Landmark Case Study Example | Topics and Well Written Essays - 2500 words

Landmark - Case Study Example The difficulty of this issue is illustrated in the aforementioned case where Article 3 of the HRA was invoked. According to Article 3 of the HRA, "[s]o far as possible to do so, primary legislations and secondary legislation should be read and given effect in a way which is compatible with Convention rights" (HRA 1998, Art 3), referring to the European Convention on Human Rights and Fundamental Freedoms. By virtue of this provision, the conventional manner that statutory interpretation under the act, is therefore challenged, such that instead of giving effect to the intention of the legislators, which enacted particular statutes; statutory interpretation must now proceed in a manner that gives effect to the original intent of those who crafted the HRA provision. This shift away from the conventional procedure, therefore leads judges to stray in the grey area between judicial interpretation and law making, which endangers them of judicial vandalism and usurpation Parliament's will. ... In Ghaidan v Godin-Mendoza [2004], the House of Lords dismissed an appeal by Ahmad Ghaidan to overturn a previous decision of the Court of Appeal; which named Juan Godin-Mendoza as successor to the tenancy of the flat Godin-Mendoza lived in until the death of his partner of the same sex by interpreting the words "as his or her wife or husband" under the Rent Act 1977 to mean "as if they were his wife or husband" by virtue of Art 3 of the HRA (Ghaidan v Godin-Mendoza [2004], para. 51). The decision to dismiss the appeal was arrived at, by virtue of the judges' interpretation of Article 3 of the HRA, which was deemed appropriate in this case, with one dissenting opinion from Lord Millet (para. 102). Based on the given case, Lord Nicholls (para. 4) identified the relevant statutory provisions as paragraphs 2 and 3 of schedule 1 to the Rent Act 1977: 21. The surviving spouse (if any) of the original tenant, if residing in the dwelling-house immediately before the death of the original tenant, shall after the death be the statutory tenant if and so long as he or she occupies the dwelling-house as his or her residence. 22. For the purposes of this paragraph, a person who was living with the original tenant as his or her wife or husband shall be treated as the spouse of the original tenant. 31. Where paragraph 2 above does not apply, but a person who was a member of the original tenant's family was residing with him in the dwelling-house at the time of and for the period of 2 years immediately before his death then, after his death, that person or if there is more than one such person such one of them as may be decided by agreement, or in default of agreement by

The administration of Theodore Roosevelt Essay Example for Free

The administration of Theodore Roosevelt Essay Theodore Roosevelt was the 26th President of the United States. Roosevelt, who was 42 when he became President after the assassination of William McKinley, was the youngest man ever told to hold that office. â€Å"Teddy† or â€Å"T.R.,† as he was called, was one of the nation’s most dynamic and colorful Presidents, remembered perhaps as much for his spirited personality as for the accomplishments of his administration (Pringle, 2006). Roosevelt had tremendous energy and wide-ranging interests. He was a patrician and a reformer, a cowboy and a scholar, a big-game hunter and a conservationist, and a soldier and a Nobel Peace prize winner, As President, he promoted progressive reforms and a strongly nationalistic and expansionist foreign policy. A popular writer and forceful speaker, Roosevelt coined many phrases that are skill quoted. He denounced the â€Å"malefactors of great wealth† and sought to curb these powerful businessmen by a variety of means. Antitrust legislation was enforced (â€Å"trust busting,† as it was called); the Food and Drugs Act was passed; and conservation laws were enacted to keep the nation’s natural resources out of the hands of private exploiters (Beale, 2004). His domestic program was called the â€Å"Square Deal,† from a speech in which he said he wanted â€Å"to see to it that every man has a square deal.† â€Å"Speak softly, carry a big stick, and you will go far,† was another of Roosevelt’s sayings. He often applied it in his conduct of foreign, as well as domestic, affairs. When negotiations to acquire the Panama Canal were at a standstill, Roosevelt recognized a rebel government in Panama, made a treaty with it for a canal zone, and authorized digging the canal. When a crisis with Japan seemed close, Roosevelt spoke softly but sent the â€Å"Great White Fleet† around the world to demonstrate the new naval might of the United States. Under Roosevelt, the United States became a major military and commercial power and gained an influence in world affairs (Mowry, 2004). Roosevelt’s administration saw the beginnings of 20th-century social legislation. Since the Civil War, big business had become monopolistic, operating in total disregard of the public interest. Roosevelt wanted â€Å"square deal, no more and no less† for everyone and his administration began a campaign of â€Å"trustbusting,† aimed at curbing the abuses perpetrated by big business. In 1902, Northern Securities Company, a railroad trust, was sued by the government under the Sherman Antitrust Act. Eventually, the U.S. Supreme Court held the trust to be illegal and ordered it dissolved. The Elkins Act, passed in 1903, banned secret rebates to favored shippers, a monopolistic practice that had been much criticized. In 1902, when owners of anthracite coal mines refused to accept arbitration to settle a long strike, Roosevelt threatened to use the army to operate the mines. The owners back down (Harbaugh, 2005). In 1903, the president pushed through Congress a bill to create a new executive department—the Department of Commerce and Labor—whose purpose was to promote industrial growth and improved working conditions. In addition, encouraged by endorsement at the polls, Roosevelt became more clearly a champion of progressivism. His progressivism, however, was aimed more at the correction of immediate abuses that at any radical change in American ways of life. He urged enactment of workers’ compensation laws, a graduated federated income tax, and federal taxation of inheritances to curb what he viewed as the menace of â€Å"swollen fortunes† (Blum, 2006). He, as mediator, succeeded in bringing to an end the Russo-Japanese War with the Treaty of Portsmouth in 1905. For this accomplishment he was awarded the 1906 Nobel Peace Prize. He also helped to arrange the Algeciras Conference, called to settle differences between Germany and France over Morocco. Roosevelt urged use of the Hague Peace Conference failed to deal with limitations on armaments, he sought Congressional approval for a naval building program he felt necessary for the security of the country (Pringle, 2006). To demonstrate the nation’s preparedness, Roosevelt sent the entire America battle fleet, called the â€Å"Great White Fleet,† on an around-the-world cruise. Furthermore, in 1913, Roosevelt visited South America and explored Brazil’s jungles in search of a tributary of the Amazon called the River of Doubt, which he found and explored for 900 miles of its course. During the trip, he contracted a tropical fever and begged his party, including Kermit, to leave him, as starvation threatened them. When they refused, he insisted on pushing on. The exertion probably undermined his health. When World War I started in Europe, Roosevelt urged military preparedness and an international tribunal backed by force to execute its decrees. When the Lusitania was sunk, he urged a trade embargo against Germany, assailing Wilson for â€Å"weakness.† In 1916, the Progressive party again nominated Roosevelt for President, but he withdrew when the Republicans nominated Charles Evans Hughes (Blum, 2006). Reference: 1. Beale, H.K. (2004). Theodore Roosevelt and the Rise of America to World Power (Johns Hopkins University). 2. Blum, J.M. (2006). The Republican Roosevelt, 5th edition (Harvard University). 3. Harbaugh, W.H. (2005). The Life and Times of Theodore Roosevelt, revised edition (Oxford University). 4. Mowry, G.E. (2004). The Era of Theodore Roosevelt, 1900-1912 (Harper Row). 5. Pringle, H.F. (2006). Theodore Roosevelt: a Biography, revised edition (Harcourt Brace Jovanovich).

