The Rise Of CVC Power: Patience Capital Encourages Long-Term Innovation, "Taking Money Or Standing In Line" Means Or Exaggerated.

Unlike IVC (independent venture capital, independent venture capital) with financial return as its main purpose, CVC (enterprise risk investment, corporate venture capital), which has both the parent company's strategic needs, is playing an increasingly important role in the private equity market.

Especially in the current difficult environment of raising funds, CVC can provide more capital for start-ups with the help of parent company's strong financial support and technical support. Such a high tolerance of failure in the short term is conducive to encouraging long-term success in innovation and thereby rewarding high returns.

"In the past ten years, CVC has been developing rapidly. At the beginning of this century, CVC accounted for only about 5% of the scale of venture capital. But in the past five years, CVC has accounted for more than 20% of the total investment scale. The number of new CVC in the world has increased exponentially, reaching the highest level in 2017, reaching an annual growth rate of nearly 50%, which has slowed slightly this year. In December 17th, Tian Xuan, vice president of Wudaokou Financial College of Tsinghua University, said at the venture capital 2019 China enterprise strategic investment and Enterprise Innovation Summit.

In the Chinese market, Lenovo, Tencent, Alibaba and other companies took the CVC layout as early as possible. Recently, Tencent investment management partner, Li Zhaohui, vice president of Tencent group, has disclosed that since 2008, Tencent investment has invested many companies in games, entertainment, electricity consumption, local services, financial technology and other fields. At present, nearly 70 listed companies and more than 100 become unicorns. Alibaba CFO Wu Wei also said in September that Ali has withdrawn from more than 50 investment projects and achieved an investment income of 18 billion yuan.

Eco companies are more suitable for CVC layout.

In fact, CVC is not only a game of big companies. In recent years, star startups such as headlines, Shang Tang technology and so on are also exploring CVC with the help of capital strength. So what kind of enterprise is suitable for CVC? What stage should the enterprise develop to do CVC?

According to Shen Jing, managing director of Qualcomm global vice president and managing director of Qualcomm ventures in China, from the experience of the United States, enterprises that need synergies of industrial chain will consider CVC or strategic investment. But there are new features in CVC in China. For example, the unicorn companies like Shang Tang are making investments and doing well. If the enterprise is concerned about the upstream and downstream industry chain, if there is such a demand, it can make CVC investment.

In addition, Shen Jin emphasizes that money is also guaranteed for CVC. Because the company's strategy may change, this year's important business will not be that important next year. But as long as the project is profitable, it will be meaningful no matter this year or next year.

"Investing is the first thing to do well in the job. The project must be profitable, and the financial return is very important. Of course, there is also CVC saying that strategy is the most important and the return on investment is second. But both for me and for Qualcomm venture capital, both are important. He said.

He Zhiqiang, senior vice president of Lenovo Group and President and managing partner of Lenovo venture capital group, also believes that making money is the passing line of CVC, but CVC really needs to serve the company's strategy and strike a balance between the two. Now, the technology of the open air, the American regiment and so on are all doing CVC, which is not much related to time, and is closely related to the purpose.

"Whether enterprises invest in CVC or need to combine their strategic needs, the demand for investment by ecotype companies will be more intense. Enterprises that are very vertically oriented may not be suitable for investment." Li Zhaohui said.

He said that there are many ways and forms of investment, some enterprises may not be suitable for equity investment, but it is suitable for mergers and acquisitions. For example, CISCO and other representative American business service companies, its growth history is a history of mergers and acquisitions.

Tencent investment is still dominated by a small number of equity investments. "In the past few years, we will do a little more mergers and acquisitions in some suitable areas, but we are still very cautious." He said.

Accepting CVC investment is not an either or a stand.

For start-ups, does accepting CVC investment mean standing teams, which will have a huge impact on the company's future business direction?

"People often say that the matter of queue up, I do not think this matter is so serious." Li Zhaohui said, "many enterprises have accepted the investments of Tencent and Alibaba, and we all live together in peace. In the long run, whether it is internal or investment, it is a very important ability to balance the relationship between the parties, and the team is not necessarily an either or a process.

He said that different enterprises have different business strategies and investment strategies, and the styles of Tencent and Ali are very different. Ali emphasizes the integrity of its business and its strong control over the business. Tencent emphasizes the support of entrepreneurs and emphasizes more open and competitive marketing and socialization. There is no direct conflict between them, and more often depends on when and where entrepreneurs choose to be more suitable for their investors.

Shen Jin, who had previously accepted the twenty-first Century economic report, also said that different CVC had their own different practices. The industry did have some CVC rules. For example, after accepting investment, they must use their products and even some exclusivity conditions. They will think that since entrepreneurs want to get CVC funds, they have to accept such conditions.

"But Qualcomm won't make such a restriction. We are open and we want to be able to grow. If we restrict their growth with all kinds of restrictions, I think this is against our original intention of investing. " Shen Jin said.