Now we’re talking about some serious money!  I wrote about some of the fund raising activities among Chinese outsourcing companies back in January.  At the time, I was happy just to report that some companies were starting to be able to attract investment.  Recently, rumors started circulating about Worksoft raising $30M.  I guess that the rumors were true - here’s the story from Red Herring’s perspective.  If my algebra skills serve me correctly, that brings the total amount that they’ve raised to somewhere around $37.5M.

So, Freeborders has taken $20M, Worksoft has taken somewhere around $37.5M.  These sorts of numbers make me really wonder what they’re going to do with the money.  When I was learning about these things, we were taught that software services companies are great because they don’t require much capital to start and they generate lots of operating cash (if they are run well).  Both of these are especially true for Chinese outsourcing companies.  So now we have a couple of software outsourcing companies with China based operations raising relatively huge piles of cash.

There’s a good deal of speculation about what they plan to do with the new capital infusions.  It seems clear to me that they are not going to use it to expand their China operations organically (the numbers are off by an order of magnitude).  I also doubt that they’ll be using it solely to build up their sales & marketing teams.  My best guess - and this is pure speculation on my part - is that they’re loading up for some M&A activity.  Neat how I timed that with my last post, eh?

Technorati Tag:  China