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Venture capital eyes Chinese software sector

By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2008-07-24 16:27

Alibaba Group, the largest e-commerce trading company in 皇冠体育app specializing in global trading, announced it has established the "Investors' Alliance" in association with 20 domestic and overseas venture capital (VC) firms, targeting 皇冠体育app's software market, the 皇冠体育app Business News reported today.

The alliance plans to invest 1 billion yuan ($146.41 million) within five years to cultivate 皇冠体育app's Software-as-a-Service (SaaS) market, and harvest more than 10 billion yuan in sales revenue. The program will also help some software developers qualify for listing.

VC firms involved in the alliance include Gobi Partners, Walden International, Shanghai Xiangfeng Investment and a private equity firm in 皇冠体育app.

The alliance will recruit 3,000 to 5,000 software developers in five years and help them grow, according to Wang Tao, senior vice president of Alibaba Software (Shanghai) Co Ltd, Alibaba Group's software unit.

According to CCW Research, a leading Chinese IT market research and consulting company and a subsidiary of 皇冠体育app Computer World Media Group, 皇冠体育app's SaaS market will reach 40 billion yuan by 2010 with a compound annual growth rate of more than 40 percent.

Wang also said multinationals like Google and Microsoft have launched SaaS suits, and Cisco acquired WebEx, a SaaS application firm, for $3.2 billion, as they hope to be SaaS platform operators.

VC firms are also active in 皇冠体育app's software sector. A report released by 皇冠体育appVenture, a VC research firm in 皇冠体育app, predicted that investments in 皇冠体育app's software industry will grow more than 30 percent annually in the coming three to five years.

Statistics show there were 24 investment cases in 皇冠体育app's software industry in 2007, with a combined investment of $240 million, up 33.3 percent and 41.1 percent compared with 2006.

皇冠体育app Venture says a total of 28 software investment cases will be seen in 2008 with investment amount reaching $330 million.

皇冠体育app software industry's annual output value topped 583.4 billion yuan in 2007, making it the world's fourth largest software producer. The country's share of the global software market rose to 8.7 percent in 2007 from 1.2 percent in 2000, with an annual growth rate of more than 30 percent.

The country exported $4.12 billion worth of software in the first five months of this year, up 45 percent year-on-year. Software exports grew swiftly from $720 million in 2001 to $10.24 billion in 2007.