Exclusive Dialogue With Wei Zhen In The Eyes Of Top PE Α And Β

"If a PE organization does not have a very prominent business in China, it can not be called the world's leading PE. Just like 30 years ago, the world's leading PE companies needed a very successful U.S. business. " Recently, Wei Zhen, CO president of Warburg Pincus investment in China, said in an exclusive interview with the 21st century economic reporter.

It has been 27 years since Warburg Pincus opened its first Asian office in Hong Kong in 1994. It is one of the first international top PE companies to enter China. Similar to the PE asset class created in the United States 55 years ago, Warburg Pincus's entry into China in 1994 not only introduced PE into the country where the first stock exchange was established three years ago, but also opened the explosive growth of China's VC / PE industry in the past 30 years.

Different from Carlyle, Blackstone, KKR and other similar global PE Institutions, Warburg Pincus has been adhering to the growth investment concept since its establishment in 1966. This is highly consistent with the general environment of China's economic development in the past 30 years. With the rapid growth of China's economy, Warburg Pincus investment has developed from the initial investment of 30 million yuan to the leader of China's VC / PE industry, with an annual investment of more than 13 billion yuan, cumulative investment of more than 100 billion yuan, and asset management scale of more than 140 billion yuan.

"China's GDP increment has contributed more than 30% to global economic growth, ranking first in the world. At the same time, the scale of investment and asset management of Warburg Pincus in China accounts for more than 30% of the world's Warburg Pincus, which matches the global contribution rate of China's economy, and such a high proportion is rare in the global PE market. " Wei Zhen said.

Today, Warburg Pincus China, led by Wei Zhen, has an investment team of more than 50 people and a professional post investment team of 30 people. The investment scope covers five high growth areas, including consumption, science and technology, financial services, health care and new infrastructure. In the transition period of China's economic growth from "high speed" to "high quality", under the situation of accelerated competition, differentiation in February 8 and constant strength of the strong in China's VC / PE industry, how to continue to lead the innovation and development of the industry has become a topic in front of Wei Zhen, the third generation leader of Warburg Pincus in China.

In this interview, Wei Zhen shared with the 21st century economic reporter several decisive factors for keeping Warburg Pincus China Evergreen, facing the future changes and changes, as well as the "entrepreneurial spirit" he always adheres to.

Evergreen "key"

21st century: as a global PE giant that has been in China for nearly 30 years, what is the secret of keeping Warburg Pincus investment evergreen in China and what are the main decisive factors?

Wei Zhen: if evergreen trees want to grow well, good soil is the first factor. China's "soil" is very good. At present, China's economy has become the second largest in the world, with the fastest growth rate among major economies. At the same time, the number of Chinese entrepreneurs is huge, the level is also world-class, entrepreneurial atmosphere is great.

Second, the genes of the tree itself should be suitable for the soil. Warburg Pincus investment was founded in the United States in 1966, creating the PE asset class. Warburg Pincus has been adhering to the growth oriented investment concept since its inception, so helping enterprises "grow" is deeply rooted in the "gene" of Warburg Pincus. This gene is suitable for the soil of China. China is a growing economy, and Warburg Pincus is positioned as a "entrepreneur growth partner" in China.

Third, the timing of sowing is good. Warburg Pincus entered China in 1994. It was the first international PE institution to come to China and created the PE asset class in China. I joined Warburg Pincus in 2002, moved to Beijing from Hong Kong at the end of 2003, and founded Warburg Pincus Beijing office. Early entry into China has first mover advantages. For example, the team has been localized very early and trained a large number of investors with deep insight into the Chinese market. Over the years, we have been lucky to win together with the best entrepreneurs in China, and have built an excellent reputation in this group. In the long run, these advantages will form compound interest effect.