Analysis on Current Venture Capital Market in China

Analysis on Current Venture Capital Market in China Introduction The huge consumer market potential and booming economy in China attract enormous foreign direct investments to capitalize this unprecedented opportunity. Foreign venture capital is not exceptional from this trend. They, however, still have to face constant challenges from regulations, market practices and business cultures in China. To be successful in this marketplace totally different from their origin, foreign venture capitals need to adapt their previous strategies and experiences and test it through trial and error. This report is to get overall picture about current venture capital market in China. Then it will focus on the market position of foreign venture capitals. The report is followed by the analyses and summary on investment and exit strategies used by foreign venture capitals. Finally, the report will discuss the potential trend in China venture capital market. Key Objectives To get in-depth analysis on current venture capital market in China and foreign venture capitals market position in China. To analyze and summarize the investment strategies and exit strategies used by foreign venture capital in China. To make prediction on future market trend, especially foreign venture capital. Key Chapters General introduction on venture capital Historical development and current venture capital market in China Detail market position analysis on foreign venture capital in China Investment strategies of foreign venture capital in China Exit strategies of foreign venture capital in China Future trends in China venture capital market Introduction on Venture Capital Venture capital is source of funds to small firms that cannot establish credit relationships with bank or other financial institutions. As Gompers (2001) states: Companies that lack substantial tangible assets and have uncertain prospects are unlikely to receive significant bank loans. These firms face many years of negative earnings and are unable to make interest payments on debt obligations. Start-up high tech firms are exactly the type of firms that banks are least likely to lend to because of poor information availability and lack of tangible assets or assets that can be readily evaluated. Firms developing software or new technology for the communications or biotech industries are largely investing in human capital. In a nutshell, the VC firm is a relative small financial services professional organization that functions primarily to: (a) assess business opportunities; (b) provide capital; and (c) monitor, advise and assist the firms in its portfolio. By investing, the venture capitalists accept substantial tranche of illiquid equity that converts their status to something like partners to the entrepreneur. The goal of the venture capitalist is not only to increase the value of that equity but also to eventually monetize the investment through a liquidity event such as an initial public offering or sale to other investors. The other way of reaping the reward is liquidation due to the firm failure and bankruptcy. In all of these scenarios, the venture capitalist exits their investment to complete the VC process. The venture capital cycle is briefly visualized in below chart. Chart 1 Fund flow of Venture Capital Cycle Source: National Venture Capital Association Yearbook 2008 The National Venture Capital Association in the United States defines venture capital as money provided by professionals who invest alongside management in young, rapidly growing companies that have potential to develop into significant economic contributors. There are a number of key attributes associated with VC that distinguish it from other equity capital investments. Venture capital normally focuses on small firms that have great growth potential. These firms usually are not mature enough to be traded in public equity markets. Compared with public equity investment, venture capital investment has poorer liquidity with more severe information asymmetry and higher investment risks. Venture capital investment is also different from angel capital. Managers of angel capital use their personal money to invest. In contrast, investments professionals who raise money from other investors manage venture capital. Angle capital invests more often in the seed stage of the start up firms than venture capital does. Finally, venture capital is different from non-venture private equity investments (such as buyouts, restructure, and mezzanine funds). Firms backed by venture capital usually have considerable growth potential. For these firms, the cash flow generated from operations is usually insufficient to support finance growth and debt financing is usually not available. In contrast, private equity funds target more mature firms that have stable cash flows and limited growth potential. The Table 1 below summarizes the investment stages and types of funding for different investment styles. Table 1. Types of Funding and Investment Stage Source: A Guild To Venture Capital (3rd edition) by Irish Venture Capital Association There are five stages (BVCAPWC, 1998) in the development of venture-backed companies, which can be defined as: 1. Seed 2. Start-up 3. Other early stages (exploration) 4. Expansion 5. Maturity (exit). The definition of the company stage is different with the definition of the financing round. The negotiation of a VC investment is a time-consuming and economically costly process for all parties. Neither the VCs nor the portfolio firms want to repeat the process very often. Therefore VCs have to balance the cost of negotiation and potential risks from one time investment. Typically, a VC will try to provide sufficient financing for a company to reach some natural milestone, such as the development of a prototype product, the acquisition of a major customer, or a cash flow breakeven. Each financing event is known as a round. So the first time a company receives financing is known as the first round (or Series A), the next time the second round (or Series B), and so on and so forth. With each well-defined milestone, the parties can return to the negotiating table with some new information. These milestones differ across industries and depend on market conditions. A company might receive several rounds of investment at any stage, or it might receive sufficient investment in one round to bypass multiple stages. One special situation is the down round. It is when the company does not meet milestones and the VC still needs to invest but at a lower valuation than prior round of financing. Venture Capital in China Why invest in China? There are four major popular arguments behind for the investment rush to east. Reason 1: High Rate of Economic Growth Chinas impressive economic growth for the past 30 years, averaging between 8% to 10% real growth per year, has been the envy of the developing world. The size of Chinese economy by the end of 2006 reached US$2.62 trillion, 13 times larger than that in 1978 when measured in constant RMB (MasterCard Worldwide Insight, 2007). According to Goldman Sachs China economic research (2003), per capita GDP expect to grow from less than $5,000 at that time to more than $30,000 in 2050 (refer to Chart 2). China will have a middle class of more than 500 million by 2025 larger than the entire population of the United States. It represents a huge emerging demand for everything from integrated circuits to cars. 500M mobile users, 130M Internet users, 104M broadband users and 4.5M college graduates every year could all transfer into huge business opportunity (represented in Chart 3). Based on the estimation (Chart 4) from Mckinsey, there will be sustainable market growth to 2025 in every business that related with peoples life and daily consumption. Huge opportunities for venture capital are Internet (B2B, B2C, C2C, online gaming, website portal and web 2.0), semiconductors, technologies (clean energy, medical, biotech and traditional manufacturing), and consumer businesses (food, clothes, shopping and other entertainments). Chart 2 China GDP Growth Forecast (2000-2050) Source: Goldman Sachs 2003 Chart 3 China Energy/Material supply imbalance (2010) Source: Goldman Sachs 2003 Chart 4 Urban Chinese Consumers Demand Forecast (2004-2025) Source: National Bureau of Statistics of China; Mckinsey Global Institute Analysis Reason 2: Inefficient Capital Market In the United States and Europe, private and public capital markets compete as sources of capital. However, China does not yet have an equity culture despite the adoption of market-oriented policies. In China, the public equity market lists inefficient and unappealing state owned enterprises (SOE) most of the times. And government holds roughly 60-70% of share capital of most listed companies. Few private firms are listed in the stock market due to legal and policy hurdle. Chinas bond market is similarly underdeveloped. Chinese corporate bonds account for less than 2% of corporate financing. Thin trading between banks and investors makes issuing bonds unattractive for fundraising or investing. Insurers and fund managers therefore have few fixed-income securities to hedge against mid- and long-term risks. The corporate bond market just started to function in late 2007 by allowing public listed firms to issue corporate debts. Around 95% of financing for Chinese companies now is still provided by bank loans. The domestic banks, however, have tendency to provide loans to stated owned company rather than private firms, especially small and medium businesses (SMB). With the poor functioning financial markets and policy discrimination, venture capital and private equity become important sources of growth capital for private firms. It is one of the key reasons that venture capital is so popular among private firms in China across different industries even including traditional industries like food, hotel and travel etc. Reason 3: Creative Solutions/Early Adopting Consumers One of the most unexpected attributes of the emerging Chinese market economy is how consumer-savvy its entrepreneurs are. Even after decades of centralized economic planning, the Chinese remain consummate creators and marketers of interesting products. Definitely the creativity and innovations are only limited in certain business for talents availability and their professional capabilities. Online gaming, wireless instant messaging, and wireless value added services are just three markets that the Chinese more or less created out of thin air. Each of these businesses has growing customer bases (and have spawned successful public companies like Shanda, Netease, Tencent, and Linktone). But none of them has significant participants yet in the United States. Different consumer behaviors contribute to this phenomenon as well. In below case study on Tencent, it provides a great example on how to innovate the Internet product offerings to cater the needs of online generation. Case study: QQ of Tencent (Adapted from www.tencent.com) Tencent (listed in HK stock exchange) is the #1 Instant Messaging (IM) service provider in China. Tencents IM community counts over 270 million active accounts and is said to be covering 95% of Chinese Internet users and 70% of Chinas IM market (MSN/Yahoo account for the rest market). QQ is the brand for its IM. Same as other IMs, QQ is a free tool to use. Tencent, however, came up the idea to generate revenue stream by allowing users to buy and exchange virtual items (clothes and background image) online to decorate his or her QQ head icon. Tencent even created its own cyber currency called Q Bi and 1 Q Bi = 1RMB (0.14 USD) to facilitate the transaction and reduce barrier of online purchasing. The estimated revenue generated from those Internet value added services in 2007 is around USD$360M. Reason 4: Risk-taking, Innovative Culture In the last fifteen years, the privatization reform is one of the critical forces in stimulating China economy growth. This privatization wave also generated tens of thousands entrepreneurs. The business culture is naturally comfortable with risks and with developing innovative ways to solve problems and create wealth both for individuals and for society at large. The successful stories of VC backed entrepreneurs further promote the risk taking culture in China and the awareness and popularity of venture capital. The Focus Media case below illustrates the power of business model innovation by its unprecedented expansion speed ever in Chinas business history. There is no doubt that foreign VCs played an important role in this story to make Focus Media successful. Case study: Focus Media China (Adapted from www.focus.com) Founded in 2003, Focus Media is Chinas largest Digital Media Group in China now. The founder, Mr. Jiang Nanchun, came up with an innovative approach in operating out-of-home advertising network using audiovisual digital displays. Basically, the idea was to display the LCD near or in the elevators in commercial centers (like office buildings and shopping malls). While waiting for or in the elevators, people would watch the contents advertised in those LCDs. By selecting and contracting with high quality commercial buildings, Focus Media was able to quickly build up its network scale and attract many advertising contracts. Tow foreign VC firms, Soft Bank and UCI, invested in the first round. And another five VCs, CDH, TDF, DFJ, WI Harper and Milestone, invested in the second round. Two years after operation, Focus Media was listed on Nasdaq with USD$172M IPO and now it is part of Nasdaq 100 index. Historical development Infancy stage: 1984 1995 In 1984, the Research Center of Science and Technology Development of the State Science Technology Commission (SSTC) (now the Ministry of Science Technology or MOST) cooperated with British experts to study how to develop high-tech in China. The British experts proposed that venture capital should be developed if China wanted to foster high technology. In 1985, the Central Commission of the Chinese Communist Party and the State Council pointed out in the Decision of Science-Technology System Reform that venture capital could be set up to support the work of developing high-tech with quick change and high risk. It was the first time that the concept of venture capital appeared in an official Chinese Government document. With the government decision to develop high technology industries, the Central Government and some local governments financed and set-up series of investment institutions that intended to pursue the venture capital business from 1985 to 1995. Examples are China New Technology Venture Capital Company, Shenyang Science-Technology Venture Development Risk Center, Shanxi Head Office of Science-Technology Fund Development, Guangdong Science-Technology Venture Capital Company, Shanghai Science-Technology Venture Capital Company, and the Science-Technology Venture Capita Company of Zhejiang Province. Moreover, venture centers (i.e., high tech incubators) were set-up in the majority of national high-tech parks. Simultaneously, some overseas investment banks, funds and venture capital institutions also started to expand their business into China. For example, the Pacific Technology Venture Capital Fund subordinate to IDG entered China in 1992. It cooperated with science-technology commissions in Beijing, Shanghai and Guangdong, and set-up a number of venture capital companies focused on investing in technology companies. Also, some foreign capital or joint stock investment institutions established venture capital businesses. Asia Venture Capital Journal (AVCJ, 