Wang Chaoyong: PE data deviates from reality and recognizes the status quo and seeks recovery
Opinion | Faith and Faith Wang Chaoyong: PE data deviates from reality, recognizes the status quo, and seeks recovery opportunities Original: Tsinghua PE Research Institute WeChat account number: Tsinghua University Global Private Equity Research Institute Summit and Global Private Equity Summit Forum Legacy, meeting siteWang Chaoyong, the founder and chairman of Xinzhongli Capital Group, said that life in the investment industry was sad in 2018 because there were six pits destroyed by value last year, but Mr. Wang is still optimistic about the future. He said that people in the venture capital industry wantThere are two skills, one is to be able to cat winter, the other is optimistic, “I believe that the spring of China’s capital market will definitely come in 2019.”
”Every winter and winter solstice, every year comes with warm spring, and when the snow melts, flowers bloom.
“Mr. Wang pointed out that I hope that VC and PE can help the capital market, create national investment income, and create the spring of A shares. Combined with the science and technology board, we can better help and serve our strategy of a strong country in science and technology and a strong country in capital.
“In front of us, we are always mentioning economic power, technology power, and cultural power. No one has ever mentioned capital power. I think capital power is what we need to pay attention to next. Capital power requires indicators. Our GDP is catching up with the United States.However, the market value of our capital market is only one-third that of the United States, which is a huge gap.
“In response to suggestions for the future, he said, first, venture capital institutions and PE institutions should be encouraged to log in to the capital market to raise long-term funds, make the industry bigger and stronger, and invest in the science and technology industry in the long run.
Second, rich VC and PE industry fund-raising channels and exploring new models of special fund management.
Third, the VC, PE industry and Internet giants have strengthened their cooperation in joint investment in industrial mergers and acquisitions.
In the end, he hopes that more peers will raise long-term capital, support more science and technology enterprises, invest in the long-term, and invest early, and serve the long-term development of Chinese SMEs with a more professional level.
The following is the full text of the speech: We are passionate and optimistic. We have two abilities in facing the venture capital industry. One is to be able to cat winter. When the market is not good, we cat winter, fire, and cheer up with our counterparts and entrepreneurial teams.I hope everyone can survive the winter, and sometimes winter is very long.
The second skill is optimism. We must be optimistic. In any field of entrepreneurship, we must learn the optimistic spirit of Chairman Mao when they were in Jinggangshan.With the cold wind in the northwest thinking about the great cause of founding the country.
From the Yan’an Caves to the founding of New China in 13 years, this kind of resolute, persistent, optimistic revolutionary romanticism is an indispensable quality for us to do venture capital and PE industry.
Therefore, when we interview employees, we will pay particular attention to this part of employees.
Of course, we also have a financial background, a legal background, and a professional staff in various industries. We hope that they have a common quality, are full of passion behind the rational, full of positive energy, such talentsIt will become the ultimate winner of our industry. Such talents will become the backbone of China’s reform and opening up. Such talents will become the bearers of China’s future Chinese dream, positive energy, full of ideals and dreams.
Grasp the key to recognize the characteristics of the industry Forum guests mentioned four keywords: First, Men Yungao, Tsinghua PE Research Institute’s PE certificate program is only open to students in Tsinghua University, and can be advanced biology.
Secondly, talented people. We train professional and highly-skilled talents, who are responsible for national science and technology, economic management, national management and governance, and financial and social elites in various fields. Of course, the PE industry is the same.
Third, big data. From the most detailed and accurate data, we can see the entire picture of China’s PE venture capital industry.
Faced 深圳桑拿按摩 with these data, we have to dig out the laws behind it.
Obviously last year everyone thought it was a cold winter for fundraising. Why did our venture capital industry raise 116%?
Our angel fundraising reaches 220%?
The numbers deviate from our reality. Why?
We can explore these.
