“Well insulated” China, though suffering from sharp drops in its own equities markets, doesn’t have the sense of crisis that exists in the U.S., says Philip Partnow, managing director of UBS Securities Ltd in Beijing. UBS, the first Western bank to assume management control of a domestic mainland brokerage, points out the fact that what’s hitting companies is not subprime-related securities gone bad.

“I think there’s nothing here we feel is toxid,” he told Reuters on Wednesday at the Reuters China Summit in Beijing. He goes on:

“The Chinese capital market has responded quite differently than global capital markets and that is because the Chinese capital markets are still pretty well insulated by the way China controls the RMB and by the other financial controls that China has.

“It is true that both the Shanghai A-share market and the Heng Seng market have fallen quite steeply, but that is more in response to a correction from what many people believe was an over-inflated stock bubble, rather than a direct response from some financial crisis or concern. That’s been then followed on by some concerns that people have about a weakening economic sentiment in the U.S. and Europe and Japan, which are China’s key export markets, and what the knock-in impact will be in China. So there is also a fundamental concern.”

“But there is not a sense of distress or of crisis, or that things that people thought were valuable suddenly vanishing into thin air, along the same lines of what we’ve seen with some of the things that were happening with Subprime and the complex structures that were set up around the subprime, back in the United States. So I think there’s nothing really that we feel that is toxic, out here in China, so we are broadly comfortable with the businesses that we’re in. “

By Lucy Hornby

One venture capital firm has been systematically doing autopsies on the many companies that collapsed during the dotcom bust to screen for great ideas that only failed because they were ahead of their time.

Allen Morgan, a managing director at Mayfield Fund, told the Reuters Venture Capital Summit why sifting through the “bubble rubble” is important. He says many companies died in 2000-2002 because of poor broadband infrastructure, weak Internet search, consumers’ then lack of comfort with the Web, and the lack of pay-per-click advertising revenue.

These “four horsemen of the Apocalypse” are no longer factors threatening to kill off such businesses, he says.

What a difference a year makes in looking at the MySpace deal.

Alan Salzman, managing partner of VantagePoint Venture Partners, told the Reuters Venture Capital Summit about negotiations to sell MySpace.com to Rupert Murdoch’s News Corp., his regrets about the price, and how an investigation by New York Attorney General Eliot Spitzer played a key role in the timing. He also talks about failed negotiations with Sumner Redstone’s Viacom.

“Anybody could have bought that company who wanted to and News Corp. wanted to more than anybody else,” he said.

VantagePoint controlled about a quarter of MySpace owner Intermix Media Inc.  Intermix was bought by News Corp. for $580 million last year.

A lot of technology conglomerates need to spin off some of their businesses because they are run in less than a top class way, with senior management spending little time on them, said Jim Davidson, co-founder and a managing director of private equity firm Silver Lake Partners. He said he asks CEOs if they can only spend half a day a quarter on a particular part of the operation then “is this a business you should be in?” He said that because the situation was unsustainable there should be plenty of buyout opportunities for firms like Silver Lake. “There are going to be years and years of deals available,” Davidson told the Reuters Venture Capital Summit.

The funding of venture capital deals is getting far too frothy, and starting to head towards dotcom-boom levels, warned a Silicon Valley-based venture capitalist. “I think the challenge is there is too much money out there,” said Promod Haque, general partner at Norwest Venture Partners. “You are starting to see, therefore, deals getting funded at a very alarming rate,” he told the Reuters Venture Capital Summit. He said that many deals were getting funded in the same category of business and prices were rising. Haque said that the result would be the demise of many U.S. venture funds, leaving just 20-30 with the returns needed to survive.

New York Attorney General Eliot Spitzer’s crackdown on the way Wall Street produces stock research has given an advantage to  investors who can fund their own research, said Jim Davidson, a co-founder and managing director of private equity firm Silver Lake Partners. He told the Reuters Venture Capital Summit that there is less quality research publicly available in the markets because the investment banks can’t fund it from banking income anymore, and trading commissions aren’t enough to bridge the gap. “You have less money to pay researchers so you get less talented people but they also give them less money to do research,” he said. That loss of information means that markets are less efficient, creating opportunities for private equity firms, he said. “God Bless Eliot Spitzer and this new framework because for people like Silver Lake we do our own research,” Davidson commented.

SAP Ventures plans to begin investing in the software industry in India by the end of the year, said Lisa Reeves, senior vice president of the corporate venture arm of Europe’s largest software company. She told the Reuters Venture Capital Summit there is “a lot of opportunity for us there.” 

The fallout from the options backdating scandal may stop politicians from amending the Sarbanes-Oxley corporate reform law, a top venture capitalist said. Allen Morgan, a managing director of Silicon Valley’s Mayfield Fund, said that he is now pessimistic about the law being changed after the November elections.

“My fear is that the technology industry has inadvertently shot itself in the foot with all of the options backdating scandals,” he told the Reuters Venture Capital Summit.

Morgan said that the law was “the typical politicians’ response to a bad situation,” and the costs of complying had become a huge impediment for smaller companies.

Venture capital firms are pouring money into bad deals in China through “shotgun investing,” warned David Chao, cofounder and managing general partner of Doll Capital Management. “I had one of our companies check into how many YouTube-like companies are there in China. There are 150 of them — 150 — and many of them, most of them, are being venture backed today.” He said that there may be $300 million invested in that one area. “If you ask me are there bad deals done — most likely 148 of them are bad deals,” he predicted.

The Nasdaq stock market’s once quasi-monopoly over technology IPOs has been “absolutely destroyed” by the Sarbanes-Oxley corporate governance and accounting law, said Claude Leglise, the managing director of venture capital firm WI Harper. “We could argue the details but the magic is absolutely broken,” he told the Reuters Venture Capital Summit. He said that Hong Kong, Singapore, Tokyo and London were now all potentially appealing alternatives because of the costs of listing in the U.S.