2001) shows that $16 million was raised for venture capital investments in 1991. In 1992, the total funds raised jumped to $583million, a thirty-fold increase compared with the $16 million in 1991. The first wave reached its peak in 1995, with $678 million in investment (AVCJ, 2001).The first wave of venture capital investments was brought by international venture capitalists. The international venture capital firms accounted for more than 95% of the total fund raised in the early and mid 1990s. The absolute dominance of international venture capital funds in China in the early and mid 1990s was mainly due to Chinas strict regulations against fund-raising and the general lack of awareness of venture capital in China. Private fund-raising by individuals or private firms without government approval was strictly prohibited in China. This strict regulation essentially removed the possibility for venture capitalists to raise funds within China. It meant that only international venture capital funds and state owned enterprises (SOE) venture capital funds could operate. International venture capital funds could bypass the regulation because they were incorporated and they raised funds outside of China. SOE funds relied on government appropriation as funding sources and did not have this fund raising problem either. Early Growth: 1996 2001 From the mid-1990s, the perception of venture capital shifted from being a type of government funding to being a commercial activity necessary to support the commercialization of new technology. As there were still no laws or regulations about setting up foreign venture capital institutions in China, many overseas investment institutions established their branches in Hong Kong, aiming to invest in the mainland. They had also located representative offices in some major cities, primarily Beijing and Shanghai. Most of the VCs active in China in the early 90s were American firms. The VC industry in the U.S. had matured and attracted a significant amount of funds. Shortly after 1995 a sharp increase from US$5 billion to US$110 billion in funds raised created the phenomenon of money chases deals (Gompers Lerner, 1999). A cadre of experienced American VCs started searching the world for investment opportunities, attempting to replicate the Silicon Valley model. Since 1998, there had been a discernible recognition of the critical success factors necessary to create an environment in which venture capital could operate smoothly and flourish. Specifically, the Governments official decision to support the development of venture capital was the key factor that had allowed Chinas venture capital industry to come into being in a new and more positive environment. In Beijing, alone, there were about 30 independent venture capital institutions, whose capital amounted to an estimated $450 million. In Shenzhen, there were at least 20 independent venture capital institutions with capital amounted to over $500 million. After 2000, China also experienced hard landing in its young VC industry due to dotcom bubble burst and came with huge casualties. It took the VC community 3 years to recover. Fast Growth: 2002 present Although initial government-backed investment operations generally failed, there has been resurgence in venture capital activity since Chinas admission to the WTO (Kenny, Han and Tanaka 2002). Capital available for investment in Mainland China keeps a steady growth trend from 2002. The capital size was increased to US$21.32B by 2007 from US$10.50B in 2002. The average compound annual growth rate (CAGR) reaches 15.2%. Venture capital investment grew rapidly from $480 million in 2002 to more than $3,247 million in 2007, invested in 440 China mainland or mainland-related enterprises (Zero2IPO 2007). According to Zero2IPO report, USD$4B VC funds were raised each year in 2005 and 2006 for China investment. But Chinas annual consumption was no more than $2B. The money chasing deal phenomenon started to emerge in China. Many foreign VC funds, especially first-time funds raised after 2005, had the pressure to pour out investment quickly to avoid US dollar depreciation against RMB and to get better deals under fierce competition. While the funding supply multiplied, quality deal flows did not increase at the same pace. Under the simple supply and demand mechanism, valuations of the China deal kept at relative high level. However, considering the fact that a big portion of funding was focusing on local value-add service segments (i.e. internet, web2.0 and broadband etc.), the issue of funds over-supply was sector specific. To get higher return under the competition, VC firms started to invest in traditional business models such as hotels, travels and fast food chains beyond their core activities such as TMT (Technology, Media and Telecom) or Internet related businesses. It was the special phenomenon happened in China now that VCs were more like PE. Legal and Regulations According to Megginson (2004), the differences in the design and the degree of development of the PE/VC industry are due to institutional factors, with the countrys legal system being paramount. Two major factors are paramount in evaluating legal system: contract law enforcement and protection of shareholder rights through effective corporate governance. Cumming and Macintosh (2002) observed that PE/VC managers in high enforcement countries had a greater tendency to invest in high-tech SMBs, exit through IPOs rather than buybacks and obtain higher returns. Cumming et al. (2004) further examined legal system effects on governance structure. Under better legal systems: the faster the origination and screening of deals; the higher the probability of syndication; less frequently funds of the same organization used to invest in a given company; the easier the board representation of investors; the lower the probability that investors required periodic cash flows prior to exit; and the higher the probability of investment in high-tech companies. Lerner and Schoar (2005) show that in a bad legal environment, PE/VC managers tend to buy controlling stakes, leaving the entrepreneurial team with weaker incentives. Interestingly, valuations tend be positively correlated with the quality of the legal environment. Kaplan et al. (2003) go deeper into the contractual aspects and found that rights over cash flows, liquidation and control, as well as board participation vary according to the quality of the legal system, the accounting standards and investor protection across countries. However, more sophisticated PE/VC managers tend to operate in the U.S. style irrespective of local institutional concerns. The authors show that managers operating with convertible preferred stocks are less prone to failure (as measured by survivorship rate). The results suggest that the U.S. contractual style can be efficient in different institutional environments. Bottazzi et al. (2005) corroborate some of the previous results and obtain further evidence on the home-country effect (PE/VC managers operating abroad tend to maintain the investment style used at home). This is observed in managers based in both good and bad legal environments. The Chinese regulations governing foreign venture capital investment are chaotic and rapidly changing. In 2005, Chinese authorities issued new guidelines (effective in 2006) intending to foster domestic venture capital firms. There is no specific regulation to monitor and stimulate the VC activities in China. The new guidelines recommended that local governments provide financing assistance, favorable tax treatment, and direct investment in Chinese venture capital firms. They also provide less stringent capitalization, investment amount, investor qualification and regulatory requirements than those applicable to FICVEs (Guerrera, Yee and Yeh, 2005). FIVCEs instead are governed by 2003 regulations that include high investment and qualification thresholds, government approval requirements, and strict foreign exchange limitations on the ability to remit profits and dividends back to the investor (Hoo, et al 2005a). Substantial legal and de facto restraints on the ability of FIVCEs to access the stock markets in China and overseas for IPO listings make exit strategies extremely difficult. For these reasons, foreign venture capital firms investing in China usually do not use FIVCEs but rely on offshore holding companies created to receive their investments. Foreign venture capital firms (most of which are U.S. based) investing in China generally have done so through the restructuring of Chinese companies into offshore investment vehicles. These enable an easier exit from investments either by selling shares on international stock markets or through a trade sale to another foreign buyer. In January of 2005, Chinese authorities brought these transactions to a virtual standstill, however, with the issuance of new regulations preventing any onshore resident from establishing, controlling or owning shares in an offshore company without the approval of the Government, either directly or indirectly. The regulations were intended to stop managers of SOEs receiving venture capital investments from stripping state assets and selling them cheaply to overseas companies, and to preclude domestic companies from using the overseas vehicles to gain foreign investor tax exemption status. However, they choked off legitimate transactions as well. There were no government approvals of offshore investment transactions in 2005. With only limited exceptions for transactions in process, foreign venture capital financing through offshore investment vehicles screeched to a halt in 2005 (Borrell and Jerry, 2005). Then, in November of 2005, the Chinese authorities issued superseding regulations. These require registration of offshore investment vehicles with the State Administration of Foreign Exchange (SAFE), but do not require the agencys approval of the transaction. They also require repatriation of all distributions of income from the investment within a fixed time frame. Like the previous regulations, the new ones do not describe specifically the registration process, the procedures involved, the scope of review nor the time required for completion, creating substantial uncertainty for foreign venture capital investors (Hoo, et al 2005b). Despite this changing regulatory landscape, many U.S. based venture capital firms have active plans for substantial investments in 2006 spurred by Chinas high growth potential, the success of recent venture-backed startups on the NASDAQ including Baidu.com and China Medical Technologies and by pent up demand after the 2005 halt in new investments (Borrell, Jerry and Aragon 2005). Hidden risk and solutions Lagging legislation and inexplicit policies in China created many uncertainties and entry barriers for foreign VCs. Below are summary of the critical problems: Chinas lawmaking on VC investment remains stagnant Existing laws such as Corporation Law, Joint Venture Law, Patent Law, etc., in many aspects even contradict VC investment. Does VC investment count as foreign investment? What status and treatment should it enjoy? The concerned authorities cannot provide clear answers to these questions. Its not clear that the amount of shares that foreign venture capital is allowed to hold when partnering with Chinese enterprises, and the way foreigners to remit in/out of foreign exchange are poorly defined. There are three available approaches for foreign venture capital firms to enter China venture capital market legally. Establishing offshore venture capital fund focusing on China Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a legal person entity Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a non-legal person entity To avoid the legal and regulation barriers, foreign venture capital funds usually takes the offshore investment route. Foreign VCs will use offshore USD fund to invest into China deals offshore holding entities with all equity activities happening outside of Chinese jurisdiction. The distinction of USD offshore holding investment and RMB local entity investment is a particular phenomenon in China. Offshore holding arrangement is a preferred structure for Chinese entrepreneurs and VCs as it provides a feasible and practical route for funding, divestment and all equity events. Its advantage and attractiveness to Chinese entrepreneurs and VC communities: Go away from laws and regulations in China. Many of them are not friendly to venture activities, such as lack of preferred shares, stock options limitation, double tax etc. Bypassing capital account control on foreign exchange. More flexible and usually profitable divestment options by overseas IPO, MA or trade sales. Offshore route investment involves the following steps: The Chinese founders set up an offshore holding company in Cayman Island or BVI with the shareholding structure and management control mirroring those of their local company in China. With kind of swap scheme, transferring the equity they hold in the Chinese local company to the offshore holding. This will typically convert the local company into a WFOE (Wholly Foreign Owned Enterprise). The offshore holding company will then be the vehicle seeking VC investment, future funding as well as for listing or be merged. All equity events happen in offshore. Companies funding and IPO proceeds will be kept offshore, and remit into China as and when operation required. Chinese founders assets, rights and proceeds stay offshore. The whole exercise is carried out essentially with an IPO at an overseas stock exchange, such as NASTAQ or Hong Kong Stock Exchange in vision. (The concept and process is visualized in chart 5.) Chart 5 Foreign VC Offshore Investment Process Source: A legal perspective on Chinas venture capital rush, Mar 2006 Restrictions in Chinas corporate regulations and limitations at the domestic capital markets explain foreign VCs preference in taking offshore route to organize their China investment. VC investors rely normally on preferred stocks or convertible preferred stock to secure a preferential return. Chinese corporate regulations allow only one class of common stock for a FIVCE with investment in a Chinese portfolio company. Notably, local VC firms would have the possibility to arrange preferred stock scheme with their investee company according to a newly issued charter regulation applicable to domestic VC firms. This gives rise to concern on the principle of national treatment under WTO law. Moreover, China domestic stock market does not provide a ready access for venture-backed companies. The conditions for listing at Shanghai or Shenzhen main-board market are too stringent for high-tech start-up companies. Even if listing conditions could be met, the queue in the pipeline waiting for a listing window is at the moment frustrating. In fact, the two domestic stock exchanges have halted the IPO since two years in the call for addressing the notorious overhang of nontransferable legal person shares. The undergoing endeavor is focusing on floating all stock legal person shares. Since the value of stock legal person shares is roughly twice of those trading in the stock exchange, full floating of legal person shares at stock is imposing acute challenge on the market place. This would mean that the suspension on IPO of new shares would be expected for a rather extended term. By leveraging on an offshore holding structure, foreign VCs could take advantage of the corporate governance in a jurisdiction where they feel most comfortable and bypass the restrictions under Chinese corporate law. VCs could take the Analysis on Current Venture