Gobi Partners: Raising Fund Ii Case Review

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Gobi Partners: Raising Fund II Case Review Background: Gobi Partners, founded in 2001 by three former WIH employees, is considering opening a second fund. The GPs, known across the industry for their due diligence, presents the idea to the advisory committee for guidance. Although the committee does not approve or deny Fund II, they seem to support a second fund under certain conditions. The GPs are faced with difficult circumstances and personal to global financial conditions; all of which could lead to fund failure. Gobi targets Chinese based, digital media, early stage investments. Position: Although the journey will not be easy for Gobi, they should move forward with the creation of fund II. Strengths: Gobi has proven success in identifying companies with great potential for high returns. With the first fund close to being fully invested, LPs continue to support Gobi’s strategy and refer their colleagues looking for Chinese exposure to them. Opportunity in the Chinese market for digital media startups can be compared to an artist’s opportunity to create on a blank canvas. Without prior digital infrastructure such as copper lines or coax cable, the network can be developed using the latest technology immediately without relying on phased in enhancements. China offers close to limitless potential for financial based on the projected growth of GDP, Population, and the increasing demand for digital products as the middle class expands. Exhibit A forecasts the eight year growth potential of digital media by subtracting the US cell phone adoption rate (68% of population in 2006) from the 400MM cell phone users in China in 2006. When the population growth of 0.6% is forecasted to 2014, the number of potential cell phone subscribers grows approximately 6M per year. This does not ramp up the current gap of 500M users based on % of population. Obstacles: Gobi has not

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