Hu Fangri Of Venture Capital Commission: Objectively Understand The Current Situation And Trend Of Venture Capital Industry

Editor's note: in the past year, there are too many special memories. The equity investment industry has also withstood the double test of capital winter superimposed epidemic. Leading institutions such as Sequoia China and hillhood capital, which have experienced several business cycles, are now leading the industry out of difficulties.

At the fund-raising side, the impact of the new regulations on asset management continued, and the new crown pneumonia epidemic situation was superimposed, and the fund-raising differentiation of institutions was more serious. The head office has raised larger funds, and several institutions have raised more than $1 billion within this year; small and beautiful funds can also raise the most professional funds, but more institutions have no one to pay attention to. Undoubtedly, this improves the efficiency of LP.

In various types of LP, the funds from banks and other financial institutions decreased significantly, which led to the decline of fund enthusiasm and turned into the stock game; and the market-oriented master fund also faced the difficulty of raising funds. It is gratifying that the combination of insurance and capital policy has given the industry a good expectation. And many institutions that have tasted the benefits of profits have made greater strides in the field of equity investment.

In the first half of 2020, the total amount of RMB fund-raising decreased by about 30% year-on-year, but the proportion of state-owned assets reached more than 75%, which forced the institutions to adjust their coping strategies. Under the influence of the new geopolitics, institutions are also reflecting on the balance of fund allocation between us dollar and RMB.

On the investment side, due to the difficulty of fund-raising downward, the number and amount of institutional investment cases decreased significantly. In terms of industry, capital preference has shifted, investment cases and amount data of semiconductors and hard science and technology have skyrocketed, and investment in medicine and health has also been in large volume, but the innovation of Internet mode has obviously cooled down. In the process, the momentum of institutional projects to add pounds to stock is stronger.

This year, many head organizations are thinking and exploring the possibility of cross-border. From growth stage investment and pre IPO investment to pipe, M & A, wealth management, etc.; from PE investment to early investment, whether catering to investors' preferences or based on asset security considerations, the head office has a strong desire for total asset management. What tests them is how to find a balance between acquisition and greed?

At the same time, we have observed an obvious phenomenon that state-owned background funds and industrial capital have been more active in this year, and financial investment institutions have been frantically crushed: on the one hand, the former has more ammunition capital; on the other hand, the project side has more demands for resource support in financing, which forces many financial PE to gradually attach importance to and increase post investment service construction Design.

At the exit end, this year, equity investment institutions ushered in a bumper year. In the first three quarters of 2020, equity market exit cases increased by 26% compared with the same period last year. Due to the favorable policies, the proportion of IPO Exit increased significantly. Many institutions gained more than 10 IPO exits in this year.

Under the stimulation of global monetary easing and many favorable policies, such as the new deal of the Hong Kong stock exchange, the launch of the A-share science and technology innovation board, and the pilot registration system of the growth enterprise market, there has been a phenomenon of "race" in Hong Kong and A-share listing. In addition, listing in the United States has gradually recovered from the impact of financial events of individual companies at the beginning of the year.

However, investment institutions that pay more attention to DPI also see hidden worries. Arbitrage opportunities in the primary and secondary markets are getting smaller and smaller. More and more IPOs have brought about a reduction in overall returns. Investment institutions have begun to attach importance to active exit management. At the same time, the portfolio has also raised its valuation expectations for funds, which is also a challenge for institutions to face.

What will the market look like in 2021? In the face of many uncertainties, how to predict ahead of time? These will test the strategy and wisdom of investment institutions. We have always stressed that no matter how pessimistic our expectations are, we should act with optimism.

Hu FangRi suggested that all departments, units and institutions should speed up the legislation of venture capital industry, so as to rectify the name and establish regulations for the venture capital industry.

"The theme of this year's annual meeting well summarizes the new normal of China's equity investment and venture capital industry in recent two years. In my opinion, this situation States may exist for a long time Hu FangRi, full-time vice president of the equity and venture capital Professional Committee of China Investment Association, said at the 10th annual meeting of China innovation capital.

The theme of this annual meeting of China's innovative capital is "reconstruction and balance: value investment in the stock age". Hu FangRi delivered a keynote speech on "objective understanding of the development status and trend of China's venture capital industry".

Hu FangRi has worked for more than 10 years in the equity and venture capital Professional Committee of the China Investment Association. According to this witness of the venture capital industry, although the growth rate of the local venture capital market is slowing down, the stock is still growing. He believes that industry practitioners should objectively understand the development status and trend of China's venture capital industry.