Capital Market in China Analysis on Current Venture Capital Market in China Introduction The huge consumer market potential and booming economy in China attract enormous foreign direct investments to capitalize this unprecedented opportunity. Foreign venture capital is not exceptional from this trend. They, however, still have to face constant challenges from regulations, market practices and business cultures in China. To be successful in this marketplace totally different from their origin, foreign venture capitals need to adapt their previous strategies and experiences and test it through trial and error. This report is to get overall picture about current venture capital market in China. Then it will focus on the market position of foreign venture capitals. The report is followed by the analyses and summary on investment and exit strategies used by foreign venture capitals. Finally, the report will discuss the potential trend in China venture capital market. Key Objectives To get in-depth analysis on current venture capital market in China and foreign venture capitals market position in China. To analyze and summarize the investment strategies and exit strategies used by foreign venture capital in China. To make prediction on future market trend, especially foreign venture capital. Key Chapters General introduction on venture capital Historical development and current venture capital market in China Detail market position analysis on foreign venture capital in China Investment strategies of foreign venture capital in China Exit strategies of foreign venture capital in China Future trends in China venture capital market Introduction on Venture Capital Venture capital is source of funds to small firms that cannot establish credit relationships with bank or other financial institutions. As Gompers (2001) states: Companies that lack substantial tangible assets and have uncertain prospects are unlikely to receive significant bank loans. These firms face many years of negative earnings and are unable to make interest payments on debt obligations. Start-up high tech firms are exactly the type of firms that banks are least likely to lend to because of poor information availability and lack of tangible assets or assets that can be readily evaluated. Firms developing software or new technology for the communications or biotech industries are largely investing in human capital. In a nutshell, the VC firm is a relative small financial services professional organization that functions primarily to: (a) assess business opportunities; (b) provide capital; and (c) monitor, advise and assist the firms in its portfolio. By investing, the venture capitalists accept substantial tranche of illiquid equity that converts their status to something like partners to the entrepreneur. The goal of the venture capitalist is not only to increase the value of that equity but also to eventually monetize the investment through a liquidity event such as an initial public offering or sale to other investors. The other way of reaping the reward is liquidation due to the firm failure and bankruptcy. In all of these scenarios, the venture capitalist exits their investment to complete the VC process. The venture capital cycle is briefly visualized in below chart. Chart 1 Fund flow of Venture Capital Cycle Source: National Venture Capital Association Yearbook 2008 The National Venture Capital Association in the United States defines venture capital as money provided by professionals who invest alongside management in young, rapidly growing companies that have potential to develop into significant economic contributors. There are a number of key attributes associated with VC that distinguish it from other equity capital investments. Venture capital normally focuses on small firms that have great growth potential. These firms usually are not mature enough to be traded in public equity markets. Compared with public equity investment, venture capital investment has poorer liquidity with more severe information asymmetry and higher investment risks. Venture capital investment is also different from angel capital. Managers of angel capital use their personal money to invest. In contrast, investments professionals who raise money from other investors manage venture capital. Angle capital invests more often in the seed stage of the start up firms than venture capital does. Finally, venture capital is different from non-venture private equity investments (such as buyouts, restructure, and mezzanine funds). Firms backed by venture capital usually have considerable growth potential. For these firms, the cash flow generated from operations is usually insufficient to support finance growth and debt financing is usually not available. In contrast, private equity funds target more mature firms that have stable cash flows and limited growth potential. The Table 1 below summarizes the investment stages and types of funding for different investment styles. Table 1. Types of Funding and Investment Stage Source: A Guild To Venture Capital (3rd edition) by Irish Venture Capital Association There are five stages (BVCAPWC, 1998) in the development of venture-backed companies, which can be defined as: 1. Seed 2. Start-up 3. Other early stages (exploration) 4. Expansion 5. Maturity (exit). The definition of the company stage is different with the definition of the financing round. The negotiation of a VC investment is a time-consuming and economically costly process for all parties. Neither the VCs nor the portfolio firms want to repeat the process very often. Therefore VCs have to balance the cost of negotiation and potential risks from one time investment. Typically, a VC will try to provide sufficient financing for a company to reach some natural milestone, such as the development of a prototype product, the acquisition of a major customer, or a cash flow breakeven. Each financing event is known as a round. So the first time a company receives financing is known as the first round (or Series A), the next time the second round (or Series B), and so on and so forth. With each well-defined milestone, the parties can return to the negotiating table with some new information. These milestones differ across industries and depend on market conditions. A company might receive several rounds of investment at any stage, or it might receive sufficient investment in one round to bypass multiple stages. One special situation is the down round. It is when the company does not meet milestones and the VC still needs to invest but at a lower valuation than prior round of financing. Venture Capital in China Why invest in China? There are four major popular arguments behind for the investment rush to east. Reason 1: High Rate of Economic Growth Chinas impressive economic growth for the past 30 years, averaging between 8% to 10% real growth per year, has been the envy of the developing world. The size of Chinese economy by the end of 2006 reached US$2.62 trillion, 13 times larger than that in 1978 when measured in constant RMB (MasterCard Worldwide Insight, 2007). According to Goldman Sachs China economic research (2003), per capita GDP expect to grow from less than $5,000 at that time to more than $30,000 in 2050 (refer to Chart 2). China will have a middle class of more than 500 million by 2025 larger than the entire population of the United States. It represents a huge emerging demand for everything from integrated circuits to cars. 500M mobile users, 130M Internet users, 104M broadband users and 4.5M college graduates every year could all transfer into huge business opportunity (represented in Chart 3). Based on the estimation (Chart 4) from Mckinsey, there will be sustainable market growth to 2025 in every business that related with peoples life and daily consumption. Huge opportunities for venture capital are Internet (B2B, B2C, C2C, online gaming, website portal and web 2.0), semiconductors, technologies (clean energy, medical, biotech and traditional manufacturing), and consumer businesses (food, clothes, shopping and other entertainments). Chart 2 China GDP Growth Forecast (2000-2050) Source: Goldman Sachs 2003 Chart 3 China Energy/Material supply imbalance (2010) Source: Goldman Sachs 2003 Chart 4 Urban Chinese Consumers Demand Forecast (2004-2025) Source: National Bureau of Statistics of China; Mckinsey Global Institute Analysis Reason 2: Inefficient Capital Market In the United States and Europe, private and public capital markets compete as sources of capital. However, China does not yet have an equity culture despite the adoption of market-oriented policies. In China, the public equity market lists inefficient and unappealing state owned enterprises (SOE) most of the times. And government holds roughly 60-70% of share capital of most listed companies. Few private firms are listed in the stock market due to legal and policy hurdle. Chinas bond market is similarly underdeveloped. Chinese corporate bonds account for less than 2% of corporate financing. Thin trading between banks and investors makes issuing bonds unattractive for fundraising or investing. Insurers and fund managers therefore have few fixed-income securities to hedge against mid- and long-term risks. The corporate bond market just started to function in late 2007 by allowing public listed firms to issue corporate debts. Around 95% of financing for Chinese companies now is still provided by bank loans. The domestic banks, however, have tendency to provide loans to stated owned company rather than private firms, especially small and medium businesses (SMB). With the poor functioning financial markets and policy discrimination, venture capital and private equity become important sources of growth capital for private firms. It is one of the key reasons that venture capital is so popular among private firms in China across different industries even including traditional industries like food, hotel and travel etc. Reason 3: Creative Solutions/Early Adopting Consumers One of the most unexpected attributes of the emerging Chinese market economy is how consumer-savvy its entrepreneurs are. Even after decades of centralized economic planning, the Chinese remain consummate creators and marketers of interesting products. Definitely the creativity and innovations are only limited in certain business for talents availability and their professional capabilities. Online gaming, wireless instant messaging, and wireless value added services are just three markets that the Chinese more or less created out of thin air. Each of these businesses has growing customer bases (and have spawned successful public companies like Shanda, Netease, Tencent, and Linktone). But none of them has significant participants yet in the United States. Different consumer behaviors contribute to this phenomenon as well. In below case study on Tencent, it provides a great example on how to innovate the Internet product offerings to cater the needs of online generation. Case study: QQ of Tencent (Adapted from www.tencent.com) Tencent (listed in HK stock exchange) is the #1 Instant Messaging (IM) service provider in China. Tencents IM community counts over 270 million active accounts and is said to be covering 95% of Chinese Internet users and 70% of Chinas IM market (MSN/Yahoo account for the rest market). QQ is the brand for its IM. Same as other IMs, QQ is a free tool to use. Tencent, however, came up the idea to generate revenue stream by allowing users to buy and exchange virtual items (clothes and background image) online to decorate his or her QQ head icon. Tencent even created its own cyber currency called Q Bi and 1 Q Bi = 1RMB (0.14 USD) to facilitate the transaction and reduce barrier of online purchasing. The estimated revenue generated from those Internet value added services in 2007 is around USD$360M. Reason 4: Risk-taking, Innovative Culture In the last fifteen years, the privatization reform is one of the critical forces in stimulating China economy growth. This privatization wave also generated tens of thousands entrepreneurs. The business culture is naturally comfortable with risks and with developing innovative ways to solve problems and create wealth both for individuals and for society at large. The successful stories of VC backed entrepreneurs further promote the risk taking culture in China and the awareness and popularity of venture capital. The Focus Media case below illustrates the power of business model innovation by its unprecedented expansion speed ever in Chinas business history. There is no doubt that foreign VCs played an important role in this story to make Focus Media successful. Case study: Focus Media China (Adapted from www.focus.com) Founded in 2003, Focus Media is Chinas largest Digital Media Group in China now. The founder, Mr. Jiang Nanchun, came up with an innovative approach in operating out-of-home advertising network using audiovisual digital displays. Basically, the idea was to display the LCD near or in the elevators in commercial centers (like office buildings and shopping malls). While waiting for or in the elevators, people would watch the contents advertised in those LCDs. By selecting and contracting with high quality commercial buildings, Focus Media was able to quickly build up its network scale and attract many advertising contracts. Tow foreign VC firms, Soft Bank and UCI, invested in the first round. And another five VCs, CDH, TDF, DFJ, WI Harper and Milestone, invested in the second round. Two years after operation, Focus Media was listed on Nasdaq with USD$172M IPO and now it is part of Nasdaq 100 index. Historical development Infancy stage: 1984 1995 In 1984, the Research Center of Science and Technology Development of the State Science Technology Commission (SSTC) (now the Ministry of Science Technology or MOST) cooperated with British experts to study how to develop high-tech in China. The British experts proposed that venture capital should be developed if China wanted to foster high technology. In 1985, the Central Commission of the Chinese Communist Party and the State Council pointed out in the Decision of Science-Technology System Reform that venture capital could be set up to support the work of developing high-tech with quick change and high risk. It was the first time that the concept of venture capital appeared in an official Chinese Government document. With the government decision to develop high technology industries, the Central Government and some local governments financed and set-up series of investment institutions that intended to pursue the venture capital business from 1985 to 1995. Examples are China New Technology Venture Capital Company, Shenyang Science-Technology Venture Development Risk Center, Shanxi Head Office of Science-Technology Fund Development, Guangdong Science-Technology Venture Capital Company, Shanghai Science-Technology Venture Capital Company, and the Science-Technology Venture Capita Company of Zhejiang Province. Moreover, venture centers (i.e., high tech incubators) were set-up in the majority of national high-tech parks. Simultaneously, some overseas investment banks, funds and venture capital institutions also started to expand their business into China. For example, the Pacific Technology Venture Capital Fund subordinate to IDG entered China in 1992. It cooperated with science-technology commissions in Beijing, Shanghai and Guangdong, and set-up a number of venture capital companies focused on investing in technology companies. Also, some foreign capital or joint stock investment institutions established venture capital businesses. Asia Venture Capital Journal (AVCJ, 2001) shows that $16 million was