Shanghai introduced in January a compensation scheme for investors who lost money on their investments, hoping to trigger more innovations. By doing that China´s second-largest city funds faulty investment deals, tells VC veteran William Bao Bean the BBC.
William Bao Bean, managing director of Chinaaccelerator, has worked in tech investment for 20 years. He said that awarding venture capitalists for making bad investments instead of encouraging them to make smart decisions was a “horrible idea”.
Besides, the scheme would do little to help the tech start-up scene directly, he said. “Whereas if you have a matching co-investing scheme, you are supporting venture investment within a locality but it’s beforehand and not afterwards, so the start-ups get something out of it,” he said.
Singapore devised similarly bad investment schemes in the early stages of development, “but they learned and today, they are the best in Asia,” Bao Bean continued. “A lot of localities in Asia have policies that encourage investment, but subsidising bad investments doesn’t.”
Are you looking for more experts on innovation at the China Speakers Bureau? Do check out this list.
Earlier this year we discussed with William Bao Bean what governments can do to stimulate innovation. “Get out of the way”, is his starting point.