VC has three major values ​​including multi-level capital market structure (VC292)

In April 2000, under the initiative of Mr. Cheng Siwei, a Chinese venture capital company was established, which is almost the earliest company in China that takes venture capital as a business.

At the end of the 1990s, along with the rise of the Internet trend and the expectation of the launch of the GEM, VC / PE development trends have emerged across China. The bursting of the Internet bubble and the plunge of Nasdaq in 2000 caused a huge impact on the newly emerging VC / PE industry in China. Until the launch of the small and medium-sized board, China's VC / PE industry has been experiencing a cold winter. With the launch of the small and medium-sized board in 2004 and the recovery of overseas listings, our VC / PE institutions saw a glimmer of spring again, but at that time foreign-funded institutions dominated. The subprime mortgage crisis in 2008 hit the global capital market very hard. In 2009, the Chinese government used various means to stimulate the economy, successfully avoiding the further spread of the subprime mortgage crisis in our country and the overall recession of our economy.

It is particularly worth mentioning that with the successful launch of the ChiNext on the Shenzhen Stock Exchange in October 2009, it is an important step forward for China to develop an innovative economy, improve the multi-level capital market structure, and promote the rapid development of small and medium-sized technology-based private enterprises. In one step, this also provides excellent development opportunities for our VC / PE institutions. At the same time, 2009 is also an epoch-making year for China's local VC / PE institutions. According to statistics, a total of 105 RMB funds were successfully raised to US $ 12.295 billion in 2009 (using the US dollar as the statistical caliber). The number of newly raised funds and the amount of funds raised accounted for 84.7% and 67.4% of the total amount of funds raised in the same period in 2009, which is also For the first time in history, RMB funds have surpassed US dollar funds in the total capital of newly raised funds, and the industry has seen a blowout development.

As an emerging industry in the domestic financial sector, the rise of VC / PE is of great significance in promoting the adjustment of industrial structure, building a multi-level capital market structure, and promoting the standardization and capitalization of Chinese enterprises (especially private enterprises). In addition, as an investment institution and As a potential corporate shareholder, we also need to provide capital and value-added services for the enterprise, so that the enterprise can become an enterprise with certain economic interests and a sense of social responsibility. This is what our investment institutions are most willing to see.

Construct a multi-level capital market structure

VC / PE institutions have enriched China's capital market structure and promoted the development of the capital market. From the perspective of financing, we have absorbed the idle funds of LP, which has improved the efficiency and profitability of LP's funds. From the perspective of investment, we have provided private enterprises with financial support when they need capital most, which has promoted The development of private enterprises. The banking system belongs to the indirect financing system and has been the main channel for corporate financing in China for many years; and VC / PE belongs to the direct financing system, which directly injects liquidity into enterprises. Compared with banking institutions, we do not need companies to provide collateral and guarantees, as long as the company has independent technology, conforms to national industrial policies, and has a certain industry position, even if there are not too many assets, we are very willing to invest. This is also VC / The biggest difference between PE institutions and traditional banking institutions is that venture capital is a useful supplement to the traditional financial service system. Of course, I think that in the future, banks and VC / PE institutions will have extensive cooperation space, such as customer resource sharing, debt and equity matching investment, and private equity fund custody business.

In addition, as an institutional investor in the capital market, VC / PE institutional-shared companies, after the final successful listing, most of them will be recognized by investors, and the market will give a higher valuation. VC / PE will comprehensively evaluate the enterprise from a professional perspective and perfect due diligence. The enterprise's advantages, industry status, development trend, and investment value are all the focus of investment institutions. The companies we have invested in will only be successfully listed after they have been comprehensively regulated by sponsors, accountants, and law firms and reported to the CSRC for review. Therefore, VC / PE institutions have ensured the healthy development of enterprises from the source, which has played a role in promoting the further development of China's capital market.

Standardize the corporate governance structure of private enterprises

Most of the current private enterprises in China are family-owned enterprises. The shareholders are basically composed of natural persons in the family or family holding companies. There is a lack of third-party shareholders or directors, and the corporate governance structure is not perfect. Most of the private enterprises we have contacted have had related party transactions and large shareholder misappropriation of company funds. The shares of other natural person shareholders are relatively small or relatives of the large shareholder. They also turn a blind eye to the behavior of the large shareholder. The normal operation and standardized development of enterprises constitute certain obstacles.

In fact, the biggest value of VC / PE institutions is to bring a reasonable corporate governance structure and perfect internal control and supervision mechanism to private enterprises, ensuring that private enterprises are more standardized and transparent in the development process. In this way, no matter whether the enterprise is finally listed or not, it will become a standardized and socially responsible enterprise. Our investment is an investment that does not seek a controlling position, but as shareholders, we must fulfill the obligations of shareholders, supervise the standardized development of enterprises, and at the same time promote the capitalization of enterprises and prepare for listing financing in advance. After we invest, we will dispatch directors or supervisors according to the situation of the enterprise, assist the enterprise to establish a perfect corporate governance structure, regulate the development of private enterprises from the system, sort out the company's business processes and financial systems; fundamentally solve the company's development The obstacles laid the foundation for the company's further capitalization.

Provide value-added services for enterprises

In the future, VC / PE institutions will certainly develop in the direction of specialization and providing value-added services. In 2001, Dongjiang Environmental Protection, which was invested by a Chinese venture capital company, dispatched a general manager and a secretary to the company at the request of the actual controller of the company. For several other early projects, due to the small scale of the enterprise, imperfect governance structure, and unreasonable management team coordination, at the request of the enterprise, we eventually assigned a management team to assist the company in management. In addition, according to the requirements of the company, we recommend suitable candidates from the outside for many of the companies we invest in. As our investment companies increase, there will be operating synergy among the invested companies to increase their own value. At the same time, there will be opportunities for reorganization and mergers and acquisitions in the industry, which also provide opportunities for mergers, acquisitions, transfers and exits for our future investment. For example, we recently looked at a water treatment company. Although it has not yet finalized whether to invest, Dongjiang Environmental Protection has stated that if the company cannot be listed in the future, they are willing to buy shares in this company.

In addition, our shareholder companies can also provide value-added services for invested companies. For example, our major shareholder, China Baoan Group, is very large, and there are many subordinate enterprises with many management talents and other resources. The Chengdu Green Gold project we invested in mainly deals in azadirachtin, a biological insecticide that is harmless to the human body. The development prospect of the enterprise is very good, but the management team is not perfect. . In addition, Baoan Group has subordinate agricultural and forestry companies that can use Green Gold products, which also helps companies to obtain valuable orders in the early promotion stage.

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