The golden age for China's Internet industry has yet to come, despite some deals worth billion dollars having already taken place.

So said veteran Chinese Internet entrepreneur Victor Koo, the former president of the top Chinese Internet portal Sohu.com Inc.

Speaking in Beijing on November 21, he said this year has been a significant one for the country's Internet industry; it entered the billion-dollar era, with Yahoo! buying a 30 percent stake of the Chinese e-commerce company Alibaba, and at one time the Chinese search company Baidu's market capitalization reached US$4 billion on the NASDAQ.

"However, the real golden age will come in three to five years and it will be a golden age for big deals on the capital markets," said Koo, who has worked in the Internet industry for 11 years.

He believed that by 2008/2010, when, respectively, the Olympic Games is held in Beijing and the World Expo in Shanghai, China's economy will be on a much larger scale and the Internet will be embedded in the daily lives of Chinese people.

But Koo said that now is the time to prepare.

Applications following the convergence of computing, communications, and consumer electronics (3C), online education and online payments all have a lot of potential.

The former Sohu President resigned in March after leading the top Chinese web portal to an initial public offering (IPO) on the NASDAQ in 2000 and making it one of the most successful Internet companies in China. He has since decided to focus on the 3C convergence area as the direction for his new company 1Verge.

Many Chinese Internet companies have succeeded in business and mobile communications networks, but the convergence of the three networks will create enormous opportunities.

Koo, a Stanford MBA graduate in 1994, has brought the investment concept of the search fund into China. It means a company searches for investment opportunities, controls the target company through capital investment, and brings the target business to an IPO or acquisition.

Koo and two partners have started a fund with several million dollars to bring the business model to China, and the first target has been identified.

The dotcom veteran said his fund will seek dominant stakes in small-size companies in the area of consumer-targeted 3C convergence.

"In China, we have good applications on the Internet and a lot of capital-seeking opportunities, but talent is the thing Chinese Internet companies lack the most," said Koo.

Koo said the first deal is expected to be completed in six months. He and his team will then take over the start-up and see it through to a public offering in three to five years.

According to a study by the Graduate School of Business at Stanford University, start-up companies face the biggest risks in the first 12 to 18 months.

Research shows that is because founders are capable of managing a small firm at the infancy stage, but when it is in the fast lane and expanding, managing it becomes increasingly difficult.

(China Daily November 25, 2005)