Change Of Investment Situation: Persistence And Cross Boundary In The Stock Age

In the fierce competition of equity investment industry, how does GP seek differentiated investment path? With the continuous expansion of the scale of funds under its management, should GP seek cross-border or choose to stick to it? How can GP balance the different demands of foreign capital, state-owned capital and private market-oriented LP in the environment of difficult fund-raising?

On December 17, under the guidance of Zhuhai Municipal People's government and Nanfang finance and economics all media group, the 10th China Innovation Capital Annual Conference was held in Zhuhai, sponsored by 21st century economic report and 21 finance app. Seven guests from Shengdao investment, Hongyi investment, panlin capital, Lvdong capital, Jinlong capital, Kunzhong capital and CCV, founder partner, discussed the above topics in the round table dialogue session with the theme of "investment changes: persistence and cross-border".

Cao Yonggang. Information map

Cao Yonggang, managing director of Hongyi Investment Co., Ltd

The most important thing of differentiation is not to follow suit and test judgment and determination

Hony investment was founded in 2003. We started from private equity investment. At the beginning, we mainly engaged in the relatively back-end M & A investment. Now, we have Hony venture capital business oriented to the early venture capital market. In addition, Hony investment is also extending to real estate investment and secondary market investment, and is becoming an investment management organization with comprehensive layout in relevant diversified fields.

In terms of investment differentiation strategy, I think the most important subtext behind the differentiation is not following the trend, which reflects the investors' judgment on the market and their own determination. In the past 20 years of the development of China's private equity investment industry, there are often some institutions in each stage. As they adapt to the so-called "tuyere" in this stage, they will rise rapidly and form a trend. A few years later, with the change of the market structure and the adjustment of the regulatory environment, the trend relied on disappeared in the market, and these institutions correspondingly ended their historical mission.

After 2010, this phenomenon is more obvious. With the rise of the Internet, a number of new institutions and investors are constantly pushing up the heat of the market, and many so-called tuyeres or important hot spots appear. Whenever such a hot spot appears, there will be a group of institutions rushing to the market, causing corresponding impact and extensive attention in the market. But in retrospect, we need to be clear about how long this trend can last. My feeling is that this cycle is getting shorter and shorter. At the same time, I think that when an organization focuses on tracking hot spots in the market, it is difficult to form differentiated competitiveness and stick to it. But when these turbulent market changes precipitate, we will eventually find that some core things will never change, such as deepening in a certain field, and only deepening in a few selected fields because we know the boundary of our ability.

From the investment stage, great changes have taken place in the industry. For example, in the past, everyone was very clear about whether to do PE or VC, but now this trend has been broken. A team with in-depth knowledge of the industry can start to invest in the industry from the VC stage, all the way to the M & a stage. Such a comprehensive layout is of great significance to continuously improve the control and cognition of the industry.

In addition, as an investor, in addition to judging or tracking the hot spots of the market, so as to find investment opportunities, the ability to control the operation level and the cyclical laws of the industry is more and more needed in the market with rapid changes in macroeconomic environment, in the fields that we are familiar with and stick to for a long time. This will determine an organization's ability to resist risks and its life cycle, and determine whether you can hold on to and stick to it in the face of good opportunities. I think this is the most precious thing after more than ten years of history.

Take pharmaceutical investment as an example. In the past year or two, a large amount of capital has poured into such highly innovative fields as biological innovative drugs to support those enterprises that are still in the phase II clinical stage or even earlier stage. Of course, some enterprises are relatively mature and have entered phase III, constantly pushing up the valuation of enterprises. After the listing of special enterprises on the science and technology innovation board and the Hong Kong stock exchange, the valuation of special enterprises has taken a new leap. From the perspective of return, it seems to be a good explanation for investors at present. But in retrospect, we should also consider that there are 23 pharmaceutical stocks listed in Hong Kong this year. How many of these 23 enterprises will survive in three years? Different from the U.S. innovative drug market, due to the different market environment, industry changes and regulatory environment, if the new drug approval, access to the medical insurance catalog and other issues are not solved, many things are just capital talk.