Fourth, big trees have deep roots. Warburg Pincus has benefited from three factors. First, we have a very large amount of capital. Warburg Pincus raised about 160 billion yuan (about 25 billion US dollars) in a cycle, which brought us financial strength. The second is our global partnership system, where our sources of income are more dispersed, and are not affected by the turbulence in a certain time point, a country or a certain capital market, which makes our decisions more stable and firm. Third, we have a long history in the industry. Over the past 55 years, Warburg Pincus has witnessed the formation and collapse of various asset bubbles, and is well aware of the huge and extensive impact of each generation of technological innovation. Since 1966, Warburg Pincus has experienced 13 fund cycles in the world and 7 fund cycles in China. This year, Warburg Pincus will raise fund 14. It is because after so many cycles, all kinds of bubbles and technological innovation, we can look at the opportunities and challenges in different periods from a longer-term perspective.

Change and invariance

21st century: under the increasingly fierce competition in China's PE industry, what changes and changes does Warburg Pincus have in China?

Wei Zhen: first of all, we should think about what is unchangeable. First, the positioning and mission of Warburg Pincus will not change. Our positioning is "entrepreneur growth partner", and our mission is to help Chinese entrepreneurs "lead China and change the world". Second, we should make full use of Warburg Pincus's advantage of large amount of capital. This is in line with the rapid development scale and financing demand of Chinese enterprises. Third, our 27 years of experience in China enables us to look at the growth of enterprises from a longer-term perspective and to accompany the growth of outstanding entrepreneurs for a long time. Finally, Warburg Pincus's global resource advantages. With the rapid development of Chinese enterprises in many fields, this advantage of Warburg Pincus will be more prominent.

Therefore, we have four advantages: positioning mission, large amount of capital, long-term company and global resources. The good tradition will not change, and it is also the core element for us to cope with future competition.

On this basis, we are also thinking about what needs to be changed.

First of all, the investment style of Warburg Pincus has always been very flexible. We have invested in round a and round B projects, as well as the first and a half projects of private placement and projects in the secondary market. Next, we should focus on systematically broadening the scope of our investment industry chain.

Second, it should be more diversified in the currency and exit channels of funds. Warburg Pincus China is currently raising its first RMB fund. In the past, many of China's large technology and innovative companies were listed on NASDAQ and Hong Kong, China. With the full implementation of the registration system and the launch of the science and technology innovation board, more and more Chinese innovative enterprises will choose to be listed in A-share market in the future, which has a milestone significance for the diversification of exit channels of VC / PE industry.

Third, the PE industry used to be a partnership, apprenticeship oriented organizational model, with experienced masters and apprentices training for many years. With the expansion of business scale and investment industry chain, group development will become an inevitable choice for Warburg Pincus, a comprehensive head organization. As PE, we first serve three types of people: entrepreneurs, investment and post investment teams and LP. In the future, on the basis of continuing to serve these three groups of people, we should also add the three elements of brand, resources and culture, strengthen the construction of these three elements, and combine the needs of the three core groups, and walk out of the transformation from apprenticeship, partnership system to group organization mode.

"21st century": the involution of industry competition is attracting more and more attention, especially in the Internet industry, which is the most competitive, resulting in a huge waste of resources. Do you think capital plays a role in dissolving or boosting competition?

Wei Zhen: all economic activities are full of competition. For example, even state-owned enterprises such as China Mobile, China Telecom and China Unicom will also have competition. So competition is always there. From this point of view, involution also exists forever.

However, I think there needs to be a time dimension to observe competition. In the process of competition involution, we are facing the problem of capital efficiency. What needs to be considered is whether the money spent by the company is burning money and waste, or has a longer-term significance for the future development of the company and the industry. I think it will take time for the company and the industry to reach a conclusion. For example, in the field of wireless payment a few years ago, wechat payment and Alipay were also highly competitive in terms of involution, but now they will not be subsidized because the ecological pattern of wireless payment in China has basically stabilized. I think the money spent at that time was well worth the money. Although it was really very introverted at that time, it also cultivated the wireless payment habits of Chinese consumers in the process, so we should give enterprises some time to compete.

21st century: what do you think of the high valuation of projects?

