Ignition, Rieschel team on China fund

Qiming Partners isn’t wasting any time making new investments, though it’s not disclosing the names in its nascent portfolio just yet.

Qiming is the newly formed offshoot of Ignition Partners. The Chinese word (pronounced “chee-ming”) means to start and signifies the beginning of a new day. Qiming announced its start last week when it said it has raised a $200 million fund to invest in tech startups and expansion-stage companies in China.

Ignition is an investor in Qiming, along with Princo, the investment arm of Princeton University, and other undisclosed institutional and individual investors in the United States and China.

The five-person founding team is comprised of two co-founders of Seattle-based Ignition, Rich Tong and John Zagula; former Mobius Venture Capital Managing Director Gary Rieschel; Duane Kuang, formerly the director of Intel Capital China; and Ed Zhou, who most recently was a senior business development manager at Cisco Systems in Shanghai, where he oversaw strategic acquisitions on behalf of the networking company.

Ignition knows Rieschel well. Rieschel is an investor in the firm’s funds and is an advisory board member. Ignition has also partnered with Intel Capital on numerous deals, including Seattle-based Melodeo, a mobile digital music service that was introduced to Ignition by Kuang, according to Zagula.

Zagula says that he and Tong have “been studying and spending time in China over the last two-and-a-half years.” But he would not discuss Qiming’s investments.

However, the firm has been involved in one investment in the region to date. It came in August, when Ignition and Rieschel teamed up to fund Yeelion, a Beijing-based startup focused on digital information. The investment was an $800,000 Series A round, according to a regulatory filing.

In October, Rieschel told PE Week that he was beginning to contemplate his own fund owing to the “fair amount of interest” that he had received from high-net-worth individuals and family offices after relocating his family to Shanghai in February 2005.

Whether the Qiming partners meet with with success remains to be seen, but they are certainly targeting one of the hottest investment regions on the planet. China recently ranked as the most compelling overseas market for U.S. venture capitalists, according to a survey by the National Venture Capital Association and Deloitte & Touche.

Unlike many American VCs, Rieschel is almost as big a veteran in China as Zuang and Zhou. “My wife is Chinese and was born in Hong Kong,” says Rieschel. “Our kids speak fluent Cantonese and are learning Mandarin.”

Also, Rieschel previously lived briefly in Hong Kong and was in Tokyo for more than four years between stints at Sequent Computer Systems and his involvement in a joint venture between Cisco and a dozen Japanese technology partners.

Of course, Rieschel also went on to join Softbank founder Masayashi Son and form Softbank Asia Infrastructure Fund and Softbank Venture Capital, which later morphed to become Mobius.

The region is much newer to Zagula and Tong, though Zagula says that before Ignition, Tong was the “first Chinese American corporate vice president, and most senior-ranking Chinese American at Microsoft Corp.” Zagula spent the early part of his career launching subsidiary operations for American Express in Asia, Latin America, and Europe. “So I’ve been around,” he says.

Neither Zagula nor Tong has achieved a successful exit from their previous investment duties, though Zagula points out that it’s “still early” in the venture careers of both partners. “My companies are all doing very well,” he says.

Zagula sits on the boards of Enclarity, Full Capture Solutions, Seamobile and nSite Solutions. Tong sits on the boards of Seamobile, Melodeo and mFoundry. One of the four investments led by Tong, in an enterprise mobile startup called Etrieve, is out of business.

Ignition Partner Robert Headley says that although Zagula and Tong will be making new investments at Qiming and not Ignition, they will retain their board seats and partner status. Ignition has made 10 investments from its third fund, a $300 million vehicle that closed in late 2004. Headley says Fund III still has a couple of years left to invest.

The firm has no plans to add anyone new to replace Tong and Zagula, Headley says.