Venture Capital Investment Committee Hu Fang day. Information map

Current situation and trend of venture capital in China

In this year's venture capital market, the data of fund-raising and investment showed a large decline, and the number of employees also showed a significant decrease trend. Therefore, there are not a few people who are not optimistic about the future of the industry.

Hu FangRi is optimistic about the development prospects of the industry. In his opinion, some views of the market on the venture capital industry are not objective and rigorous, which has affected the formulation of government policies to a certain extent, and even indirectly hindered the development of China's venture capital industry.

After that, Hu FangRi analyzed the development status and trend of China's venture capital industry from three dimensions of policy system, investment operation and theoretical research.

First, China's venture capital policy system has been basically formed, which provides a better institutional guarantee for the development of China's venture capital. However, due to the lack of legal status, the development path is full of twists and turns, and the future is still unknown.

Second, the overall development scale of China's venture capital has ranked the second in the world. There is a certain structural bubble, and the stock is adjusted. Although the short-term growth is hindered, the long-term development is healthy, and a venture capital operation mechanism with Chinese characteristics has been formed.

Third, the theoretical research on venture capital in China lags behind, the concept is confused, and opinions are divergent. There is no unified understanding in the academic, practical and policy-makers. This has affected the formulation and implementation of China's venture capital policies, regulations and laws to a certain extent, and then affected the healthy development of China's venture capital industry.

Venture capital industry still can not be relied on

In terms of industry policy analysis, the management system of China's private equity and venture capital industry mainly includes four aspects of policies: one is to continuously improve the preferential tax policies for venture capital; the second is to continuously expand fund-raising channels; the third is to actively develop venture capital guidance funds; the fourth is to constantly improve the multi-level capital market.

Hu FangRi pointed out that although there are policy documents related to venture capital issued every year, so far, there are no documents of real legal nature, and the venture capital industry is still in a state of no reliance.

In the view of this venture capital association worker, it is extremely urgent to formulate and promulgate the regulations on the promotion of venture capital or the law on the promotion of venture capital so as to give the venture capital a legal identity.

On the investment and operation of venture capital fund, Hu FangRi made observation and sharing on the current situation of the industry from the perspectives of fund-raising, investment and withdrawal.

From the perspective of capital composition, the proportion of state-owned institutions in the field of venture capital is about 40%, followed by non-state-owned institutions accounting for 25% - 30%, financial budget funds accounting for 15% - 20% and individual investors accounting for 10.20%.

Corresponding to the investment operation, the average annual investment cases of a single venture capital enterprise are kept at about 4, with an average investment amount of about 60 million yuan, and the investment amount of a single case is between 15 million yuan and 20 million yuan.

In terms of exit mode, the proportion of equity exit cases by listing transfer is about 20%, the proportion of withdrawing by agreement transfer is basically 40% - 50%, the proportion of withdrawing by repurchase is 20% - 30%, the proportion of withdrawing by liquidation is 5% - 8%, and the proportion of withdrawing by overall acquisition and other methods is less than 5%.

It is suggested to speed up the industry legislation

In his speech, Hu FangRi especially discussed the theoretical research of venture capital. He thought that the unclear concept of venture capital has a direct impact on the formulation and implementation of industry policies, and will affect the healthy development of venture capital industry.

"China is in the critical period of transforming the mode of development, optimizing the economic structure and transforming the driving force of growth. Only by adhering to innovation as the first driving force can China win the initiative in the global scientific and technological revolution and industrial transformation." In his opinion, only a strong venture capital can make a strong innovation, and a strong innovation can make a strong country. It is of great significance to do a good job in the work of venture capital during the period of the 14th five year plan.

According to the "Research Report on the development of China's venture capital industry" released by the Venture Capital Commission in July this year, more than half of the institutions believe that the development speed of China's venture capital industry may decline in 2020, but they believe that the medium-term (the next three years) will achieve stable development. According to the survey object, the effective means to support the development of venture capital industry are opening up the registration, exempting the filing management, broadening the financing channels and building the investment and financing platform.

"After more than 20 years of free development, China's venture capital has become an independent industry that can not be ignored, whether in the scale of development or in the impact on innovation and entrepreneurship and social and economic development." At the end of the speech, Hu FangRi suggested that all departments, units and institutions should speed up the legislation of venture capital industry, so as to rectify the name and establish regulations for the venture capital industry.

In his opinion, only when the venture capital industry is justified can we further improve the institutional environment, market environment and ecological environment for the development of venture capital, make up for the weak points in the development of venture capital, and promote the venture capital industry to play a greater role in promoting innovation driven development, serving the real economy, and creating at a higher starting point The new situation of industrial investment development.