Looking back on differentiation, if we have a deep and long-term understanding of China's pharmaceutical industry, we can make some different layouts. For example, some enterprises that used to do traditional chemical drugs have done a lot in market cognition, industry layout, sales network and so on. They can establish merger and acquisition platform together with long-term investors, put innovative drugs in highly mature sales channels, and better combine innovative products with mature networks. Therefore, my understanding is that the differentiation of investment should be based on the in-depth understanding of China's market and industry changes, so as to know what the market wants and ultimately bring good answers to investors.

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Xue Mengjun, managing partner of panlin capital:

The difference of organization is reflected in the word "do"

Panlin capital, which was established in 2010, is a RMB fund. We focus on early investment mainly on round a. Although panlin capital has been established for 10 years, it has not invested a lot of projects. We pay more attention to the success rate of the project, and basically there will be continued additional investment in the project.

At present, we mainly focus on two investment directions. First, medical treatment. We focus on the subdivision of innovative drugs and high-end medical devices, mainly involving major diseases such as cancer, cardiovascular disease and chronic diseases. The second is enterprise level service. The focus of our investment is digital and intelligent transformation of the consumer supply side.

Differentiation is an eternal topic, because frankly speaking, the entry threshold of investment industry is not high, but it is difficult to do well. At present, there are 120000 investment institutions in the industry, so each company should form its own differentiation and characteristics. In the long run, the problem of differentiation is actually how the professional equity investment institutions build their own core competitiveness.

But from a strategic point of view, the equity investment industry also has convergence, and there are many common points. For example, in recent years, we focus on the same areas, such as medical and health, digital intelligence, industrial Internet, etc., but there will be differences in some subdivision tracks. In addition, some companies in the industry have moved forward from PE to VC, and the former VC companies have also moved back to PE and M & A.

To talk about differentiation, it is mainly reflected in how to do it. Good projects are done. Therefore, how to create the differentiation of an organization should be reflected in the word "do".

For equity investment institutions, the core competence is mainly in three aspects: first, judgment, to judge things and people. Just like panlin who has been working for 10 years, many people go to see all the projects we cast. The final results are different, and there are differences in judgment.

Second, the ability to find and excavate projects requires high-quality project sources. Third, how to manage the project after investment is not only a problem of risk control, but also how to provide value-added services to the invested enterprises as much as possible. Especially in VC, when we invest in many projects, the scale is quite small. How to guide this enterprise to avoid detours in the development process, and how to make these founders grow into entrepreneurs quickly is what we should do as an investment institution.

In terms of fund-raising, we all have a deep understanding of the diversity of LP demands in China. In the past few years, LP's emphasis on return, especially on cash return, has increased significantly. A more obvious signal is that when we go to raise funds, previously LP people may ask how much the return is. Now it is not to say how much the book return is, but how much money GP has allocated to LP. We are concerned about DPI. Especially in the past two years, various types of LP pay more and more attention to cash returns, even the government guided funds can not accept losses. This requires GP to pay more attention to exit in the process of project management.

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Bai Bo, chairman and CEO of Lvdong capital:

Deep understanding of the industry is the core competitiveness of GP

Green capital was established at the end of 2016, and the current scale of funds under management exceeds 15 billion yuan. From the perspective of characteristics, first of all, green capital should be regarded as a relatively early and relatively large pure market-oriented green influence private equity fund in China, and we also fully run the impact evaluation throughout the entire investment decision-making process. Second, we focus more on technology driven industries and business services.

When we talk about differentiation strategy, in many cases, we are talking about differentiated investment mode, but I think the purpose of differentiation is the core. As fund managers, we must first of all abide by the commitment to LP, so maximizing the return is the first purpose. However, the differentiation of green capital is reflected in the second purpose, that is to create financial returns and pursue green influence at the same time.

To achieve the above goals, it is necessary to establish a profound knowledge and understanding of the industry. In my opinion, this is the core competitiveness of each GP. Green capital is based on the original intention of promoting carbon neutral and green development, and the team's long-term deep cultivation in industry and business services, which determines our investment theme. Under this theme, combined with the development stages of different industries and business models, as well as the technical path, to find a suitable segment for our focus.