raised for venture capital investments in 1991. In 1992, the total funds raised jumped to $583million, a thirty-fold increase compared with the $16 million in 1991. The first wave reached its peak in 1995, with $678 million in investment (AVCJ, 2001).The first wave of venture capital investments was brought by international venture capitalists. The international venture capital firms accounted for more than 95% of the total fund raised in the early and mid 1990s. The absolute dominance of international venture capital funds in China in the early and mid 1990s was mainly due to Chinas strict regulations against fund-raising and the general lack of awareness of venture capital in China. Private fund-raising by individuals or private firms without government approval was strictly prohibited in China. This strict regulation essentially removed the possibility for venture capitalists to raise funds within China. It meant that only international venture capital funds and state owned enterprises (SOE) venture capital funds could operate. International venture capital funds could bypass the regulation because they were incorporated and they raised funds outside of China. SOE funds relied on government appropriation as funding sources and did not have this fund raising problem either. Early Growth: 1996 2001 From the mid-1990s, the perception of venture capital shifted from being a type of government funding to being a commercial activity necessary to support the commercialization of new technology. As there were still no laws or regulations about setting up foreign venture capital institutions in China, many overseas investment institutions established their branches in Hong Kong, aiming to invest in the mainland. They had also located representative offices in some major cities, primarily Beijing and Shanghai. Most of the VCs active in China in the early 90s were American firms. The VC industry in the U.S. had matured and attracted a significant amount of funds. Shortly after 1995 a sharp increase from US$5 billion to US$110 billion in funds raised created the phenomenon of money chases deals (Gompers Lerner, 1999). A cadre of experienced American VCs started searching the world for investment opportunities, attempting to replicate the Silicon Valley model. Since 1998, there had been a discernible recognition of the critical success factors necessary to create an environment in which venture capital could operate smoothly and flourish. Specifically, the Governments official decision to support the development of venture capital was the key factor that had allowed Chinas venture capital industry to come into being in a new and more positive environment. In Beijing, alone, there were about 30 independent venture capital institutions, whose capital amounted to an estimated $450 million. In Shenzhen, there were at least 20 independent venture capital institutions with capital amounted to over $500 million. After 2000, China also experienced hard landing in its young VC industry due to dotcom bubble burst and came with huge casualties. It took the VC community 3 years to recover. Fast Growth: 2002 present Although initial government-backed investment operations generally failed, there has been resurgence in venture capital activity since Chinas admission to the WTO (Kenny, Han and Tanaka 2002). Capital available for investment in Mainland China keeps a steady growth trend from 2002. The capital size was increased to US$21.32B by 2007 from US$10.50B in 2002. The average compound annual growth rate (CAGR) reaches 15.2%. Venture capital investment grew rapidly from $480 million in 2002 to more than $3,247 million in 2007, invested in 440 China mainland or mainland-related enterprises (Zero2IPO 2007). According to Zero2IPO report, USD$4B VC funds were raised each year in 2005 and 2006 for China investment. But Chinas annual consumption was no more than $2B. The money chasing deal phenomenon started to emerge in China. Many foreign VC funds, especially first-time funds raised after 2005, had the pressure to pour out investment quickly to avoid US dollar depreciation against RMB and to get better deals under fierce competition. While the funding supply multiplied, quality deal flows did not increase at the same pace. Under the simple supply and demand mechanism, valuations of the China deal kept at relative high level. However, considering the fact that a big portion of funding was focusing on local value-add service segments (i.e. internet, web2.0 and broadband etc.), the issue of funds over-supply was sector specific. To get higher return under the competition, VC firms started to invest in traditional business models such as hotels, travels and fast food chains beyond their core activities such as TMT (Technology, Media and Telecom) or Internet related businesses. It was the special phenomenon happened in China now that VCs were more like PE. Legal and Regulations According to Megginson (2004), the differences in the design and the degree of development of the PE/VC industry are due to institutional factors, with the countrys legal system being paramount. Two major factors are paramount in evaluating legal system: contract law enforcement and protection of shareholder rights through effective corporate governance. Cumming and Macintosh (2002) observed that PE/VC managers in high enforcement countries had a greater tendency to invest in high-tech SMBs, exit through IPOs rather than buybacks and obtain higher returns. Cumming et al. (2004) further examined legal system effects on governance structure. Under better legal systems: the faster the origination and screening of deals; the higher the probability of syndication; less frequently funds of the same organization used to invest in a given company; the easier the board representation of investors; the lower the probability that investors required periodic cash flows prior to exit; and the higher the probability of investment in high-tech companies. Lerner and Schoar (2005) show that in a bad legal environment, PE/VC managers tend to buy controlling stakes, leaving the entrepreneurial team with weaker incentives. Interestingly, valuations tend be positively correlated with the quality of the legal environment. Kaplan et al. (2003) go deeper into the contractual aspects and found that rights over cash flows, liquidation and control, as well as board participation vary according to the quality of the legal system, the accounting standards and investor protection across countries. However, more sophisticated PE/VC managers tend to operate in the U.S. style irrespective of local institutional concerns. The authors show that managers operating with convertible preferred stocks are less prone to failure (as measured by survivorship rate). The results suggest that the U.S. contractual style can be efficient in different institutional environments. Bottazzi et al. (2005) corroborate some of the previous results and obtain further evidence on the home-country effect (PE/VC managers operating abroad tend to maintain the investment style used at home). This is observed in managers based in both good and bad legal environments. The Chinese regulations governing foreign venture capital investment are chaotic and rapidly changing. In 2005, Chinese authorities issued new guidelines (effective in 2006) intending to foster domestic venture capital firms. There is no specific regulation to monitor and stimulate the VC activities in China. The new guidelines recommended that local governments provide financing assistance, favorable tax treatment, and direct investment in Chinese venture capital firms. They also provide less stringent capitalization, investment amount, investor qualification and regulatory requirements than those applicable to FICVEs (Guerrera, Yee and Yeh, 2005). FIVCEs instead are governed by 2003 regulations that include high investment and qualification thresholds, government approval requirements, and strict foreign exchange limitations on the ability to remit profits and dividends back to the investor (Hoo, et al 2005a). Substantial legal and de facto restraints on the ability of FIVCEs to access the stock markets in China and overseas for IPO listings make exit strategies extremely difficult. For these reasons, foreign venture capital firms investing in China usually do not use FIVCEs but rely on offshore holding companies created to receive their investments. Foreign venture capital firms (most of which are U.S. based) investing in China generally have done so through the restructuring of Chinese companies into offshore investment vehicles. These enable an easier exit from investments either by selling shares on international stock markets or through a trade sale to another foreign buyer. In January of 2005, Chinese authorities brought these transactions to a virtual standstill, however, with the issuance of new regulations preventing any onshore resident from establishing, controlling or owning shares in an offshore company without the approval of the Government, either directly or indirectly. The regulations were intended to stop managers of SOEs receiving venture capital investments from stripping state assets and selling them cheaply to overseas companies, and to preclude domestic companies from using the overseas vehicles to gain foreign investor tax exemption status. However, they choked off legitimate transactions as well. There were no government approvals of offshore investment transactions in 2005. With only limited exceptions for transactions in process, foreign venture capital financing through offshore investment vehicles screeched to a halt in 2005 (Borrell and Jerry, 2005). Then, in November of 2005, the Chinese authorities issued superseding regulations. These require registration of offshore investment vehicles with the State Administration of Foreign Exchange (SAFE), but do not require the agencys approval of the transaction. They also require repatriation of all distributions of income from the investment within a fixed time frame. Like the previous regulations, the new ones do not describe specifically the registration process, the procedures involved, the scope of review nor the time required for completion, creating substantial uncertainty for foreign venture capital investors (Hoo, et al 2005b). Despite this changing regulatory landscape, many U.S. based venture capital firms have active plans for substantial investments in 2006 spurred by Chinas high growth potential, the success of recent venture-backed startups on the NASDAQ including Baidu.com and China Medical Technologies and by pent up demand after the 2005 halt in new investments (Borrell, Jerry and Aragon 2005). Hidden risk and solutions Lagging legislation and inexplicit policies in China created many uncertainties and entry barriers for foreign VCs. Below are summary of the critical problems: Chinas lawmaking on VC investment remains stagnant Existing laws such as Corporation Law, Joint Venture Law, Patent Law, etc., in many aspects even contradict VC investment. Does VC investment count as foreign investment? What status and treatment should it enjoy? The concerned authorities cannot provide clear answers to these questions. Its not clear that the amount of shares that foreign venture capital is allowed to hold when partnering with Chinese enterprises, and the way foreigners to remit in/out of foreign exchange are poorly defined. There are three available approaches for foreign venture capital firms to enter China venture capital market legally. Establishing offshore venture capital fund focusing on China Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a legal person entity Establishing a foreign invested VC firm in China (Joint VC with local player/Wholly Owned Foreign firm) as a non-legal person entity To avoid the legal and regulation barriers, foreign venture capital funds usually takes the offshore investment route. Foreign VCs will use offshore USD fund to invest into China deals offshore holding entities with all equity activities happening outside of Chinese jurisdiction. The distinction of USD offshore holding investment and RMB local entity investment is a particular phenomenon in China. Offshore holding arrangement is a preferred structure for Chinese entrepreneurs and VCs as it provides a feasible and practical route for funding, divestment and all equity events. Its advantage and attractiveness to Chinese entrepreneurs and VC communities: Go away from laws and regulations in China. Many of them are not friendly to venture activities, such as lack of preferred shares, stock options limitation, double tax etc. Bypassing capital account control on foreign exchange. More flexible and usually profitable divestment options by overseas IPO, MA or trade sales. Offshore route investment involves the following steps: The Chinese founders set up an offshore holding company in Cayman Island or BVI with the shareholding structure and management control mirroring those of their local company in China. With kind of swap scheme, transferring the equity they hold in the Chinese local company to the offshore holding. This will typically convert the local company into a WFOE (Wholly Foreign Owned Enterprise). The offshore holding company will then be the vehicle seeking VC investment, future funding as well as for listing or be merged. All equity events happen in offshore. Companies funding and IPO proceeds will be kept offshore, and remit into China as and when operation required. Chinese founders assets, rights and proceeds stay offshore. The whole exercise is carried out essentially with an IPO at an overseas stock exchange, such as NASTAQ or Hong Kong Stock Exchange in vision. (The concept and process is visualized in chart 5.) Chart 5 Foreign VC Offshore Investment Process Source: A legal perspective on Chinas venture capital rush, Mar 2006 Restrictions in Chinas corporate regulations and limitations at the domestic capital markets explain foreign VCs preference in taking offshore route to organize their China investment. VC investors rely normally on preferred stocks or convertible preferred stock to secure a preferential return. Chinese corporate regulations allow only one class of common stock for a FIVCE with investment in a Chinese portfolio company. Notably, local VC firms would have the possibility to arrange preferred stock scheme with their investee company according to a newly issued charter regulation applicable to domestic VC firms. This gives rise to concern on the principle of national treatment under WTO law. Moreover, China domestic stock market does not provide a ready access for venture-backed companies. The conditions for listing at Shanghai or Shenzhen main-board market are too stringent for high-tech start-up companies. Even if listing conditions could be met, the queue in the pipeline waiting for a listing window is at the moment frustrating. In fact, the two domestic stock exchanges have halted the IPO since two years in the call for addressing the notorious overhang of nontransferable legal person shares. The undergoing endeavor is focusing on floating all stock legal person shares. Since the value of stock legal person shares is roughly twice of those trading in the stock exchange, full floating of legal person shares at stock is imposing acute challenge on the market place. This would mean that the suspension on IPO of new shares would be expected for a rather extended term. By leveraging on an offshore holding structure, foreign VCs could take advantage of the corporate governance in a jurisdiction where they feel most comfortable and bypass the restrictions under Chinese corporate law. VCs could take the

