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US firms expanding fundraising efforts with eye on China

Plentiful capital is one reason US firms send representatives

Instead of taking money from existing capital sources for new investments, venture capital firms in Silicon Valley are asking their investors to establish separate, China-focused funds, VentureWire reports.

Because there is "so much capital floating around China right now," several firms are sending investment teams to the country. The move is also partly motivated by the wave of high-level departures of major fundraising talent due to the ease of establishing funds in China, some limited partners told the news source.

Usually, firms based in the U.S. that want to invest in Chinese ventures employ one or a mix of three approaches - hiring local talent to manage investments pulled from a global fund, having a limited partner invest in a particular fund or raising "discrete funds" and assigning a managing partner specifically for China - the news source reports. Firms that have employed the last method include Sequoia Capital China and Kleiner Perkins.

While venture capital activity in some regions is still strong, the same cannot be said for IPOs. A recently released study from Deloitte and the Venture Capital Associations of the U.S. and several European and Asian countries found that a majority of venture capitalists worldwide would rank current IPO activity as "low," and that it is not high enough to maintain the health of the global venture capital industry.