After having a deep understanding of the subdivision track, we will systematically identify 5-10 leading enterprises on the track, and then conduct bottom-up screening. This process needs the help of GP capability circle and ecological resource circle, that is, the ability of project "source seeking". There will also be differences in the project "source seeking" ability and post investment management ability of each GP. In the end, what kind of way to invest and what kind of return is just the result.

For example, in the iron and steel industry, we have done a very systematic industry research, and finally found that driven by 5g, Internet of things and other digital technologies, the iron and steel industry is undergoing many interesting changes, and the whole production and manufacturing has become intelligent and green. There are many investment opportunities, such as the recovery and recycling of steel slag, which is suitable for the early growth period investment from round a to round B.

In addition, the steel industry is also suitable for M & a funds and special opportunity funds. Green capital, together with Baowu iron and steel and China Merchants Group capital, carried out the bankruptcy reorganization of Chongqing Iron and steel. The whole process was very difficult, but the results were very happy. This is actually the embodiment of GP differentiation - based on the understanding of the industry, we can look for investment opportunities in different ways in the upstream and downstream of the industrial chain.

Of course, it has something to do with the ecosystem we're building and our technological background. From a technical point of view, our company has nearly 30 people, most of whom are from science and engineering background. From the perspective of the ecosystem, there are Anshan steel, Baosteel, Chinese Academy of Sciences and other enterprises in our strategic ecosystem, which makes us have certain advantages in the selected track.

To sum up, the ultimate goal of differentiation is to create value for LP more effectively. If GP wants to have the ability of cross cycle, I'm afraid it should focus on the field that they are good at and stick to the industry they are good at. The means and methods of transaction can be cross-border, but cross industry should be a process of gradual accumulation.

There are some differences between us dollar LP and RMB LP in raising funds. In my opinion, the appeal of US dollar LP is mainly financial return, while RMB LP is not necessarily. In the process of raising RMB funds, we realize that different types of RMB LP have different demands, which is actually a great test for GP.

For example, there are many central enterprises LP behind the China US green phase I fund managed by green capital. Why did they invest in us? I think in addition to maintaining and increasing the value of capital, they also hope to form industrial synergy by participating in market-oriented funds, especially green influence funds such as green dynamic capital, so as to jointly promote the green development, transformation and upgrading of the industry. Chongqing Steel's bankruptcy reorganization is an example. We have set up a special fund to do this project. Finally, through our work, we brought real changes to this enterprise, promoted the rebirth of the local steel industry, and fulfilled our commitment to LP.

As investors, in the long run, we are a passer-by after all. But we want our work to really create value and change. In this process, it also reflects the professional ability of GP. In fact, when we raise funds, we promise LP whether it is industrial collaboration or anti investment, we should be conscientious to cash in. And when we say it and do it, the road will be wider and wider.

Yang Fan. Information map

Yang Yi, founding management partner of Jinyi capital:

Building a great team, ecology, research and project portfolio

Jinlong capital was established two years ago, when it was also the most difficult time for the whole industry to raise funds. We have gone through new regulations on asset management and national deleveraging. This year, we have encountered the global new crown pneumonia epidemic. Therefore, we are a typical enterprise against the trend, but we have completed the fund-raising excess.

We focus on investing in the most potential leading enterprises in consumption upgrading and industrial upgrading, and have built a top-level team, ecology, research and project portfolio. The team will take the initiative to research, explore and invest in large opportunities with long-term structural growth, and support social entrepreneurs with great vision and pattern.

Our differences are reflected in three aspects: first of all, our founder team belongs to the first group of people engaged in private equity investment in China, and it is a team growing up together with China's private equity investment industry. The founder team of Jinchang capital has invested nearly RMB 40 billion in the past decade, creating long-term and cross cycle outstanding performance. Jinlong capital has gathered a very professional team, continuously introduced more best practices in institutional construction, and practiced long-term value investment.

