5 questions with Scott Bonham

Granite Global Ventures last month upped its third fund to $600 million from the $400 million it had raised when it closed the vehicle in 2006. The firm expanded the fund size as a result of adding four investment partners from SIG Capital and subsuming the Shanghai-based firm.

From SIG, Zhuo Fumin and Jessie Jin have joined Granite as managing partners and Michael Kuan and Steve Chu as venture partners. The SIG team will continue managing its portfolio as it begins working on Granite’s deals. “They have a very similar working methodology to us,” says Granite co-founder and Managing Partner Scott Bonham. “The SIG folks are very well connected in China. They know the entrepreneurs and bring a different set of experiences that help us go after this opportunity.”

Senior Writer Alexander Haislip recently caught up with Bonham to talk about the firms joining forces.

Q: Why did your firm combine with SIG?


The conscious decision right from the beginning was that we embrace diversity. You couldn’t find four more diverse people than the team from SIG. What we really like about diversity is that we didn’t want to be a homogeneous firm because then you get homogeneous thinking.

It has worked for us as a firm. When we first started, many people didn’t think we would be around until fund three.

Q: How did this deal come about?


We had done a lot of work with SIG and thought we could work better together. It’s an integration of the teams. The SIG team is continuing to manage their RMB-denominated fund, Venture Star Shanghai. Granite Global has taken a stake in Venture Star as an additional offering to our existing fund.

Q: How has China changed since the firm started investing there in 2000?


China is a very large market. It’s very dangerous to say that China is X or China is Y. We actually think we’re in China 3.0. China 1.0 was eight years ago when we flew over there and did deals. The Chinese companies were looking for Western money and access to Nasdaq, and the CEOs were often English speakers.

During China 2.0, in about 2004, you had all these franchise funds start, and many of the CEOs came from China and the teams had a more Asian complexion.

Now, China 3.0 is the big one that’s here to stay. It’s very localized, most of the business is conducted in Mandarin, and if you’re not connected at the local level you’re not going to get access to the best ideas. A lot of the opportunities are moving away from technology, media and telecommunications and toward what we’re calling “Urban Growth.”

Q: What’s that?


Urban Growth is all about the growth of new consumers. Instead of worrying about jobs and putting food on the table, they’re starting to buy services and go about life just the way we in the United States go about life. There are a bunch of companies that are going to emerge to take advantage of that. These types of businesses are a little different than what traditional venture firms look at.

Q: How do you stay in touch with what’s going on in China?


I’m going with my family for the summer there. This type of fund is not something that you can just hang up a sign and get money from. It takes a lot of work.