The Nature of Love Explored in Plato’s Symposium Essay -- Plato Sympos

The Nature of Love Explored in Plato’s Symposium In classical Greek literature the subject of love is commonly a prominent theme. However, throughout these varied texts the subject of Love becomes a multi-faceted being. From this common occurrence in literature we can assume that this subject had a large impact on day-to-day life. One text that explores the many faces of love in everyday life is Plato’s Symposium. In this text we hear a number of views on the subject of love and what the true nature of love is. This essay will focus on a speech by Pausanius. Pausanius’s speech concentrates on the goddess Aphrodite. In particular he looks at her two forms, as a promoter of â€Å"Celestial Love† as well as â€Å"Common Love.† This idea of â€Å"Common Love† can be seen in a real life context in the tragedy â€Å"Hippolytus† by Euripides. This brings the philosophical views made by Pausanius into a real-life context. The speech by Pausanius in Plato’s Symposium divides the goddess Aphrodite into two beings, each responsible for a different aspect of love. To prove the existence of her double life he cites her creation. There are two versions of the birth of Aphrodite, one coming from Hesiod’s work, Theogony, where she is borne out of Uranus’ castrated genitals as they splash into the sea; the other is from Homer’s work, the Illiad, where she is said to be the daughter of Zeus and Dione. (Notes on Plato’s Symposium 180e) From these two vastly different creations she takes on two vastly different forms. Pausanius describes one of her forms as â€Å"Celestial† love. This type of love springs out of the Aphrodite created from Uranus’ genitals. This form is â€Å"wholly male† (Symposium 180c) which inspires men to be a... ... love described by Pausanias as â€Å"Common† love. Throughout the play love is used by Euripides as a key plot factor and in many ways sets the outcome of the play. This love was definitely based on a physical attraction between a male and a female, thus making it â€Å"Common† love. The fact that Euripides uses â€Å"Common† love lends credibility to Pausanias’ philosophical ideas. The appearance of this idea suggests that it had realistic roots. . The events that took place in the play, such as the relationship between Phaedra and Hippolytus, must have been realistic so a Greek audience would believe the story. Even though Hippolytus is a fictional play the events that take place must have their roots in realistic events. This allows us to believe that Pausanias’ philosophical ideal was in fact a real life issue that Athenians dealt with in day-to-day life.