Second, in the past 15 years, the founder team of Jinchang capital has adhered to the value investment concept driven by in-depth research, invested and supported China's most successful leading enterprises in various stages of the enterprise life cycle, such as Baili and Delma in the growth period of the enterprise, invested in Huaxi biology and Haier electric appliance group in the prime of the enterprise, and helped Chinese enterprises to go out to sea and assist United He wanted to acquire IBM's global PC business, which led to the largest cross-border M & A in China at that time; he also helped Chinese enterprises return, for example, from the privatization of focus media in the United States to a shares (the largest leveraged buyout in Asia at that time), built a complex structure and designed extremely sophisticated trading plans; during the transformation period of the enterprise, he invested in Li Ning and Pacific Insurance to help the company turn losses into profits. There are many similar examples. Just because it is lucky to explore investment opportunities at all stages, support and accompany the growth of China's best enterprises, Jinchang capital understands the needs and challenges of enterprises at all stages, and has sufficient experience and resources to provide the assistance and support they need most.

Third, we often say that Jinlong capital is "ecological capital". The diversified ecology we have accumulated over the years can provide enterprises with the help they need in the aspects of brand marketing, flow, customers, products, supply chain, technology, M & A and capital market.

As for the future development of Jinlong capital, I think that the strategy will lead the future. Our strategy is to continuously strengthen the differentiation advantages of the fund by creating excellent teams, research, ecology and project portfolio.

First of all, in terms of team, we have gathered a professional PE investment team with concept, vision and ambition, and made value investment with correct methodology. Only a professional, institutional and vision driven platform can bring together excellent investors to work together and practice value investment and value creation for a long time.

The second is research ability. We attach great importance to research ability and take the initiative to study and explore the big opportunities in the big theme. Jinlong capital believes that deep research and value investment are a continuous linkage relationship.

Third, we are committed to continuously creating a diversified cross-border ecology, in which LP, consultants and other partners are organically structured. In Jinlong's ecology, it always insists on promoting cross-border collaboration and bringing multi-faceted empowerment to the invested enterprises.

The fourth is the project portfolio. Jinlong capital invests in the most potential leading enterprises in the track of consumption and industrial upgrading, many of which are world-class enterprises.

For example, in the consumption upgrade track, we are very optimistic about "beauty economy" and "healthy life". Huaxi biotechnology, which invested last year, is the leading enterprise in this field and the largest hyaluronic acid enterprise in the world. This enterprise has been favored by Jinlong for a long time because its terminal markets, including cosmetics, medical care, food and so on, are big markets with high ceiling. What Huaxi biology is doing is to let technology stimulate everyone's vitality.

In addition, we are also very optimistic about the theme of rational consumption. Later, Jinlong capital invested in famous and innovative products. With China's industrial cluster and cost advantage, mingchuang is the largest retailer of brand daily necessities in the world. This enterprise wants to bring happiness to the whole world, so that we can know that the best is not necessarily the most expensive.

Consumption has become the first engine driving China's GDP for many years. With the emergence of new consumer demand, flow, content, supply chain and infrastructure, a new consumption era has come. While consumption has become the biggest structural opportunity in the next decade, the incubation, growth and listing of national consumer brands are often inseparable from the promotion of private equity investment institutions. We hope to contribute to the progress of society and the improvement of people's living standard through our excellent team and research ability, as well as promoting the cooperation of ecological network.

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Xue Yuning, CEO of Shengdao Investment Co., Ltd

Focus on the consumption of holding investment

Founded in 2016, Shengdao investment is the private equity fund management platform of Wuhan contemporary group. At present, Shengdao manages more than 10 funds, with an accumulated management scale of more than 5 billion yuan.

In the first two years of its development, Shengdao is similar to most VC companies in the market. It mainly makes minority equity investment, and its projects cover sports, consumption, education, science and technology. In 2018, Shengdao began to transform, mainly focusing on the consumption of holding investment. At present, Shengdao investment holdings of three or four enterprises, including Jiangzhong dietotherapy, easy fruit fresh and so on.

In the current market environment, for new institutions, unless there are strong classic cases in the past, they can easily get funds. Otherwise, the new organization must have something different from other ways to raise funds smoothly.

Shengdao chooses to be a differentiation strategy of holding investment in the consumption field. First, we have a strong post investment team, which can help enterprises to do fine operation. For example, after we took control of Jiangzhong dietotherapy, we helped it from loss to profit. Second, corporate cash flow in the consumer sector is very good.

