Mobius Venture Capital Managing Director Gary Rieschel says that U.S. investors who are serious about investing in China need to move there, or else forget it.
Rieschel is practicing what he’s preaching.
The founder of Mobius VC tells PE Week that he moved with his wife and kids to Shanghai in early February, a decision that was a “long time” in coming and was made for a variety of reasons. He says that he will oversee Mobius VC’s investment in the region. He has also planted himself in Shanghai to help the firm’s U.S. portfolio companies develop relationships with Chinese companies and customers, and to scout out new investment opportunities abroad for the team back home.
Describing himself as “perpetually jetlagged,” but happy with the move, Rieschel stresses that he’ll continue to spend nearly half of his time in Silicon Valley. He says that his departure is not an indication that he is planning to leave Mobius. Nor is the Palo Alto, Calif.-based firm, which was founded in 1996, looking to allocate more of its resources to China.
“Gary is logging more airline miles than I would ever aspire to, but he is still also working on his U.S.-based portfolio companies and working with the rest of here on our fund,” says Managing Director Heidi Roizen.
Having Rieschel move to China is hardly a toe in the water for the firm. Already, its investments in the region include TopSec Network Security Technology, a 10-year-old security firewall company in Beijing; Accelergy, a materials science startup primarily based in Shanghai (it also has an office in Atherton, Calif.); and TCG, or “Tivo Greater China,” a venture founded by Tivo managers and investors to provide DVR licenses and products to greater China.
Mobius VC – once strictly an investment unit of Tokyo-based Softbank Corp. – maintains a close relationship with the company’s Softbank Asia Infrastructure Fund, a $1 billion vehicle that has invested with Mobius VC in a handful of regional investments, including TopSec and TGC.
For Rieschel, the move is no big deal, he insists. “My wife is Chinese, born in Hong Kong. Our kids speak fluent Cantonese and are learning Mandarin. [In my career], I’ve lived briefly in Hong Kong and for more than four years in Tokyo.” He anticipates living in Shanghai for at least 18 months.
“People make this assumption about China that there’s easy money to be made there, but it’s incredibly competitive,” he says. Many firms seem to think that they can waltz in and spend a lot of money and delegate [deal sourcing] to analysts and other junior people there and have some certainty of success. They’re flat wrong. You have to commit senior partner time.”
One question begged by Rieschel’s move is whether Mobius has plans to beef up its regional operations. The answer is no, he says.
A bigger possibility is that Mobius will use its evolving Asian expertise when marketing its next fund to limiteds.
Mobius has $70 million left to commit from the its $125 billion fund that it assembled in 2000. (Mobius reportedly set out to raise a $350 million fund last year but later postponed the effort.)
Rieschel has ruled out a commingled fund. “[LPs] want to know explicitly that you are investing in Asia [exclusively],” he says. “They’ve seen carve-outs [for international investing] in broader funds and those generally haven’t done well. I don’t think the LP community is going to sign up for that much longer.”
However, he declines to comment on the possibility of raising two funds, one targeting U.S-based investments, and one dedicated to investing in the Asia-Pacific region.
“I haven’t made any decision at all if Mobius should raise a fund targeting Asia, or what our target will be in the U.S.,” he says. “But I do plan to use what I learn this year in terms of opportunities and challenges to determine what makes sense for Mobius.”