Recent capital market activity amongst the Yellow Pages suggests the colour could well stand for solid gold. Compared to the newest software 'killer app' or mobile phone breakthrough, business-to-business (B2B) yellow pages directories may not set the blood of every private equity specialist racing. But they have provided very high returns to their owners, thanks to the advertising revenue they can raise from small and medium-sized businesses - for whom the yellow pages are often the only marketing outlet.

Reflecting the 40% profit margins the sector has achieved, several notable deals have occurred. 2003 saw the almost S$200 million IPO by Yellow Pages Singapore, as well as the $2.1 billion UK IPO by Yell Group, which owns the US and UK yellow pages. The most spectacular deal occurred when the Carlyle group paid over $7 billion for Qwest's yellow pages unit in 2002.

Given this background, it is not surprising that Qian Xiaojun, CEO of Beijing United Media Information (IBI), and Liu Quan, the Chairman, should be sitting in their office in the Southwest of Beijing with an unmistakably satisfied look on their faces. After all, in a few short years, their company has become one of only two major players in the B2B yellow pages sector with a roughly 35% share of the industry's ad revenue.

Many entrepreneurs come across as double acts, and these two are no exception. Liu, dressed in a dramatic combination of striped black shirt and checked trousers, has an attractive amiability and animation about him. His partner, Quan, speaks more quietly, in sentences which are concise and to the point.

Like any decent entrepreneur, they assure me that money is the furthest thing from their minds. And unlike most entrepreneurs, it is tempting to believe them.

The car designated for picking up guests is a huge Ssanyong Chairman, replete with imitation-wood paneling, massive bucket seats and powerful engine. Even more impressive is the multi-story building in which the interview is held: It is all theirs, thrown up for Rmb20 million in cash and still smells of fresh paint.

Not bad for two men still under 30 in what is basically their first job after university.

The two represent an interesting aspect of Chinese entrepreneurialism, namely the gradual way it has become the preserve of China's aristocracy, whether they be top students or former cadres.

That is partly a reflection of what has happened in the rest of the world. Originally the preserve of outsiders, eccentric geniuses, workaholics and even criminals, entrepreneurialism has become an increasingly elite activity.

Top universities believe they can make entrepreneurs by supplying them with the right tool kits. People who would previously have become bankers and lawyers are now turning to setting up their own businesses as a way to financial success.

The same is happening in China. After the success of the so-called 'prison generation' in the 1980s, men who had nothing to lose and who made their fortunes through personality and drive in low-tech industries, university students began to take note.

Quan and Liu both graduated from Beijing People's University in 1998 and seemed set on conventional careers when they graduated. Liu was due to join a foreign-invested enterprise while his partner was looking to the less glamorous but safer option of a government post.

However, during their time at university helping out their tutors with academic research they had dealt a great deal with publishing houses. As they tried to track down the right research materials for their professors, and find the right company to publish their tutors' findings, they became aware that the most basic industry-specific information was almost non-existent in China.

"There was a clear asymmetry in information in the business to business publishing sector, so we saw a gap in terms of providing industry information, sector by sector, " notes Liu.

For those not familiar with China, it is difficult to overstate the value of good information. Even the research done at the top universities and think tanks fails, by a wide margin, to fill the gap.

Government cadres set the tone for information distribution. They keep as much information to themselves as possible, since they would much rather arbitrage good information than distribute it publicly for nothing. It is a country where somebody without the right connections has little access to even basic information such as the right person or department to contact within a company.

Still, the nature of a society where the exploitation of inside information is the foundation of wealth and power is gradually changing as commercialization takes hold. People within an industry need each other.

Customers need suppliers and vice versa, and everybody needs accurate basic information relevant for contact purposes. With an estimated 22 million small businesses within China, it is clear that finding the right partner within a reasonable time would be an onerous job without some outside help.

A quick glance at one of the dozens of directories filling a bookshelf in the partners' office shows that this help could now be at hand. The basic contact information is supplemented by an industry analysis and other bonus materials. Most impressive from a business point of view is the sheer weight of advertising, which appears to be two to three times as thick as the section with the contact information.

It was an understanding of the evolving need for business information that prompted the two friends to take a gamble on filling the gap after graduation in 1998. Ignoring the outcry of parents, teachers and friends they pooled their savings and raised a total of Rmb300,000 to set up their first business.

"We knew that timing was crucial, so we moved as fast as we possibly could," says Quan.

They were right. After all, collecting the raw data might be frustrating and tedious, but it is not technically challenging. And a competitor might just buy a copy of the directory and try to sell at a cheaper price. But like the industry all over the world, the sales of the directories are a much less important source of income than the advertising.

With the most obvious entry barriers this low, others had to be built. Over the past seven years, it became a matter of raising the company's profile, establishing a brand, and forging strong relationships with the key players in order to make the company the leading advertising vehicle in its space.

The key relationship is with the industry association in each sector. These provide the initial, usually very disorganized and fragmented hard copy contact information, policy reviews, and industry analysis. IBI pays them a flat fee for doing so. IBI then converts that information into a professional database, before organizing, designing and selling the advertising, and printing and distributing the books.

The industry associations do have one key attribute: With their government connections and long history they can help to promote the IBI publications to firms in their sector.

The partners focused their earliest reports on the big, high-growth, capital-intensive industries, such as the oil and chemical industries, steel and machinery. "All the areas in which national GDP growth was most strongly reflected," says Liu.

The business model seems to be working well. The company employs 1,000 sales people and has 40,000 clients. That translated into more than $10 million in turnover last year, a figure the partners hope to grow by 20% in 2005.

"The remarkable thing about this company is that it exhibits all the traditional virtues of the yellow pages business, such as high margins, strong cash flow and so on, but with the prospect of huge growth. That's the Midas element which is missing in the mature Western markets," says one venture capitalist familiar with the company.

Working with an industry growing that fast, it is important to provide an increasingly modern offering, and the partners are set to migrate their hard copy data base online.

"Once it's all online, we will also have many more opportunities to play with the information and to offer further value-added services such as market research," says Qian. Indeed, it is to that end that the company is beginning to look at strategic partnerships and IPO possibilities.

It is sometimes difficult to understand the motivation of China's entrepreneurs other than the obvious search for wealth. US entrepreneurs, while fully enjoying the material rewards, often display a belief in the virtues of free markets, hard work, creativity and risk amounting to a secular religion.

But Liu and Quan somewhat indignantly refute the idea that they are merely interested in money. They point out that graft in government service, or work with a foreign company, would have provided them with ample remuneration.

"We want to be business heroes," explains Liu. Difficult as that is to define, it might be that just by working to make information in China more accurate and more accessible to the masses they will achieve that very goal.