Look at a list of top VC investors for 2003. You’ll see many household names. Firms like MPM Capital, 3i, St. Paul, Atlas Venture, and then there’s the China Development Industrial Bank (CDIB). CDIB ranks ahead of Benchmark, NEA, JPMP, TCV and Charles River in the top 10 and ahead of a host of well-known firms in the venture capital community. CDIB sits even higher on the list if you add in investments made via a related company, CDIB Bioscience Venture Management, of San Diego, which last week participated in the $41 million funding of CancerVax.
CDIB is a 44-year-old Taipei, Taiwan industrial bank that over the first six months of 2003 pushed its way into 12 investments (and four more via CDIB BioSciences), making the bank one of the most active investors in U.S. venture-backed startups.
Founded in 1959, Taiwan’s China Industrial Development Bank was created by Taiwan’s government with World Bank advice and additional private sector funds to support the country’s economic development. The bank, one of three established by the country’s government, is a publicly traded company (Taipei Exchange: CDIB, 2804 Kai Fa) with over $5.8 trillion (or 200 billion Taiwan New Dollars) in assets. And it is in the process of evolving from its investment bank background into a financial services company.
CDIB helped build the China’s textile and petrochemical industries until the 1980s when it turned to electronics and telecommunications investing. During the 1980s, the bank founded multiple venture firms including: Sino-Scan Venture Fund, China Venture Management, and China Securities Investment Trust Corp., which invested primarily in Taiwan companies.
Since then, the bank has invested heavily in semiconductors. Today CDIB is shifting its focus to telecom and biotech, investing in U.S. and Canadian startups. It invests almost equal sums in Korea, Southeast Asia and Japan.
In 1997 CDIB formed CDIB Ventures, based in Santa Clara, Calif., to pursue overseas investments. CDIB Ventures, now five years into two funds, has $150 million under management and investments in 16 portfolio companies, primarily in semiconductors and communications.
Emily Chen, CEO and managing director of CDIB Ventures, founded the firm for CDIB in 1997, having spent the previous 10 years at CDIB in Taiwan.
Investments by the group to date include AccelLight Networks, AccessLine, Garuda Networks, Sonics and other less than stellar startups. The group’s most recent investment was in network processor semiconductor company BroadLogic in December. Since then, investing has stopped.
“We haven’t made any investments this year,” reports CDIB Executive Director Praveen Gupta.
Instead, venture investments have come out of CDIB in Taiwan for U.S. venture startups. Chen was not available for comment at press time as she was in Taiwan for investor meetings, which may have to do with the China Development Financial Holding’s announcement Aug. 4 that it was changing its projections of an annual profit to an annual loss, based upon problems at its wholly-owned subsidiary, CDIB, as reported by the Taipei Times. The newspaper cites the Taiwan Ratings Corp. as noting, “[CDIB’s] investments in the late 1990s have yet to generate strong returns.”
The article further cites a July 25 press release by CDIB to the effect that the losses are primarily attributable to CDIB’s “provisioning to cover losses from its investment portfolio.”
Meanwhile there has been trouble in Taiwan. The chairman of CDIB, Liu-Tai Ying, (formerly a senior aid to Taiwan’s ex-president Lee Teng-hui) was indicted on 12 charges of embezzlement, breach of trust, forgery, money laundering and insider trading, causing him to resign June 20.
Diana Chen, who had acted as CDIB’s chairwoman for the four month’s preceding Liu’s resignation, was named co-chair of the firm together with Benny Hu on June 24.
Chen, who posted Liu’s bail, is a member of the Chen family, whose family-run business Lilontex is the largest private shareholder in CDIB. Lilontex is a publicly traded Taiwan based company and textile manufacturer founded in 1985.
Hu, formerly president of CDIB, and most recently notable for heading up the consortium building the world’s tallest building in Taiwan (slated for a 2004 completion) was pushed out as CDIB president in a power struggle with Liu in August of 2001.
CDIB BioScience Venture Management Inc., founded by Hu and spun out of CDIB following his departure, is an investor in the life-sciences with $75 million under management in its first fund and has six portfolio companies, including CancerVax.
CDIB BioScience sometimes invests independently from CDIB in Taiwan, which, coincidentally provides one-fifth of the BioScience groups’ funding.
The situation is, says one source “extremely convoluted,” as CDIB sorts through the legal and financial issues it must resolve as a publicly held company. Meanwhile, investing continues.
Besides CancerVax, U.S. startup Investments in 2003 by CDIB include: Cavium Networks, Nanosys, Pixim, U.S. Genomics and ZettaCom. These firms have received $350 million in new or follow-on investments from investors that include CDIB.
Email Jerry Borrell