ill Hambrecht discusses the opportunities and challenges of investing in Asia based on his twenty years of experience investing in the region.

WR Hambrecht’s OpenIPO^® is leveling the playing field among investors, issuers and the investment banks and has been called one of the few disruptive innovations in modern finance.

In addition to WR Hambrecht+Co, Bill co-manages Hambrecht Ventures I focused on disruptive technologies. If you would like more information on this series of conversations with Bill, contact Peter Morrissey at 415-551-8613.

I have been driven to build a business in China since starting Hambrecht & Quist Asia-Pacific in 1984. At Hambrecht & Quist we were one of the first US-based firms to make Asia a priority. In fact, Hambrecht & Quist Asia-Pacific still exists, independent of both the old H&Q and WR Hambrecht + Co.

From my first visit it has been clear that Asia in general and China in particular would be a rich source of opportunities for many decades. To have a large economy like China sustain such high growth rates is amazing. We are seeing China move through several epochs of economic development in just a few years: from an agricultural society to a manufacturing powerhouse and now to an information technology and services-based economy.

Historically the best investment returns come from countries that are using capital to make a key transition that will allow them to leap ahead in productivity and wealth creation. China is growing so quickly that as soon as one transition is complete it is already starting the next one making additional opportunities for investors.

We are. Although we are active throughout the Pacific Rim our strategic focus is on China and the greater China area for a number of reasons.

First, as I noted before, China is big and growing fast which creates more opportunities than anywhere else in Asia.

Second, the team we have built at WR Hambrecht + Co, including Lee Ting and Robert Eu, have deep experience in China. Lee ran Hewlett-Packard’s operations in Asia and is now on the board of Lenovo and Robert Eu has spent many years investing in, building, and advising Chinese companies.

Finally, the particular conditions of China: an entrepreneurial culture fed by infusions of management and capital from the overseas Chinese whether in Taiwan, Singapore or the United States, is very well suited to our experience in helping emerging growth companies.

Investing in China involves significant risks, but fundamentally investing is about finding and taking prudent risks. We have decades of experience in China so I like to think we have a better handle on those risks than most others.

One of the frustrating things about China for most U.S. investors is that many relationships and rules that Americans expect to be clear, consistent and legally enforceable seem murky and incoherent to a foreigner. Part of that is reality and part of that is bringing unrealistic expectations to a country that has a lot fewer lawyers than we do!

Our experience allows us to understand these risks and mitigate the frustrations of working in China. Cultural and transactional experience helps our team understand implications and relationships that may be invisible to an outsider. In addition, deals and investments can be structured in ways that either provide the clarity needed, or align incentives so that everyone is on the same page.

We think that China is going through two different economic transitions right now. On the supply side, China is moving from being the world’s manufacturer to being an information and service-based economy. On the demand side, the rising wealth of the Chinese is building a brand new consumer market.

Our investments seek to benefit from one or both of those economic transitions. For example, we have an investment in YeePay, an electronic payments company. As the country becomes an information and services-based society, electronic banking should grow much faster than cash-based payments. As wealth increases, we expect that consumers will demand an efficient way to purchase goods online or with their mobile phones.

Another investment we have is in an electronic advertising company, ePIN, providing Wi-Fi and video advertising on China’s railroads. Consumer goods companies are expected to increase their advertising spending in China to capture the growing market and we think the company’s solution also leverages the growing technological sophistication of Chinese companies and consumers.