Global growth consulting leader Frost & Sullivan(Frost &Frost & Sullivan, abbreviated as: Frost & Sullivan) The 18th Frost & Sullivan China Growth, Innovation and Leadership Summit and the 3rd New Investment Conference (hereinafter referred to as:The 2024 Frost & Sullivan New Investment Conference) will be held in Shanghai from August 28th to 30th, 2024.
On August 28th, the morning's 'New Investment' roundtable forum was hosted by the Shanghai Branch of Sino-Global Newswire (Beijing) International Communication Group. Cao Hui, Director of the Shanghai Branch of Sino-Global Newswire (Beijing) International Communication Group, served as the moderator. The forum invited Fei Jianjiang, Managing Partner of Yuanhe Yuanpoint, Ji Wei, Founding Managing Partner of Huaying Capital, Dr. Xia Zhaoyang, Founding Managing Partner of Common Investment, and Zhang Jiacheng, Managing Partner of Haier Capital, to engage in a lively discussion on the current state of venture capital 'fund raising, investment, management, and exit'.
subject toThe slowdown in IPO pace has affected the 'exit' process, posing challenges to subsequent fundraising. However, some institutions have over-subscribed. The participating guests admitted that the current market has put forward higher requirements for corporate founders and investment institutions, and they need to possess adaptability.
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Market challenges outweigh opportunities
Regarding the current market environment, Ji Wei stated that the industry faces significant challenges in fundraising, investment, and exit. Of course, opportunities also exist alongside these challenges, but it depends on how entrepreneurs and investors can seize them. Venture capital institutions have the attribute of effectively allocating resources, which plays an important role in promoting the development of new productive forces. At the same time, investment institutions also need to adapt to market changes.
Founding Managing Partner of Huaying Capital Ji Wei
Xia Chaoyang also said that it is indeed the pressure that outweighs short-term opportunities, mainly because globally, geopolitics are becoming increasingly complex; at the same time, the downward pressure on the Chinese economy is also increasing. Currently, there are more structural market opportunities, but overall, the pressure is significant. From the perspective of enterprises' desire for successful development, they hope to maximize all resources"all Angel investors, as early-stage shareholders, play a significant role in the startup and development process of enterprises, which places higher demands on the post-investment management of institutions, especially their post-investment service capabilities.
Common investment executive directors, founding partners Dr. Xia Chaoyang
Jack Ma also said that to overcome current difficulties, in fact, in the pastThere have been pessimistic voices in the market for 2-3 years, but there is an optimistic attitude towards more opportunities ahead. The current situation is changing too rapidly; previously, there was a trend every three years, but now it's one every two or three months. For businesses, founders, and investment institutions, they need to possess adaptability in the future.
Regarding both exits and fundraising, Fei Jianjiang mentioned that currently, the venture capital industry faces more challenges than opportunities. Objectively speaking, venture capital institutions are facing huge contradictions at the upstream level.LPs are continuously raising DPI requirements, which conflicts with the increasing difficulty for downstream companies to exit. The pressure from both links inevitably affects investment, requiring investment institutions to find suitable investment strategies at this stage amidst the gaps.
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Why do some institutions overraise funds against the trend?
In terms of fundraising, what changes have occurred in current fundraising methods? How are institutions adjusting their fundraising strategies?
According to Fei Jianjiang, Yuanhe Original Point has completed Phase IVThe fundraising of 1.961 billion yuan is still focused on early-stage investments and technology, with a commitment to investing in hard technology and healthcare. There will be slight adjustments in specific sub-sectors. For an early-stage investment firm, this scale is a bit on the large side. The main goal is for Yuanhe Yuandian to reserve more resources during difficult times in the industry, maintaining sufficient vitality and competitiveness.
Yuanhe Origin Point Management Partner Fei Jianjiang
At the end of last year, Common Investment announced the completion of the first fundraising and filing for its Phase II Science and Technology Innovation Fund. It is worth mentioning that there was also a Phase I fundThe LP reinvestment ratio exceeds 70%. "Since 2021, there have been significant changes in the fundraising market. However, as an early-stage technology startup investment institution based in Beijing, which focuses on technological innovation, we completed the fundraising for a new fund at the end of last year with overfunding and introduced state-owned capital cornerstone investors."
Xia Chaoyang analyzed that from the perspectives of timing, location, people, and harmony, there are changes as well as constants.In terms of 'timing', the focus of this fund period remains on early-stage investments in the field of technological innovation, as technological progress is the most core element driving economic growth. In terms of 'location', the role played by state-owned assets in equity investments in China is becoming increasingly important, gradually taking on a leading role, providing convenient conditions for successfully introducing cornerstone investors of state-owned assets from Beijing. 'Human factors' are dynamic and adaptable; in the new fund period, it is common for investment management teams to contribute a quarter of the fund's portfolio.
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"M&A exit" is unlikely to become mainstream
asThe crucial 'last-minute push' is related to the exit strategy, which affects the next round of fundraising. However, since the second half of last year, the pace of IPOs has slowed down, impacting the exits of venture capital institutions.
"There is a consensus in the investment community that it is better to manage well than to invest well, and managing well is better than to exit well." Jack Cheung also stated that for achieving investment returns, investment, post-investment management, and exit are all crucial.
Haier Capital Management Partner Jack Ma
So, how feasible is the exit strategy through mergers and acquisitions? In Xia Chaoyang's view, exit through mergers and acquisitions is actually a very important channel for foreign investments. In the early stages of the US market, the proportion of investments exiting through mergers and acquisitions exceeded70%. However, in terms of China's venture capital market, the development of M&A exits is indeed not yet sufficient. To address this, we should start from the initial investment phase, allowing founders to gradually understand the methods of M&A exits. They should actively choose potential investment opportunities from related industry chain leaders or potential acquirers by going through the entire process from technical engineering, productization, 'first-of-kind' products, to application and finally large-scale deployment.
Fei Jianjiang stated bluntly that mergers and acquisitions will not become our primary exit strategy within three years. This is because mergers and acquisitions are an ecosystem that requires maturity before they can be scaled up on a large scale. Currently, in China, exiting through mergers and acquisitions has not become mainstream.S fund is just a supplement to exit methods.
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