Ignition reportedly to invest in China

Ignition Partners, the Bellevue-based venture-capital firm, plans to raise $125 million to invest in China, said people who have been briefed by the firm.

Ignition partners Richard Tong and John Zagula will work with Gary Rieschel, a former partner at Mobius Venture Capital, in Shanghai to market and invest the fund, said sources who declined to be identified to protect their relationships with Ignition.

China, whose economy has expanded more than 9 percent a year over the past two decades, is attracting U.S. venture capitalists. Since mid-2004, firms raised more than $1.9 billion in venture-capital and buyout funds to invest in China, data compiled by London-based Private Equity Intelligence show.

"There have been extremely good deals in China in the last few years," said Christophe Florin, a managing director at French insurer Axa's private-equity unit in Singapore. "There's a lot of money being raised for venture in China. The problem will be whether it will be invested, as everyone says the valuations are high."

Venture capitalists hope to find businesses such as Baidu.com, China's most popular Internet search engine, whose shares almost tripled from their initial public offering price in August, and Alibaba.com, China's biggest online retailer and the owner of Yahoo!'s brand in China.

By providing startup financing, venture capitalists can make hundreds of times their initial investment. They will hire locally and form alliances for the U.S.-based companies they have funded, investors said.

Tong and Zagula didn't immediately respond to e-mailed requests for comment.

"China will become a major innovative force in the global economy," Rieschel said in an e-mail. He declined to discuss the new fund.

Rieschel previously was a partner at Palo Alto, Calif.-based Mobius, formerly known as Softbank Venture Capital. He moved to Shanghai to focus on investments in China and has been an adviser to Ignition since it was founded in 2000.

Tong is a founding partner of Ignition, which has gathered $750 million for its previous three funds. He invests mainly in telecommunications, wireless software and services, and consumer-related services, according to Ignition's Web site.

Before Ignition, he spent 12 years at Microsoft. Zagula specializes in business software and services and consumer-related companies. He spent eight years at Microsoft in senior marketing and strategy jobs.