by Loren Fox

January 14, 2000

For years, the global nature of the Internet was like the weather: Everyone talked about it, but no one did anything about it. But in recent months, U.S. venture capital firms have cast their eyes overseas. To become truly global, they would do well to look at the example that Lip-Bu Tan has set.

Tan is the founder and executive chairman of Walden International Investment Group, a venture capital firm that invests in U.S. and Asian companies. The firm, which has over $1 billion under management, has a true international flavor, with headquarters in San Francisco and 15 offices throughout Asia.

Using its network of Asian and American contacts, Walden International seeks to help Asian companies attract attention and money in the United States, and help U.S. companies expand in Asia.

For example, Walden introduced portfolio company Terawave Communications, a U.S. optical networking firm, to Singapore Telecommunications, which became a customer. "Our goal is to invest globally and add value globally," Tan says.

Among Walden's large portfolio of holdings are such well-known U.S. names as About.com and Vitesse Semiconductor. Walden also invested in Looksmart, the Web search engine, nearly two years before its August 1999 initial public offering, and well before the company was known in the United States. Tan knew of LookSmart because of a venture between Walden and an Australian investment firm.

Bullish on Asia. Naturally, Walden International also has stakes in many Asian companies. For example, the firm has a 10 percent stake in MediaRing, an Internet telephony provider that listed on the Singapore stock exchange in November. Walden's investment of $3.8 million was worth $20 million by early December, Tan says.

Walden International's most recent venture fund is the $328 million Pacven IV Fund, which began investing in the spring of 1998 with a goal of investing two-thirds of its money in Asian companies and one-third in U.S. startups. The Pacven funds are almost entirely for U.S. investors, but the firm's tradition is in funds for Asian investors.

Walden's international flair likely came from Tan's background. He grew up in Malaysia and went to college in Singapore, then in 1978 moved to the U.S. to get an engineering degree at the Massachusetts Institute of Technology. He joined the U.S. investment firm Walden Group in 1984, and expanded the small outfit's horizons to Asia. Two years later, Tan started Walden International with a $20 million Taiwan fund.

Walden International focused on Asian investors in the early years and offered its first fund for U.S. investors in 1994. Tan remains bullish on Asia, which is expected to see a huge rise in Internet usage. Walden International remains affiliated with Walden Group, and also has an affiliate that invests in Israel.

Some 80 percent of its current investments are in communications-related industries, Tan estimates. Although its average investment size is $5 million to $10 million, Walden International prefers to invest early in a company.

VCs looking east. Traditionally, U.S. venture capital firms haven't shown an international focus in their investing strategies. Tan theorizes that the bountiful opportunity within the United States and the time commitment of overseas investing has limited its appeal.

"But I think that's changing now," he says, noting that Warburg Pincus, Goldman Sachs, and other U.S. investors have adopted a more international outlook. For one thing, the Internet has made the high-tech market more global. But another reason is the lofty prices that Internet startups can command in the United States.

"I can still do Internet investments in Asia that value a company at $5 million, while in the U.S., it's almost impossible to find an Internet company pre-venture money valued under $20 million," Tan says.

Even with U.S. firms taking their checkbooks overseas, Walden International has an early lead in going global. Tan says , "I think we've created a real sweet spot for ourselves."