There has been a recent surge in Chinese venture capital activity in Germany. Based on field research from a real-life investment situation, Prof. Ozcan and Dr. Sassmannhausen have authored a teaching case which is published by the Case Center:
The China Gambit: When Chinese VCs knock on a German start-up's door.
This “decision-making case” is about a high-flying German medical device start-up (“BLDSGR”) that is looking into raising Series C financing. The lead investor for the Series C financing round has brought along a government-backed Chinese venture capital firm, which is keen on participating in the financing round with very generous terms, but under the condition that the start-up will soon expand into the Chinese market. The Chinese market offers highly lucrative growth opportunities, as well as possibilities for lowering the cost of production for the medical device by outsourcing the production to Chinese device manufacturers.
The Chinese VC is a newly founded firm dedicated to investing in the European high-tech sector. The firm is relatively unknown in start-up circles, but is making inroads. The firm is headed by professionals and is incorporated in Germany, but the ownership structure remains complex, and is not fully transparent.
BLDSGR’s current investors include two German venture capital firms: one of which is the firm that is leading the upcoming financing round; and a corporate venture capital (CVC) arm of a Swiss medical device company. The CVC is firmly opposed to getting the Chinese investors on board.
The case focuses on the critical decision of how to structure the next financing round.