The Psychological Impact on Children Soldiers

Some are abducted or forcibly recruited, others are driven to Join by poverty, abuse and discrimination, or to seek revenge for violence enacted against hem or their families. There is legislation in place that makes illegal any involvement of children under age 18 in hostilities, however it is still rampant throughout the world. The use of Children in war is an epidemic that has plagued humanity since the earliest civilizations and has developed through time. In medieval times in Europe, young boys from about twelve years of age were used as military aids called squires, though their role in actual combat was supposed to be limited.In 1212, the Estevez 2 Children's Crusade rounded up thousands of children, with the notion that they will ucceed in battle due to divine powers that will ensure their victory. In 1814, Napoleon was faced with an invasion and recruited many teenagers for his armies aged between fourteen and seventeen. During the 1800's and the age of sail, young boys form ed part of the crew of British Royal Navvy ships and responsible for many important tasks. Even during the Civil War a 15 year old received the Medal of Honor for his acts during the Civil War Battle of Antietam, the bloodiest day in American history.People under the age of eighteen fought in world war one and world war two, even beside the fact it was illegal. They had age restrictions, but due to the patriotism, of the boys, and the conditions of England they accepted some and others passed by into the military. In Cambodia, during the Vietnam War, a communist group exploited thousands of desensitized children, recruiting them to commit mass murders and other inhuman acts during the genocide in Cambodia. They were brainwashed and taught to follow any orders without any hesitation.I find this a betrayal of the responsibility adults have towards children. In the 16th and 17th centuries, childhood began to be recognized as a different state then adulthood. Society began to see childr en not as miniature adults, but as a person of a lower level of maturity needing the protection, love, and nurturing of an adult to guide them through that stage of their lives. This was the change in society that transitioned to children being given less responsibility than adults.The division Estevez 3 of children and adults became officially recognized, however it didn't eliminate the abuse of children. The use of children in battle and wars has been around for a long time, but has taken a new form in todays society due to the improvement of technology. The early 1900's are regarded as a huge development of war weapons, with the creation of the fully automatic rifle. Through the century, they have involvement of children in modern conflicts that typically involve irregular forces; they usually target civilians. 80% of the fighting forces composed of child soldiers, this is one characterization of the ‘new wars,' which constitute the dominant form of violent conflict that ha s emerged only over the last few decades† (Schauer and Elbert). The motivation for armies or soldiers to recruit children to be use in war is that children have a limited ability to asses risk. It is easier to manipulate the mind of a child than it is a mind of an adult. They have feelings of invulnerability, shortsightedness, and cost less money. Children receive fewer resources, including less and smaller weapons and equipment.They are more likely to get killed or injured in the front lines than their adult counter parts. Children and young adults who are facing poverty, starvation, unemployment, and ethnic or political persecution, can be lured by the idea of becoming a soldier to escape the pain they feel. In interviews from â€Å"The Psychological Impact of Child Soldiering† they say, â€Å"that hildren are more malleable and adaptable. Thus, they are Estevez 4 easier to indoctrinate, as their moral development is not yet completed and they tend to listen to autho rities without questioning them† (Schauer and Elbert).The conflicts that use children in the battlefield usually start by the breakdown of a government. It becomes difficult to identify those who are recruiting and using children as soldiers, making it difficult to influence them to stop. Child soldiers typically raised in environments of severe violence are often made to commit the worst cruelties and atrocities. The children would be repeatedly exposed to these traumatic stress', during the most crucial stages of development. This caused mental and physical damages changing their personalities.Post-Traumatic Stress Disorder is also a common disorder found in children solders, because they are so young they become deprived from a normal and healthy development, impairing their integration into society as a fully functioning being. During the twentieth century the proportion of civilian casualties in armed conflicts has continually increased and is now estimated to be more tha n ninety percent. Half of the casualties are children, and more than 2 million died as a result of armed conflicts over the last decade.In addition to that, at least 6 million children have been seriously injured and between 8,000 and 10,000 children are killed by landmines every year (UNICEF, 2005). Seven of the ten countries with the highest rates of deaths of children under the age of five are due to the affects of armed conflicts in the countries. Estevez 5 In â€Å"The Psychological Impact of Child Soldiering†, they interview three people who had been child soldiers. The first interview was of a sixteen year old boy who had een an active recruit for three years since the age of thirteen, for the group, Mai- Mat.His recruitment process was a lot more civil than the other two. He stated that, â€Å"l was frightened, since our home was attacked almost every night by bandits and other rebel groups as well, what did I have to lose? Also my parents were too poor to send me to school anymore my mind was made up fast, I Joined my friends and from that boy had served five years after being recruited at age fourteen. He says, â€Å"350 strokes were given on my back and buttocks. After a while the pain was so big that I felt that t would be better if I was dead†¦..But then I heard a loud voice: â€Å"Get up. † I tried, but I couldn't sit. I kneeled for almost one hour. I realized that all other children around me had died in the beating. I could see them lying still and not breathing† (Schauer and Elbert 7-8). The next boy was recruited at 13 and served three years as a child soldier, he explains how they would kill other soldiers as punishment, â€Å"When people did something really wrong, they got killed as a punishment .. .1 have seen 5 people being killed for severe disobedience during my time with the group.They were crucified in the forest. Nailed to trees at their hands and feet higher up on tall trees. The nails were thick ones, y ou would first nail through the palms of the hand and later through the feet† (Schauer and Elbert). Estevez 6 It may seem to the individual that some children Join these groups with their own free will, but in a psychological and social point of view, children's choices to Join and remain in armed groups cannot be considered Voluntary. There are reasons or circumstances that may lead children to be more accessible to Join a militant group.

Essay on Human Resources

Essay on Human Resources Essay on Human Resources Sample Essay on Human Resources: My basic plan if hired App sense being a leader in user virtualization for enterprise organizations has in the past won this title through what I believe is sheer hard work from all the concerned quarters of the company. I take note of the fact that App sense has managed to win awards due to the fact I have just outlined. In light of this view, my basic plan is focused in maintaining the success of App Sense and at the same time take it to higher levels. Secondly, I strongly believe that for any company to flourish and prosper in its returns and profits, the organizational culture should be cohesive. Therefore I will strive to get acquainted to my workmates so as to enable a harmonious working environment that is aimed at achieving high performance. (Stutley) Thirdly, it is a known fact that customer satisfaction, cohesiveness among workmates and good relations between the management and employees are some of the factors that are the backbone of a human resource manager. Once again, I take note that App Sense has already established itself in these fields. I say established because the company has realized customers all over the world. Customers like: JP Morgan Chase, Lowes, United Airlines, Wachovia, ESPN and Richard Ellis. My basic plan here is to try and ensure that these worldwide customers are fully satisfied in terms of customer services. While keeping this in mind, I will also develop techniques of increasing the company’s global network. In increasing the global network, as a human resource manager, I will ensure good relations are fostered between the company and the customers so as to secure a long lasting relationship. Outline form of a 30-60-90 plan My first 30 day plan will be geared towards making myself familiar with App Sense Company. By this I mean I will learn company systems. Since App Sense is a company that largely involves the use of systems as its product; user virtualization manages user specific information of the desktop and applying this information on any given desktop- I will have to learn more about this so as to be fully conscious and get a technical knowhow. Secondly, I will strive to master the product knowledge in this case being user virtualization. Thirdly, I will ensure that I address important and immediate needs of the company and also identify areas that should be given priority for action. Lastly, it is vital that I meet with other key members of the company and other key players so as to familiarize myself with them with the aim of learning more about company processes, policies, procedures, norms and the general management structure of the company. My plan for the next thirty days will largely involve the clientele of the company. By this I mean I will ensure that I am introduced to the customers and that I also review customer satisfaction. By reviewing customer satisfaction, I mean seeing if there are ways I might enhance the company-customer relationship with the aim of better results. Also I will strive to ensure that the workforce is not only united but committed to excel. My final thirty days plan will be aimed at reviewing the recruiting structure of the company, reviewing the various functions of the workforce, engaging all departments in effective communication that I might be able to get to know of the situations at hand, reviewing financial records and seeing that business functions are adequately catered for. Research and Review of the Company App Sense, as I have noted above is in the business of user virtualization which entails managing user specific information and applying this information to any desktop. In light of this view I will ensure that I review the company processes and policies so as to see what I can enhance or improve on these issues. With the aim of improving internal competition I will instill competitiveness by reviewing and improving the rewards given by the company by offering rewards on the basis of performance among employee.

