01 Oct 037: Lessons on Fundraising in China
Scott Einbinder is a producer, executive, investor and China consultant. He discusses the challenges of fundraising in China but has encouraging words about western educated Chinese executives.
Scott talks about the challenges of fundraising in China. He highlights the difference between the East and West’s view on the value of long term relations. But he says next year will hold plenty of opportunity despite present setbacks.
THREE KEY POINTS ON FINANCING
1. BE WARY OF INVESTORS WHO SAY THEY HAVE CAPITAL
While a lot of folks make financing commitments, some don’t have the capital they say they do. In other words, they may leverage your deal to raise capital. You have to cut to the chase quickly and get clarification on what they can bring to the table now. Not one year from now. By all means, be ready to walk away if you feel they not real. This goes for potential distributors, financiers, and co-investors). It happens all the time.
2. VALUING LONG TERM RELATIONSHIPS WITH INVESTORS
Mainland China might not value long term relationships like the west. When you do fundraising in China – some investors may walk away from a deal at the last moment.. In the west you have to care about the other side and your reputation. That’s less important in China
3. HARDER TO GET MONEY OUT OF CHINA
Markedly, the Chinese government is constraining big and small media companies. Explicitly, they are trying to get local companies to focus on internal investment. Making payments, wiring funds is very difficult. It’s a little easier to deal with Mainland Chinese companies who have a Hong Kong outpost. Nonetheless, it’s getting harder.
THREE TAKEAWAYS ON FINANCING DEALS
1. DON’T COUNT ON CHINESE INVESTMENT FOR PRODUCTION FINANCING
Specifically, you can’t exploit your content in China if you don’t pass censorship. Thus Chinese companies may be hesitant about doing US deals in this climate. However, business transactions should get better in the future. Europe may be in a better position to take advantage of this.
2. EUROPEAN PARTNERS
Scott is optimistic about the future. He believes next year things will get better and it will be easier to do deals in China. Europe may be in a better position next year to take advantage of the improving Chinese business climate.
See my previous podcast # 015. In #15 I interview Cristiano Bortone. He is a member of Bridging the Dragon. This is a European association that fosters collaboration between Europe and China. He talks about Bridging the Dragon’s matchmaking events. They connect Chinese and European producers.
3. THE HONG KONG QUESTION – FUTURE FINANCING IN PERIL?
Will the mainland Chinese government start constrict Hong Kong investment banks and hedge funds?
Most people in Hong Kong feel that won’t happen Hong Kong. In particular, the rule of law to governs business deals and IPOs. If the mainland Chinese took a heavy hand with the Hong Kong banking system – that would hurt Hong Kong property prices. And there would be a brain drain. Fundraising in China or Hong Kong would be in doubt.
Maybe there will only be restrictions on censorship however not as strong as in Mainland China. If there’s a clampdown on content – that could change things a lot. Right now, nobody knows where it’s going.
At the same time, Scott believes there is big business opportunities to do in China starting next year. See my previous podcast # 25 China is Starving for Good Projects. Additionally, Scott says Chinese executives who studied overseas are more flexible than their older bosses. Additionally, they also speak fluent English. These up and comers may be your key to a success Chinese business deal.
China Hollywood Greenlight Podcast – Episode 37
Scott Einbinder – producer, executive, investor and consultant
Host: Caryn McCann
Website: The China List – where Hollywood and China meet
Twitter: @chnlist https://twitter.com/chnlist
Podcast mentioned in show roundup – #15 Cristiano Bortone – European and Chinese producers collaborating:
Guest: Scott Einbinder
Company: ANA media: