Early Alibaba bets look golden

Some experts say that despite the dizzying profits, foreign investors should make sure they have removed any semblance of rose-colored glasses before jumping in. Unfamiliarity with a foreign market and potential regulatory concerns are factors to consider, they say.

Still, there have been more than enough winning hands to tempt the hardy.

South African media company Naspers made $40 billion from a $34 million investment in what was then a startup－Tencent Holdings Ltd－the owner of the QQ messaging service and WeChat mobile messaging app, now valued at $120 billion. It is one of China's big three Internet firms, along with Alibaba and search engine giant Baidu Inc.

The venture capital firm Draper Fisher Jurvetson owned nearly one-third of Baidu when the Beijing-based company went public in the US in 2005.

JD.com Inc, China's second-largest e-commerce player after Alibaba, raised $1.78 billion in its US IPO in May.

Backers of JD include foreign investors such as US investment firm Tiger Global, DST of Russia and Prince Alwaleed bin Talal of Saudi Arabia.

Two decades ago, when the world's most populous country gained access to the Internet, Chinese dotcom companies, most of which were private, were desperately seeking investors.

Foreign venture capital firms with deep pockets and mature systems of investment were seen as knights in shining armor by many Chinese Internet startups, which worked to make themselves attractive investment prospects.

"Most of the Chinese TMT companies have business models that originate in the Western developed countries," says William Ng, Deutsche Bank director and head of sales of global equity services for Greater China.

"It is easy for foreign investors to understand Chinese Internet companies. For example, Alibaba can be sold to Wall Street as the Chinese Amazon. Weibo is known as the Chinese Twitter."

Ng, whose bank has been helping many US-listed Chinese dotcom companies with their American Depositary Receipts, says that TMT is the Chinese sector that meshes best with the US venture capital system.

"The US market provides Chinese TMT companies with a comparatively friendlier growth environment. Regardless of whether you are listing on NYSE or NASDAQ, there are more flexible regulations." Ng says, adding that stock markets in the Chinese mainland require companies to be profitable for three years in a row to go public, a very tough rule for Internet startups.

In the case of JD.com, for example, despite being China's second-largest e-commerce company by market share and listed in the US in late May, it broke even for the first time only in 2013, 10 years after the company was founded in Beijing.

Western venture capital systems, US dollar-based funding and the rather flexible Western IPO regulations all create an ecosystem suitable for the growth of Chinese TMTs.