Elite Investor Series Report: The IPO Explosion Maximizes VC / PE Exit Earnings, And The Future Good Fund Must Be Dual Currency Fund

Due to the reform of registration system, VC / PE ushered in a big outbreak of IPO this year. By the end of August this year, nearly 300 enterprises in the market had already approved the meeting. The Dachen team predicts that by the end of this year, the number may exceed 400, and even reach a new high next year.

"Former British Prime Minister Churchill once said," don't waste a good crisis. ". The epidemic is a crisis and a good time to increase investment. " During the 2020 global PE forum held on September 8, Liu Zhi, founding partner and chairman of Dachen financial intelligence, said in an exclusive interview with the 21st century economic report.

Liu said that Dachen's strategy this year is to increase investment. From January to August this year, Dachen invested in 37 companies with a total investment amount of nearly 2 billion yuan, achieving 100% growth compared with previous years. These projects mainly focus on medical and health, new generation information technology, consumption and other fields.

Take the medical and health field as an example, in the past, the allocation proportion of Dacheng in this field was about 20%. But this year, health care accounts for one-third of total investment in Dacheng. "On the one hand, due to the epidemic situation, people pay more attention to medical and health investment. On the other hand, medical and health investment is indeed the industry that is least affected by the economic cycle, and has a good anti cyclical Liu said.

Technological innovation and consumption upgrading are also the two main tracks that Dachen pays attention to. Liu said that in terms of science and technology innovation investment, we must pay attention to the development of core technology and bottom technology, especially the reform of frontier technology. Independent control and import substitution will be the strongest theme of venture capital in the future. At the same time, under the policy of internal circulation as the main body, China's consumer market is brewing new investment opportunities.

The reform of registration system guarantees the exit of VC / PE

Since this year, the epidemic has disrupted the lives of many people, adding factors such as the global economic downturn and Sino US trade friction, which have an impact on China's economy and PE investment. But among many uncertainties, China's epidemic situation was controlled earliest and its economy recovered fastest.

From an investment point of view, a series of policies and measures introduced by the state this year have gratified investors, Liu said. For example, the implementation of the new securities law, the formal implementation of the new third board selection layer, the implementation of the gem registration system, etc., the capital market is constantly reforming and becoming more open, which has brought good protection for the exit of VC / PE.

"The registration system with information disclosure as the core is a revolutionary reform of China's capital market. We believe that this is another great reform after the reform of non tradable shares in 2005." Liu said.

Due to the reform of registration system, VC / PE ushered in a big outbreak of IPO this year. By the end of August this year, nearly 300 enterprises in the market had already approved the meeting. The Dachen team predicts that by the end of this year, the number may exceed 400, and even reach a new high next year.

Liu said that under normal circumstances, for VC / PE Institutions, IPO Exit earnings are greater than M & A exit earnings, and M & A exit earnings are greater than repurchase exit earnings. The IPO of the project in the capital market enables VC / PE to maximize the exit earnings, which is conducive to the formation of a virtuous circle in the industry.

Dachen also benefited from the implementation of the registration system and the introduction of the former science and technology innovation board for more than a year. Liu revealed that since last year, Dachen has harvested 9 listed companies on the science and technology innovation board. Since the beginning of this year, 13 projects have been listed on the market. It is expected that there will be about 18 projects for the whole year.

From the perspective of the industry, this year is undoubtedly a bumper year for RMB funds. Many institutions claim that the number of IPO projects this year has reached a record high. However, in the case of a single project with a stable return of US $10 billion, it is not as good as that of a single fund with a long-term return.

"In the past, this phenomenon was quite obvious. Many of our investment institutions in Shenzhen have the same feeling. Investment in a lot of listed companies, but not as much money as the U.S. dollar fund. But I think that with the passage of time and the maturity of RMB funds, this pattern will change. " Liu said.

In the past, foreign dollar funds started earlier than RMB funds in China, which led to the development of RMB funds. In the early stage of development, many things are in the water testing stage. Because the scale of fund-raising is generally small and the amount of investment in a single subject is also small, it is difficult for a single project to be as heavy as the dollar fund.

But now, the RMB fund is gradually developing and growing, and it is also beginning to add more investment targets. For example, in 2010, Dachen invested 60 million yuan in Shangpin home accessories, holding 30% of its shares, which was the first large amount of financing for the domestic furniture industry since the outbreak of the financial crisis in 2008. In 2017, after Shangpin Jiapei was listed, Dachen still held more than 20% of its shares. Such a heavy position investment can bring more than 30 times return to Dachen.

After the 20 "crown addition", it will extend its business to asset management

The competition between RMB fund and US dollar fund is not only in the investment side, but also in the fund-raising side. Today, Sequoia, Hillhouse and many other U.S. dollar backed institutions have appeared in the investment list of government guided funds, but the process of raising US dollar funds by RMB based institutions is relatively slow.

"This is mainly due to different LP populations." Liu said. Many U.S. dollar funds have entered the Chinese market for 10 or 20 years. They can easily find LP in China and raise RMB funds. However, if you want to have a strong relationship with foreign funds in the US dollar fund, you need to find a foreign fund with a strong relationship with foreign funds.

"If there is no personal relationship, and you are not familiar with large LP such as insurance companies and pension companies in Europe and the United States, you will naturally not be able to raise money, which is the biggest constraint." Liu said.

Dachen has also issued a dollar fund, but the scale is not very large. "In the future, a good fund must be a dual currency fund, and its investment is also in the domestic and foreign markets. This must be a standard configuration, and we will work in this direction. " He said.

As far as the 20th anniversary of the outbreak was concerned, we didn't want to celebrate the 20th anniversary of the outbreak. But in fact, Dachen team has also done a lot of internal work. The team summed up the 10 DNA of Dachen at the 10th anniversary, and also summarized the 20 principles of Dachen at the 20th anniversary.

"Over the past 20 years, we have become more and more aware of our mission and vision." Liu added, "Dachen hopes to be a fund manager satisfied with investors, making good use of and managing every cent. To be a long-term partner satisfied with entrepreneurs, support and promote the innovation and growth of enterprises. To be a good platform for employees' satisfaction, to gather and achieve outstanding talents and realize their dreams. "

"In the past 20 years, there are so many things worth summarizing, reflecting and improving. Dachen also feels very lucky. We have enjoyed the fruits of 40 years of reform and opening up, especially the dividend of rapid economic development in the next 20 years. " Liu said with emotion.

Along the way, Dachen's focus has changed with the times. Ten years ago, the team focused on investment in cultural media, consumer services, energy conservation and environmental protection, and modern agriculture. At present, the investment fields focused on by Dacheng still include cultural media and consumption, and also extend to the new generation of information technology, medical and health, military industry and other fields.

"With the gradual growth of the team, we cast a lot more things than before. More importantly, in the past two years, due to changes in the international situation and other factors, we have paid more attention to investment in science and technology, independent innovation and independent controllable technology. It's a change in our cutting-edge thinking, and it's our biggest change. " Liu said.

After 20 years of development, Dachen has laid a solid foundation. Liu revealed that in the next five years, while continuing to do a good job in venture capital, Dacheng will appropriately extend to the direction of asset management, and may also become M & A fund and s fund. "We also see that some peers are making investments in the primary and secondary markets, or trying to be a master fund. However, we will still decide on the future development mode according to our own genes." He said.

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