Foreign Direct Investment (FDI) in US companies has fallen dramatically over the past several years due to the economic recession both in the United States and abroad. However one source of FDI has seen an increase – China. Private Chinese companies and individuals seeking high yield investment returns are looking to US companies in need of capital. It can be difficult for entrepreneurs to tap into this source of funding due to the cultural, regulatory and language barriers approaching Chinese investors presents, but there are a few key strategies which can ease the process.
Chinese investment banks have begun expanding their operations, opening offices on both coasts of the United States. Conversely, major US and international investment banks are pursuing joint ventures to open offices in China. These investment banks form a bridge across which capital can flow. They are able to have a firm grasp of the regulatory climates on both shores as well as know the players who would be most interested in a potential investment opportunity. US local state governments have also gotten involved in courting Chinese investment, sponsoring trips for Chinese investors to tour facilities and attend presentations by US firms seeking investment. However in both these cases the opportunities to receive backing from an investment bank or state government are very competitive and limited to industries in which there is major Chinese investment interest: natural resources, energy, large scale real estate, and technology.
It is also important for US based entrepreneurs to note that the regulations for soliciting non-US citizen Accredited Investors who reside outside the United States differ from those regulating solicitation of investors within the US. Startups and operating companies seeking foreign investment can directly solicit investment from offshore, giving them much more freedom to present their projects directly to investors. With this in mind, here are some tips to approaching Chinese investors:
- Have a Chinese Web Presence: Many US websites are blocked and inaccessible from China. If you are seeking Chinese investors it is best to have a separate version of your website translated in Chinese and hosted from Hong Kong, which is considered a relatively net neutral zone. This website must be competently translated into Chinese by someone who has a firm grasp of the language and financial terminology, as translation programs frequently cannot adequately handle the nuances of technical terms.
- Appear on Chinese Search Engines: Google.com is the premier search engine used in the United States, but it is not used in China. It is important to have search engine optimization which is tailored to Chinese search engines so that internet users in mainland China can find and access your content.
- Issue Newsletters and Press Releases in Chinese: Frequent updates on developments with your small business are a must in any language: at the very least you should be issuing quarterly updates to both existing and potential investors. If you are courting Chinese Capital it makes sense to take the next step and translate those updates into Chinese so that potential investors can easily and comfortably access them.
- Presentation Matters: Chinese investments are very relationship oriented. Potential investors will want to meet you and get to know you, your management team, and your company before investing. It is important that you make a professional impression at all times. If your company does not yet have a formal office space, it is worthwhile to use a virtual office to host meetings with potential investors so that they are comfortable and know that you are serious. Forming a solid relationship from the beginning with a potential investor will yield their trust for years to come providing you with a long term backer.
It is understandable that all of this may seem overwhelming for an entrepreneur or small business owner who has to oversee the day to day operations of his or her company. That is why the assistance of a professional firm such as The Wall Street Organization, Inc. is so crucial. We can provide the guidance you need to develop a strategy for finding and approaching investors, both onshore and off. We can also help to interface with potential and existing investors by providing many investor relations services such as website design and maintenance, issuance of press releases and newsletters, and one on one communication with investors. Contact us today to learn how we can meet your small business’s needs.