For example, angel investment, which was not in the statistical caliber before, may have replaced the statistical caliber. Of course, the truth may not be the case.
Does the venture capital industry really raise 116%?
Why does this number rise so much?
We have to look at whether two pieces of data are going to be scrapped. One is a state-owned enterprise that has sprung up, a state-owned enterprise investment platform and a local investment platform, and the other is the British and American tobacco giant’s tens of billions and hundreds of billions of investments.Did statistics come in?
If these three funds come in, I believe that last year was a big spring for venture capital, because the amount of funds raised soared.
But is this fundraising really recognized?
Can I really cast it?
There are parent funds and guide funds all over the place, but can the 6 trillion yuan fall?
Can market managers get money?
If you look at an industry for ten years, if its annual expenditure is greater than its withdrawal and replacement, there must be problems in this industry, indicating that a lot of funds have precipitated or died, we must look at the exit and the incoming funds.
Fourth, solve the problem.
What was the biggest problem last year?
What were the biggest obstacles to funding last year?
The new rules on asset management, deleveraging of competition-type supervision, and the motivation of private enterprise investment have brought about some possible effects. How can these problems be solved?
What impact does it have on the PE industry?
This is what our research institute should pay attention to. From the international experience, China ‘s venture capital industry development opportunities and challenges. Private equity and venture capital PE and venture capital are actually an industry. Private equity distribution covers venture capital. Venture capital is just an early stage of private equity investment.
From a more precise academic definition, indeed, in the US textbooks, PE and LBO, leveraged buyouts, and mergers and acquisitions funds are more closely linked. The difference between it and venture capital is the first in the stage, the second is the scale, the firstThe three are investment proportions. PE generally refers to a holding-type investment in the world.
The fourth is that PE can use a lot of leverage, and venture capital uses almost no leverage.
Comparison of the development history and current situation of the PE and VC industries in China and the United States: The real PE and venture capital in the United States began in the late 1940s, of which the well-known IDG was established in the 1960s.It is a data company; Hua Ping, KKR is a real PE company in terms of scale. It has been listed. It is a publicly-held PE company and also has a venture capital part.
The first project Huaping entered into China Investment in 1993 was AsiaInfo, a high-tech project, and a venture capital project. The second project was Ctrip.com, a startup project, and a venture capital project.
Therefore, when these international PE giants first entered China, they also gradually upgraded from venture capital to expanded PE projects with LBO characteristics.
KKR Huaping came to China under the brand of an international PE giant. They all started from the venture capital field. Their internal PE and venture capital were clearly divided according to the amount of investment and the stage of investment.
However, in the past five years, venture capital and PE have started to be unclear again. Originally, the scale of more than 100 million US dollars was PE, and the investment of less than 100 million US dollars was venture capital.
This line is now blurred.
For example, Didi, Meituan, and Xiaomi. When they were founded, the angel round raised more than US $ 100 million, and by the time of the B round, it had already US $ 500 million, US $ 1 billion, and billions of US dollars in Pre IPO.
Two-thirds of China’s more than 200 years of unicorns have not been profitable. It can be estimated at billions to tens of billions of dollars. Do you say it is a venture capital or a PE?
So this field constantly challenges us.
In the first half of last year, the China Securities Regulatory Commission prepared to say that unicorns would return to the CTR for listing, but not a few of the smallest unicorns meet the listing standards. In the end, the CTR plan did not land, and this is the current situation.
The pits destroyed by the six major values in 2018 all reflect the difficult winter. Is it really the case from an investment perspective in 2018?
In 2018, not only people in venture capital and PE are sad, the whole of China is sad as long as they are involved in investment, because there were 6 pits of value destruction last year.
1 Tax compensation for cultural and creative industries Of course, this is a good thing. The country has added more than 100 billion crystals.
But there are more than 3,000 film and television companies and countless studios closed and closed.
The cultural and creative fund did not raise a penny last year, and almost did not dare to invest last year.