Wei Zhen: I think good investment is far more important than cheaper prices. Over the past 27 years, we have consistently pursued high quality, not undervalued value. Successful investment is the pursuit of compound interest effect. The compound interest effect of investing in high-quality enterprises comes from the compound interest of the growth of the enterprise itself, while undervaluation is an arbitrage behavior, which is not what we are pursuing.

In addition, our investment is long-term. Usually, we hold a company's equity for about 5-10 years. From a long-term perspective, we are willing to pay a premium for the high growth and value creation of excellent enterprises, as well as the scarcity and innovation of excellent entrepreneurs.

Creating China α

21st century: what are the core factors behind a successful investment α， Which belong to β？

Wei Zhen: in the past 30 years, the most important β It must be more about China. Last year, China's GDP exceeded 100 trillion yuan, and China will probably become the world's largest economy in the next 10 years. Looking long at China can lay the foundation for investors to get rich profits.

In the growth environment of China as a whole, we have to choose racetrack and see the sub industry, which also faces a lot of problems β The choice of. Warburg Pincus tracks a large number of data every quarter to improve its judgment on the general situation.

However, only β Yes, definitely not. LP will say, "if you only have β， I can buy an index. Why do I need you, So for excellent PE, α More important.

In my opinion, Warburg Pincus created in China α It comes from three aspects

First, post investment services. Warburg Pincus has been in China for 27 years, and its long-term local experience gives us a deeper understanding and insight into the pain points of Chinese enterprises. Our post investment team will tailor-made enabling management according to the needs of each enterprise and founder, and provide enterprises with comprehensive professional services and consultation, such as financial management, digitization, market public relations, talent recruitment, financing, legal compliance, etc. In 2020, Warburg Pincus's talent recruitment team conducted more than 500 interviews, helping our company recruit 43 CXOs.

In addition, Warburg Pincus also has a high-quality consulting team from Alibaba, Huawei, Mars, meituan, Jingdong and other enterprises. They are well-known business leaders and experienced experts in different industries. In the important stages of enterprise growth and organizational expansion, the consultant team can support and empower the founder and founder team in business and organizational upgrading, strategy and operation.

Second, global resources. Warburg Pincus has 14 offices in 10 countries of the world's major economies and has invested in nearly 1000 enterprises in more than 40 countries. The global resources of Warburg Pincus can bring very important support to the internationalization strategy of Chinese enterprises.

Global resources are also reflected in the important network resources in the international market. Timothy F. Geithner, the current president of Warburg Pincus, is the 75th US Treasury secretary. In the pharmaceutical field, Mr. Fred Hassan, a global partner of Warburg Pincus, has served as the chairman and CEO of Schering plough, the chairman and CEO of famalia, and the chairman of boswellen. He is now a director of Amgen, a biopharmaceutical giant, and a director of Time Warner and Avon. Mr. Hassan has a distinguished reputation in the global pharmaceutical field, His experience and resources have provided great support for the invested enterprises in the field of innovative drugs. Another example is Ren, a global partner at Warburg Pincus é Obermann, a former CEO of Deutsche Telekom and a director of Airbus, is also a director of Telenor ASA and Allianz Deutschland AG, and has great influence in the European business community.

Third, long term cooperation with outstanding entrepreneurs. Warburg Pincus is the first global PE co founded with entrepreneurs in China. For example, in the field of new infrastructure, 10 years ago, we predicted that the rise of China's e-commerce would bring huge storage demand. However, at that time, we did not find a suitable enterprise in the market. Therefore, we found sun Dongping and Shen Jinchu, who have rich experience in the logistics and real estate industry, and jointly founded ESR (e-commerce). Today, ESR is the largest logistics real estate platform in Asia. We then continued to work with sun Dongping to replicate this successful model to other new infrastructure areas. Founded Dongjiu China in 2014, it has become the largest comprehensive service platform of headquarters park in China. In 2018, Xinyi China was jointly founded, which has become China's leading hub logistics infrastructure integrated platform. Similar long-term series of cooperation stories have rich cases in every industry we are involved in.

?