Chao: It depends on the kind of deal that you’re investing in China. Think of 51jobs as an example. Most of the business development for the company was done in California or Japan. This would seem awkward, but when the company tried to get software license deals for its products, the number one player in the world in the job space is a company in Japan called Recruit, so we had to work out a license agreement with Recruit in Japan. Business development is fairly global in nature.
In terms of doing the local work of opening new offices and all that’s related, yes, we’ll go out once every month and work with our portfolio companies. You’d be amazed how much work is done outside China for many of deals.
Grady: You need to manage investments locally. You have to have people on the ground. And I don’t say that as a unique comment to China. It’s true whether you’re investing in Germany, or Japan, or Russia, or Silicon Valley.
We just believe you’re going to have a much better feel for the market if you have local people on the ground. You’re going to have a much better feel for the entrepreneurs. You’re going to have better relationships. You’re going to understand what you’re doing, who the good people are, and who are some of the bad people you might want to avoid. Things like that.
It will be a test in China for us, even though we have three offices there now, because development is spreading throughout the country. You have to be close enough to be plausibly connected. We generally believe that those people who are leading the investments and sitting on boards should be nationals of that country. They should be local and they should understand the environment.
The Carlyle Group
Offices: Hong Kong, Shanghai
Funds: About $29B under
Focus: Aerospace, telecom, media, automotive, consumer, retail and tech. Active in China since the mid-1990s.
Notable Deals: Ctrip.com, Ness Displays and Taiwan Broadband.