Tax reimbursement is right, but everything must have its share or consider its historical background.
We believe that Zhongli invested in the cultural and creative industry very early. In 2005, it invested in Huayi Brothers. At that time, the Chinese box office was less than 1 billion, and Hollywood blockbusters flooded our screen.
The Ministry of Culture and the State Council have continuously issued red-headed documents to support the revitalization of China’s cultural industry.
In order to introduce cultural and creative companies, the local government provided incentives and tax exemption policies in accordance with the revitalization outline. The controversial benefits after the Xiao Cui incident were not recognized, and thousands of film and television companies have evacuated from Tibet.
How much money has the entire stock market shrunk in the cultural and creative sector?
At least hundreds of billions.
2 According to incomplete statistics, a large number of P2P companies running under the guise of Internet finance have raised funds nationwide.
7 trillion, much more than the venture capital industry and the PE industry.
These P2P companies were closed and ran away, and people found them.
Before, there was a paragraph saying that someone bought a house with loans on 20 P2P platforms and could not afford to double the sale of the house.
I want to return the money to sell the house and find it all on the P2P platform.
This shows a phenomenon that P2P income is fixed, and the consequences of rigid payment are endless. The savings of small town residents, especially the elderly, are lost under the temptation of high interest rates. We really feel bad for them.
The value of 3A shares destroyed A shares in the last 2000. The market value of more than 500 companies fell by 70%, and 320 companies actually held East Substitution, because their equity pledges were liquidated, the Shanghai Stock Exchange fell 25%, and the Shenzhen Stock Exchange fell 34.%.
Last year, the entire A-share market destroyed more than 15 trillion yuan. What a value!
So I may be particularly proud, saying that when I came to power in the United States, the stock market rose by $ 6 trillion.
The US Dow Jones Index fell from 6,600 points to 25,000 points, which brought out a very strong bull market and also created a lot of national value appreciation.
Our 2020 National Income Double Plan in the 18th National Congress of the Communist Party of China should rely heavily on investment income, which is the guideline of the national policy macro policy.
However, our stock market has not provided such reasonable investment income for the people and shareholders, and has lost so much.
In 2019, I believe that the spring of China’s capital market must come.
The 19th National Congress of the Communist Party of China mentioned three articles. The first is to vigorously develop a multi-level capital market, vigorously develop financial financing and reduce financial leverage, and vigorously support the development and financing of innovative small and medium-sized enterprises.document.
Hope this year we can see the A-share market pick up, especially the spring breeze of the science and technology board can blow to our science and technology industry.
4 Lack of long-term capital, funds are too short, too small, too weak. Since it is a registered system, why can science and technology enterprises be listed on the market?Let’s look at the examples of US VC companies and PE companies listing. We must vigorously allow VC companies to be listed. We hope that more peers can participate together. Allow the leading companies in China’s VC industry.For more than years of history, senior venture capital companies that have witnessed several industry cycles of healthy operation are listed on the science and technology board.
Venture capital companies listed on the science and technology board, its biggest advantage is that it can raise more long-term equity, and then return to the government’s guidance funds, industry funds, pensions, insurance companies’ long-term capital to form long-term capital.
The biggest problem in China’s venture capital industry is its small size and short duration.
The scale of funds managed by PE companies in the US in 2900 was US $ 17 trillion. Our 3400 venture capital companies, PE companies and Sunshine Private Equity only managed 12.
About 4 trillion yuan.
All in all, the number of our institutions is 8 times that of the United States, but the average size of funds managed by each of our institutions is 1/7 and 7 856 times that of its American counterparts. How big is this gap?
The duration of Silicon Valley’s venture capital funds is basically more than ten years, because its fund sources are the money of pension funds, survival funds, and insurance companies. It can invest early and it can invest small.
