Angel network heads to China

The Keiretsu Forum, which calls itself the largest North American angel investor network, plans to open its first overseas chapter in Beijing this month.

Founder and CEO Randy Williams last month acknowledged that the Chinese government’s regulations overseeing venture investing remains clouded “by a lot of gray areas.” But he is optimistic that the Beijing chapter will grow within a year to up to 75 members and that it will make up to 10 investments in the first year. Membership in the forum is by invitation, and only accredited investors are allowed to join.

“There is a sizable VC community in China creating deal flow and a robust community of individual investors looking to help entrepreneurs grow companies,” Williams says. “I don’t see any letup in activity in China.”

Rocky Lee, head of DLA Piper’s Venture Capital & Private Equity Practice in China, is not familiar with Keiretsu Forum’s plans to come to China, but notes that he has handled three angel financings this year, all of which were under $1 million in deal value. Lee adds that he has seen a growing number of angel investors in China show up in deals as early seed investors. “In China, angel investors are typically bankers and professionals working or living in China,” says Lee, who is based in Beijing. “Another trend I have seen lately is that quite a few Hong Kong-based based angels are emerging.”

The idea for Keiretsu Forum to expand to Beijing came from group members Hal Lemmon and his partner, Jenny Shii, a Beijing native. Williams says Lemmon and Shii approached him and expressed interest in starting a chapter in China that follows the Keiretsu model of not only backing local entrepreneurs, but in giving back to the community. For example, at a recent meeting, Williams auctioned a Carmel cottage vacation package for $4,800. The Keiretsu Forum Charitable Foundation matched the winning bid and donated the money to an organization that fights Parkinson’s disease.

“Our goal is to grow each chapter analogous to all the other chapters, with up to 150 members who invest in companies and give back to the local communities,” Williams says.

Williams founded the angel network in the San Francisco East Bay six years ago. It currently operates 10 chapters in North America. After Beijing, it plans to open a chapter in Barcelona, says Judith Iglehart, Keiretsu Forum’s vice president of international chapter development. The date for opening the Barcelona chapter has not yet been set.

Since the founding of Keiretsu Forum, its members have invested more than $70 million in 128 companies. Forum members typically invest between $250,000 and $1.5 million in early stage companies. Members collaborate on due diligence, but they make individual investment decisions. Nearly three-quarters of the group’s investments are in tech companies, and the remainder goes into real estate and consumer product makers. Williams says that Keiretsu Forum has achieved 122 liquidity events to date, including its first IPO a couple of months ago.

In August, Napo Pharmaceuticals Inc. (LSE: NAPL), a San Francisco-based company, launched a $22.6 million IPO on the London Stock Exchange, becoming the first U.S. incorporated company to have a sole listing on the London exchange. Napo had raised $850,000 collectively from 18 Keiretsu members, and the IPO generated a 3X return on their investment, Williams says. —Alastair Goldfisher