Composing the Executive-Level Résumé

Composing the Executive-Level Rà ©sumà © In the ever-competitive career world, the executive level career field is a whole nother ballgame when it comes to applying for and landing jobs in the over $100K realm. With the big bucks and greater responsibility of such positions comes the necessity for a bigger and better presentation when applying for such jobs. In short, the executive-level rà ©sumà © is not the same animal as the plain, concise document that lower totem pole positions might present.Breaking the cardinal ruleFirst off, the executive-level rà ©sumà © is not limited to one page. While most all rà ©sumà ©s in the less than executive realm rarely need to be more than a single page (unless youve got 20 years of work experience to present), the executive-level rà ©sumà © gives weighty details for potential employers to peruse. Additionally, a few meaningful sections are added for the executives rà ©sumà © that arent on other run-of-the-mill rà ©sumà ©s.Summary statementThe summary statement is often wron gly used by rà ©sumà © writers, stating some generic job desire one has, replete with career field buzz words to fill it out. However, the executive-level rà ©sumà © should be a succinct sales pitch in a sentence, letting potential employers know just who they are looking at. Essentially, if someone asked the executive to explain their career life and highlights in a short, descriptive paragraph, the summary is it.Core competenciesThis bulleted list of five to ten strong, relevant skills is a snapshot of your full professional experience. In essence, you want to brag about your most impressive abilities here, not simple tasks like administrative duties or general skills, like prospecting for customers. You want meaty, detailed descriptions of important job functions that show the employer you know your industry inside and out.Highlight those accomplishments!Naturally, everyone should be listing professional experience on their rà ©sumà ©. Whats vital to the executive-level rà ©sumà ©, however, is not just the what, where and when, but the accomplishments that you achieved while there. Executives need to boast, boast, boast their greatest accomplishments in the professional experience section, making sure to include important statistics like sales numbers and quotas reached and exceeded, awards gotten, promotions given (and how quickly), etc. Its a dog eat dog world, so employers are typically looking for the best of the best for their exec positions- you must show them that thats you.The rest of the documentOf course, Education and Organizations and Honors are certainly still meaningful categories to include on your executive-level rà ©sumà ©, or any rà ©sumà ©, for that matter. Whats key, again, is pointing out any extra, outstanding things about that education. Were you on honor roll or Deans List? Did you receive any specific awards or get accepted into elite programs while in college?Military experience and fraternal organizations are equally a s important when it comes to the Organizations and Honors details. Many a bond has been struck by an interviewer when they learn the potential new exec they are questioning is also an ex-Army man or Freemason. Dont miss the chance to point out such associations- they can give you that extra edge.Cover your basesFinally, always package your executive rà ©sumà © with a strong, positive cover letter highlighting your most impressive abilities and accomplishments. That letter should be a tightly written, one-page document that truly sells you as the best choice for the job. And finally, dont get discouraged when you dont land a job in the first few weeks, or even months, of your search. The executive-level job field is highly competitive and specialized, but with a strong rà ©sumà © and perseverance, youre bound to land that next top-notch position in time!

Free Essays on Tragedy In Life Is Beautiful And This Way For The Gas Ladies And Gentlemen

Tragedy is a reappearing character throughout â€Å"Life is beautiful† and â€Å"This way for the gas, ladies and gentlemen.† Even though both Benigni, and Borowski use their own diverse style to approach the issue of the holocaust. In â€Å"life is beautiful† Benigni uses Guidos family to represent values and how they are represented during the holocaust. He does not use vivid images nor do you see any grotesque images. One can beven suggest that he eased the events in his film. While Borowski uses his vivid descriptions to animate the story and capture the reader with his powerful use of imagery. A clear and powerful description of the holocaust and concentration camps could be established from the story. It is not unusual to say that both works deal with the same issue from two totally different sides. â€Å"This way for the gas, ladies and gentlemen† offers vivid descriptions of conditions in the concentration camps during the holocaust; the brutality towards the Jews can be conceived throughout the whole story. â€Å"Heads push though the windows, mouths gasp frantically for air. They draw a few breaths, then disappear; others come in their place, then also disappear. The cries and moans grow louder.† Death is another tragic character in the story; its presence is constantly felt throughout the scenery. â€Å"We climb inside. In the corners amid human excrement and abandoned wrist-watches lie squatted, trampled infants, naked little monsters with enormous heads and bloated bellies. We carry them out like chickens, holding several in each hand† This horrible scene of the narrator carrying out the children further succumbs the horrible atmosphere of the story. This story uses its gory description to capture the audience’s attention, not to keep the read er enthusiastic about reading the story but to enlighten him/her of the situation that went on during those times. We do not see the narrator ease at anytime with his accurate descri... Free Essays on Tragedy In Life Is Beautiful And This Way For The Gas Ladies And Gentlemen Free Essays on Tragedy In Life Is Beautiful And This Way For The Gas Ladies And Gentlemen Tragedy is a reappearing character throughout â€Å"Life is beautiful† and â€Å"This way for the gas, ladies and gentlemen.† Even though both Benigni, and Borowski use their own diverse style to approach the issue of the holocaust. In â€Å"life is beautiful† Benigni uses Guidos family to represent values and how they are represented during the holocaust. He does not use vivid images nor do you see any grotesque images. One can beven suggest that he eased the events in his film. While Borowski uses his vivid descriptions to animate the story and capture the reader with his powerful use of imagery. A clear and powerful description of the holocaust and concentration camps could be established from the story. It is not unusual to say that both works deal with the same issue from two totally different sides. â€Å"This way for the gas, ladies and gentlemen† offers vivid descriptions of conditions in the concentration camps during the holocaust; the brutality towards the Jews can be conceived throughout the whole story. â€Å"Heads push though the windows, mouths gasp frantically for air. They draw a few breaths, then disappear; others come in their place, then also disappear. The cries and moans grow louder.† Death is another tragic character in the story; its presence is constantly felt throughout the scenery. â€Å"We climb inside. In the corners amid human excrement and abandoned wrist-watches lie squatted, trampled infants, naked little monsters with enormous heads and bloated bellies. We carry them out like chickens, holding several in each hand† This horrible scene of the narrator carrying out the children further succumbs the horrible atmosphere of the story. This story uses its gory description to capture the audience’s attention, not to keep the read er enthusiastic about reading the story but to enlighten him/her of the situation that went on during those times. We do not see the narrator ease at anytime with his accurate descri...

Choose from the book Essay Example | Topics and Well Written Essays - 1250 words

Choose from the book - Essay Example The two writers are Steven Schier and Theda skocpol. According to (Schier 124) the reason for political indifference and hence the low voter turnout is due to activating American citizens into political rather than mobilisation as it was previously done. This has led to emergence of progressive movements that have replaced the power that political parties had. These progressive movements are very selective and do not activate all American citizens politically, what they do is select a small group based on their political interest and focus on them. This excludes a large number of American voters from the electoral and political process and therefore most of them have lost interest in being part of elections hence the low voter turnout. According to (Schier 134-150) the earlier 1970s political parties gained influence by mobilising the support of all American voters. This was through carrying out extensive campaigns to appeal to the American people, mass live broadcasting. This method of political mobilisation was extremely effective as it included all Americans and was in no way selective or choosy. This built a sense of belonging among most American citizens and encouraged them to take part in their electoral process. This explains the high voter turnout then. This is no longer the situation; the new era is more focused on lobbying interest groups such high earning American citizens, well educated American citizens and those with high incomes. This has isolated most American citizens who do not fall under this category and most no longer vote. In order to resolve this prevailing situation there is need to restore power back to the political parties as it was in the early 1970s instead of living the whole political process in the hands of interest and lobbying groups (Skier 140-150) This will put control of the election process back to political parties who instead of activation should resort to once again mobilising the entire American population. This will in vite the isolated American population to get involved in the electoral and political system. Although this is a difficult task to achieve, it will completely change the political environment and without a doubt increase voter turnout. I agree with some of Schier’s sentiments as to why there is poor voter turnout in America this is because there is indeed a power shift in American politics as more control is held by the interest groups other than the political parties especially in the election process. I also agree with his commendations to improve the prevailing situation by bringing back mobilisation in place of activation as a political tactic during the election period. I however disagree with Schier when he says that Americans have been isolated from the election process in terms of education level and the level of income. This is because a more than before the election process is fully covered in the media and even social networks. We cannot rationally argue that any Am erican is unaware about the elections due to isolation and give that as a reason for low voter turnout. This is because as much as most Americans may not be involved firsthand in the elections a majority if not all Americans are very aware of the political situation and most times choosing to participate in voting has nothing to do with whether they were mobilised or not. I find Theda Skocpol’s arguments in his book Diminished democracy: From membership to management in American

Creating Graphics for Learning and Performance Essay

Creating Graphics for Learning and Performance - Essay Example Serif typefaces have little extensions at the end of the character. Sans serifs, on the other hand, do not have those little extensions at the end. At large, sans is considered more readable especially in electronic-based presentations such as PowerPoint presentations. This is normally because, in high resolution, serifs are not well shown thus making serif typefaces to lose their readability. Therefore, sans serifs are always preferred to serifs when it comes to the writing of computer-based instructional material. However, most people seem to hold the belief that reading body text written in serif typeface is easier especially for extended text (William &Tollet, 1998). According to William, readability is concerned with the ease of reading the extended text, a lot of text, pages of text, and pages. Can I, therefore, claim that serifs are better than sans for reading? I would say Yes and No. No, sans are rather better than serifs when used in preparing instructional material, when l egibility is the goal.   Thus, this question of whether sans or a serif is better for readability is debatable. Chapter 9 Web activity Q. Attempt one of the web activities below. If activity one is chosen, remember that they are two in number and thus you should do all. The second activity should be carried out in the mentioned forum if at all the writer decides to attempt. Activity 1 Using a black and white typography, the meaning of the following words needs to be expressed in an art form. A typography representing the word Collaboration A typography representing the word Synergy A typography representing the word Bossiness A typography representing the word Alienation Use typography (black and white only) to express the words: A typography representing the word Anger A typography representing the word Discord A typography representing the word Harmony A typography representing the word joy Chapter 9 Challenge Activity Activity: Designing words that express their meaning A design expressing the meaning of the word Exit A design expressing the meaning of the word Typhoon A design depicting the meaning of the word walk Chapter 10 Focus questions Q. 1: Are meanings attached to shapes? Yes, meanings are attached to shapes. According to Hansen (1999), designers get more than classic experience when it comes to simple shapes. Shapes such as circles, squares, ovals, lines, and rectangles all have some instructional attribute or meaning. For instance, when ovals and circles are used, they often portray, or show harmony, unity, focus attention, slow process, and portray elements of subsystems or systems.