In China’s venture capital and PE industry, venture capital 5 + 1 + 1 for up to 7 years, PE3 + 1 + 1 for up to 5 years, and many PEs still invest in venture capital, and it is impossible to complete a complete investment exit in 5 years.cycle.
For example, in China, investing in the transformation of scientific research results from a Tsinghua laboratory. It will take one or two years to transform at this stage, and then form products into the market, form sales, lose two or two years, and then form profits. According to the requirements of A-share listed companiesTo make a profit in three years, this is another three years.
Submit for approval and meet the requirements for approval by the CSRC for at least one year.
After the completion of the market, the lock-up period is one year, and then there are new rules to reduce holdings and reduce investment in venture capital.
As long as you invest more than 5% of the equity, you can withdraw in about three years, which adds up to more than ten years.
So why is China’s venture capital industry afraid to invest early?
It’s not that these people are timid, but the source of funds restricts you, because our LP knocks on the door in one to three years, when will it exit?
When is the money split?
When is liquidation?
Therefore, the fund managers of Chinese VCs are completely pushed forward by short-to-medium-term funds and are afraid to invest in the early stages.
Softbank, a Japanese listed company, uses its own company capital to make long-term investments. Therefore, it has held Ali for 20 years and earned more than 200 billion U.S. dollars.
South Africa’s MIH is now the largest shareholder of Tencent.
In these two companies, Ali’s team, Ma Huateng’s team has less than 10%.
These two companies have given a very lively case education to the Chinese venture capital community, while leaving bloody wounds in the hearts of Chinese venture capitalists.
The company under our eyes, why can’t we invest?
Is it because of our Chinese eyesight?
Aren’t these foreign PEs all Chinese people doing?
Because the sources of funds are different and the strategies are different, they can be invested early, small and held for a long time.
Speaking of BAT, I invested in Baidu 15 years ago, and the stock sold more than 123 times, but what if I hold it for more than 10 years?
It has been 15 years now, and the multiple of this income is more than a thousand times. Ali, Tencent, this is that the returns to the major shareholders have exceeded 5000 times.
So this is why we have been in China’s venture capital industry. We must think about the problem from the source and solve the problem. To solve the problem that our funds are too short, too small, too weak, especially too short.
5Government funds are difficult to land Today I talked about the challenges of the venture capital industry. There are mother fund managers and government guidance fund managers. Everyone knows that over the past few years, the number of public guidance funds in China has gathered more than 60 billion.How many are there?
It may not be here.
Why can’t it fall?
Because the guidance fund says that when you come to my place to invest in an industrial fund, I will give you 20% to 40%, and the remaining 60% will go to the market to find it yourself.
There is also a limit on the proportion of counter-investment, that 20% requires 3 times at least 1.
A five-fold counter-investment must support local economic development, industrial development, political achievements, and many conditions, and then the approval process is long and corrupt.
Therefore, the government’s guidance fund is difficult to land, and it is difficult to invest to get returns.
My suggestion is that the government guidance fund should consider special commissions. Find these right-handed, platform-based, experienced, and well-invested teams with a total of 8 to 10 years of experience. Special commission management.It ‘s good to have a professional manager to help the government guide the fund or local fund to carry out investment business. This approach may be a measure to solve the problem that the current guide fund cannot invest.
6 The problem of Internet giants Now circulating a word to BAT in the startup company, formerly called VC, now called BAT, is to attract these Internet giants to acquire their own startup companies.
In this regard, I don’t recommend that everyone’s goals are too clear. Entrepreneurship is a unique opportunity you see in a field. You think you have unique resources. Do you think your team can persist in this opportunity to develop, grow, and achieve your own businessDream, not to say that I considered selling from the time of starting a business, this kind of team is generally not seen in entrepreneurial teams.
But what to do in the face of a giant like BAT?We invested in some companies, and finally found that they and BAT really have value that can be integrated on the industrial chain. Finally, they are willing to join their big family. We also encourage them.
