticed signs of declining asset prices in China, and that the firm was set to take advantage of that trend.
Katie Hu, head of Hearst' investments in China, said: "We do see prices going down in the VC investment market.
"Since the stock market crash, many investors who have been experiencing cash flow problems started pulling out of previously committed deals, causing lowering valuations of the companies raising funds."
Hearst has invested $1 billion globally over the years. In its current portfolio, about 30 percent of the capital deployed is in China, according to the firm.
The firm has invested in a slew of Chinese TMT companies since 2006, including fashion website Yoka.com - an online platform for home design firm Kujiale.com - and online gaming portal IGG, which has already listed in Hong Kong.
Hearst has adopted a relatively conservative China investment strategy, mainly targeting deals valued at between $3 and $10 million, said Bronfin.
Lin Dakun, an analyst at market research company Zero2IPO Group, expects that excessive deal valuations may gradually disappear by the end of the year, as the VC market cools.
Hearst Ventures only started building its dedicated Chinese investment team in 2011.
Before that, it carried out indirect joint investments in the country, through a partnership with the U.S.-based venture capital firm IDG Capital Partners, and the multinational mass-media group News Corp.
