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INTERVIEW: Crystal Ventures Seeks $150M For Tech Fund By Andrew Batson Dow Jones Newswires October 12, 2003

HONG KONG (Dow Jones)--U.S. venture capital firm Crystal Ventures LLP has begun approaching potential investors for its new fund, seeking up to $150 million to invest in Asian and U.S. technology companies - particularly those that can draw on the growing economic ties between the two regions. "Our main focus is going to be on trans-Pacific technology companies," said managing director Joseph Tzeng. "That goes both ways: U.S.-based companies doing significant business in Asia, and Asia- or China- based companies doing significant business development or technology work in the U.S." He said 60-70% of the fund would likely be raised from Asian investors - it is targeting those in Hong Kong, Taiwan, Singapore and mainland China - with the remainder from the U.S. The minimum target for fund- raising is $80 million, and though the fund will take as much as $150 million, he said its optimal size would be around $100 million to $120 million. "We believe the center of gravity for technology-based investment has shifted. It's no longer US-centric. It has moved across the ocean to Asia," Tzeng told Dow Jones Newswires in a recent interview. Cleveland, Ohio-based Crystal Ventures is already talking to current investors in its two existing funds, which total $40 million and $170 million respectively, Tzeng said, and will begin formal marketing of the new fund Nov. 1. "Some large financial holding companies in Taiwan are taking an interest," he said. "We are going to have at least one strong alliance with one of them." Such partners will invest alongside Crystal Ventures into target companies, Tzeng said. While Crystal Ventures itself expects each of its investment to be around $10 million, equivalent to stakes of around 20% to 25% in each company, the participation of other partners would ring the total outside investment close to 50%, or even higher. That high level of control is appropriate for the more hands-on approach Crystal Ventures is planning. While about one-third of the fund will invest in the early- stage startups Crystal Ventures has focused on in the past, the majority will go to more developed companies who have $5 million to $20 million in annual revenues, but need a major revamp of their business and finances. Though its people won't take a direct management role, Crystal Ventures will be "a group of very active investors helping the company transform itself," Tzeng said. "We have been looking at 50 to 60 companies in the last few months," he said, in a few major sectors: enterprise software, equipment and applications for mobile telecommunications and broadband, and content, including Internet media, music and games. "I think overall it will be 50% U.S. and 50% Asia," Tzeng said of the fund's investments. "Even for the US companies, most if not all will have an Asian or Chinese component. We won't invest in any company whose scope of business is limited in a locality or a region." He expects to raise about one-third of the money by January or February, enabling it to complete the first closing of the fund and begin actively investing. The remaining fund-raising and second closing of the fund should be completed by second quarter 2004. Crystal Ventures expects to exit from its investments within three to five years, either through a listing on an Asian stock market, like Hong Kong, Taiwan or Singapore, or on the Nasdaq exchange. A sale to a publicly-listed multinational is also an option, Tzeng said. Crystal Ventures was an early investor in the Chinese- language Internet company Sina Corp. (SINA), now listed on the Nasdaq exchange. Other past investments include Cobalt Networks, which was acquired by Sun Microsystems in 2001.

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