This is actually not found in PE statistics in China’s venture capital industry. This is a huge error.
The amount of BAT investment is really considerable, plus the brand and traffic they can get shares without real money.
When these Internet giants thought of listing overseas or introducing foreign exchange in China 20 years ago, China had not yet entered the WTO.
In 2000 and 2001, the country had very strict industrial policies for ICP, the Internet, video, games, mobile Internet, etc. At that time, foreign investment could not be invested, and overseas listings were not available.
Finally, taking Sina’s listing as an opportunity, foreign investment banks and lawyers thought of a VIE structure.
For example, following Chinese law, the policy at the time was that foreign countries must not exceed 50%, and the remaining 49% must be residents in China as shareholders.
But overseas listed companies, offshore companies, they said no, I want your 100% profit, income, 49% not, what should I do?
The method is holding.
Citizens of the People ‘s Republic of China can hold ISP or ICP licenses 100%, so citizens, shareholders, founding teams of the People ‘s Republic of China, VCs and institutional investors who replace foreign capitals hold on behalf of them, thus forming a VIE structureFinally, holding shares for consulting, software, domain names, and various types of traffic to transfer revenues, and finally remitted to listed companies to support the market value of listed companies.
This is why several companies such as BAT, including the current rookie TMD, are in this mode.
If this model is strictly affirmed, it will be problematic if it remains unchanged for 20 years. Because Internet companies did not make money in the past, everyone feels indifferent. Now these Internet giants are very profitable.
The profits of hundreds of billions a year, all these billions of profits flowed to overseas shareholders through the structure of VIE, because these companies are not listed in China, dividends, and equity appreciation have gone overseas.
According to incomplete statistics, the market value of China ‘s overseas listed Internet or China ‘s stock companies has increased by more than 10 trillion yuan (more than 1 trillion US dollars) in the past ten years. China ‘s entire fund industry has brought investment returns to citizens in 15 years. 2More than one trillion yuan.
Why can’t Chinese A-shares always get up, because the most profitable companies, the best growing companies, and the most profitable companies are all outside, which has nothing to do with our residents and hundreds of millions of low-headed people.
This is an issue that I have been paying close attention to recently.
It is not that we have any ideas about foreign companies, because we also managed foreign venture capital funds in the early days, but this situation has remained unchanged for 20 years.
Especially in the state of Sino-U.S. Economic and trade frictions, and the United States is wielding a big stick against us, our industrial policy is ineffective, it is gradually tightening, and even the introduction of 1,000 talents in science and technology is affected. Some of our friendsSilicon Valley funds dare not invest, and funds with Chinese funds behind them dare not say that they have Chinese funds because they are afraid of censorship.
So I hope that the dividends of the Internet giants can be shared by Chinese residents. This is my third perspective to share with you.
A few suggestions for the future: First, encourage venture capital institutions and PE institutions to enter the capital market to raise long-term funds, make the industry bigger and stronger, and invest in the science and technology industry in the long run.
Second, rich VC and PE industry fund-raising channels and exploring new models of special fund management.
Third, the VC, PE industry and Internet giants have strengthened their cooperation in joint investment in industrial mergers and acquisitions.
Finally, I hope that VC and PE can help the capital market, create national investment income, and create the spring of A shares. Combined with the science and technology board, we can better help and serve our strategy of a strong country with science and technology and a strong country with capital.
In front of us, we are always mentioning economic power, technology power, and cultural power. No one has ever mentioned capital power. I think capital power is our next concern. Capital power needs indicators. Our GDP is catching up with the United States, butThe market value of our capital market is only one-third that of the United States, which is a huge gap.
Finally, I hope that more peers will raise long-term capital, support more science and technology enterprises, invest in the long-term, invest early, and serve the long-term development of Chinese SMEs with a more professional level.
For example, our company has invested about 20 companies and nearly 30 companies that meet the initial conditions of the science and technology board.
Thank you everyone!