There are also some funds that are good at holding transactions in the market, including foreign KKR and 3G capital, domestic CITIC Industrial Fund and Hillhead capital. But we believe that the biggest difference between Shengdao and them is that their ultimate goal is to earn high returns for the fund. Shengdao is "taking advantage of the financial situation to become the real industry". The fund return is one aspect, but the ultimate goal of the team is to become a large industrial holding group mainly focusing on consumption.

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Yao Haibo, founding partner of Kunzhong capital

Through the innovation of investment side and exit side, the differentiated competitiveness is formed

Kunzhong capital was established in 2016, focusing on the layout of scientific and technological innovation field, which is the logic inherited by Kunzhong capital from the first day of its establishment. In February this year, Kunzhong capital completed the establishment of the US dollar fund.

In fact, investment means "raising, investing, managing and withdrawing". Since this year, the innovation of Kunzhong capital has mainly reflected in two aspects. In terms of investment, we have invested in excellent companies like Xiaopeng automobile. Kunzhong capital invested in Xiaopeng automobile in round A. now the market value of the company is close to 40 billion US dollars.

At the same time, we have also invested in companies such as Xianhui technology, Suteng juchuang and Wenyuan Zhixing. They both invest in each other and are suppliers to each other. Therefore, in fact, we have formed a preliminary ecological closed loop for investment in travel technology.

In terms of exit, we completed the establishment of Kunzhong US dollar fund in the form of s fund. At present, Kunzhong capital has invested in more than 40 projects, of which 7 projects are converted into US dollar projects through s fund, which not only enriches the management of GP, but also is a good injection of US dollar LP assets.

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Nie Dongchen, partner of CCV

A good investment strategy should be in line with the team's own genes and capabilities

Founder partner CCV is a brand newly established in 2017 under the leadership of Zhou Wei, the former managing partner of KPCB in China. In the past 10 years, the team has focused on the investment layout of China's early VC industry. The investment is mainly round a, with cases of Jingdong, Himalaya and exploratory.

Now, CCV has made investment layout around cutting-edge science and technology, industrial Internet, digital medicine, and new crowd consumption. Star cases include several Kun technology, playful mobile, ice science and technology, Korean pine classroom, and the smart logistics solution warehouse just announced C + round financing. Over the past three years, we have received two IPOs - wanka Yilian (1762. HK) and Quecheng (605183).

When it comes to the differentiation of investment strategies, we believe that investment strategies ultimately serve the growth of the entire fund. Therefore, the choice of strategies must be based on the GP's understanding of the entrepreneurial cycle and return cycle, the ability of their own team, as well as their understanding of market awareness and competitive situation. Finally, the uniqueness of the strategy should be able to serve the investment of the entire fund for a long enough period of time, otherwise it will become a mere slogan.

As far as CCV is concerned, the founder of our fund and three of its partners have had successful entrepreneurial experience. Zhou Wei started his business in University for 11 years and is a pioneer in China's financial technology payment industry; Melissa is the co-founder of tujia.com, and Zong Jun is involved in the start-up of DOTC united group. I personally have entrepreneurial experience in sharing economy.

Based on our deep understanding of entrepreneurship, we firmly believe that the right path for early investors is to accompany entrepreneurs from start-ups to greatness, which is the original intention and mission of our fund; in addition, we firmly believe that technology can enable human beings to enjoy the wonderful life of "dreams come true". Therefore, we have formulated the strategy of focusing on early stage, focusing on technology investment and accompanying entrepreneurs to start their own businesses, which has also been effectively verified. Based on the above strategies, as well as our ability to manage international top dollar funds and our deep understanding of China's domestic market, we believe that early stage funds must find the largest whale in the future, so that early investors can realize their dream of joint venture and bring high returns to LP.

In this industry, when it comes to strategy, in addition to the return of real gold and silver, mature LP is very concerned about whether GP insists on long-term and effective investment according to its claimed strategy. And in this process, based on the good investment results, reverse verify that your differentiation strategy is effective enough. This is the positive cycle, which is CCV's understanding of strategy differentiation.

Different institutions will adopt different investment methods. For example, some institutions need to lay out the track, some need to do multi-point layout in the industrial chain, while some organizations keep the concept of small and refined to do single point layout. Therefore, different strategies must be consistent with their own team's genes and abilities in the end, which is a good and successful strategy.

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