Who will be the strongest VC / PE in China in the next decade


By Yan Qi
Who will be the strongest VC / PE in China in the next decade? We may be able to trace the past decade.
On December 30, 2013, with the advent of 2014, the venture capital industry first received a new year’s gift: after 400 days, the IPO suspension of a shares ended. In the month of IPO restart, 43 enterprises were listed. Starting from 2014, China’s venture capital market ushered in a wave of rare climax.
In that year, when Alibaba was listed, Softbank sun Zhengyi got hundreds of times of book return, and the name of “God of investment” has been established since then. Jumei Youpin, Jingdong and Alibaba’s three e-commerce companies all have the figure of Sequoia China. Together with vipshop, which was listed before, Sequoia has become the biggest winner of the rise of China’s e-commerce, and Shen NANPENG, the “gold winner”, has been widely known since then.
Subsequently, Chinese VC ushered in a new wave of fission in history. Zhang Zhen left, combined with Gao Xiang and Yue bin, and founded Gaorong capital, which has a strong reputation in the future; Cao Yi, who became famous at a young age, bid farewell to Sequoia China and was supported by Wang Xing and Zhang Yiming to establish source code capital; Fu zhe Kuan left Dachen for 13 years, and Qifu capital was born. In this great change, Chinese VC quietly entered the era of 2.0.
At the same time, with the public’s enthusiasm for entrepreneurship being ignited, new institutions have sprung up like mushrooms after a spring rain, as if countless angel investors were born overnight, and “national VC” and “national angel” began to appear. And all kinds of post-90s entrepreneurial stars have also been hailed on the altar – Ma Jiajia, Yu Jiawen, Wang Kaixin… These once shining names have become the epitome of those years.
The tide is receding. “Now the venture capital circle is a little confused, many people can not raise funds, many people leave.” Having witnessed the rapid development of the past few years, Xiao Bing, executive partner and President of Dachen financial intelligence, said that the industry is returning to a quiet state. And good things often appear when they are quiet, so is investment.
VC upstarts are born,
They changed the direction of venture capital in China
Back to five years ago, a large number of new generation investors who left old investment institutions changed the direction of China’s venture capital circle.
As early as 2013, Zhang Zhen and Gao Xiang, who were the partners of IDG capital, had already sensed the trend of the rapid rise of Internet upstarts and began to advocate the establishment of a separate sub fund within IDG capital. But it failed because of the more aggressive investment style of the fund. As a result, the two joined hands with yuebin, vice president of IDG capital, to resign and set up Gaorong capital.
“At that time point, I don’t know how much I can do when I come out to do fund.” Zhang Zhen recalled that when he made this decision, he was not sure. But later proved that Gaorong capital seized the best time node. After its establishment, Gaorong capital invested a large number of star enterprises, such as pinduoduo, who to learn from, Huya, meituan, mushroom street, shuidi, etc.
From Gaorong capital, the curtain of Chinese VC entering the era of 2.0 was slowly opened, and brand-new names appeared in the history of venture capital in China.
In April 2014, Cao Yi, who is already the youngest vice president of Sequoia Capital in China, found Wang Xing and Zhang Yiming and expressed his intention to be a fund. Just a month later, a $100 million fund has been raised.
Cao Yi is surrounded by many Internet upstarts, so there are many Internet enterprise founders and executives in the LP team of source code. “The capital in the Internet industry is becoming more and more. After the companies go public, the founders and executives begin to consider how to allocate their assets. They think it is better to feed back to this industry, which they love and are optimistic about.” This may also be the original intention of Cao Yi to establish source code capital.
Gaorong capital and source capital are just two typical epitomes of the great change in VC. In those two years, almost every month, there will be news that investors will leave to work alone.
A similar scene is also staged in the local head venture capital institutions. Fu zhewan was once a partner of Dachen, and was responsible for the two most important regional businesses of Dachen in the South and the north. In October 2013, Fu zhewan, who left Dachen, founded Cifu capital. In the past six years, he has invested in famous projects such as who to learn from and bubble Mart in the early stage; and Liu Erhai, who worked in Junlian capital until 2015, founded joy capital.
No doubt, compared with 2005, 2014 is another more violent fission tide in China’s VC industry. “The era of VC2.0 began in 2014, and the next 9-10 years will be the era of VC2.0.” Fu Xinghua, managing partner of Qingke group, managing partner of Qingke master fund and general manager of Qingke Research Center, predicted that “70% of the top 50 VC rankings in the past years will change. In 2014-2016, old investment institutions that failed to make a good layout will soon be submerged in this era. ”
The absurd scene is staged:
Investment into the era of the whole people, Sister Feng has become an angel
No one thought that China’s venture capital circle broke out so fast. Looking back on those years, the legend of entrepreneurs starting from scratch and the myth of investment institutions turning stone into gold made many people boiling with blood.
At this time, the enthusiasm of the whole nation to start a business was ignited, and entrepreneurs from all over the country. In 2014 alone, 40000 enterprises were born in Zhongguancun.
During the same period, the number of VC / PE companies in China also showed an explosive growth. Among them, in addition to some of the previous PE Institutions moving forward the investment stage, there are also state-owned enterprises, listed companies, private enterprises, senior investors, tripartite wealth companies, trust companies, securities companies, asset management companies and so on, and have set up their own investment subsidiaries or investment departments.

According to the data of China Fund Industry Association, in less than one year since March 2014, there were 4276 registered private equity and venture capital fund managers, with a scale of about 1.6 trillion. By the end of December 2018, 14683 private equity and venture capital fund managers had been registered in China, with 8.6 trillion yuan of private equity and venture capital funds.
In fact, China’s investment market was much hotter than these figures seemed. Compared with the sharp increase in the number of investment institutions, the number of angel investors nationwide is more difficult to calculate. Some people with some money in their hands become entrepreneurial mentors, and venture capital circles are full of all kinds of absurdities for a time
At the end of 2015, Sister Feng had officially announced on her microblog: “since so far many people are scolding me because of jealousy, I have to invest in a quarrelling app to satisfy everyone. Yes, I am an angel investor now.”. She also said the initial investment amount reached millions.
In the whole country, there are countless people like Sister Feng who have accumulated a little wealth but lack knowledge to invest in angel, which makes Angel training suddenly have a broad market. Angel training institutions have sprung up all over the country, but due to the asymmetry of information, this industry is in chaos.
In November 2018, the Chinese angel investor college, which once claimed to “cultivate 60000 qualified angel investors in 20 years, and manage a capital scale of 6 trillion within 20 years”, was revealed to have been empty, which was the end of the angel era for all people.
a flash in the pan
Post-90s entrepreneurs give VC a lesson
Those years were the best and worst times for entrepreneurs.
In 2016, 17-year-old Wang Kaixin dropped out of school to start a business because of a reality TV show I am a unicorn. Born in 1998, she quickly became a representative of post-90s entrepreneurs. Wang Kaixin’s “as long as you are willing to vote for me, I can make you earn enough money after 95” in the future, which has moved many top VC companies in China.
However, only a few months later, data fraud, embezzlement, layoffs A minor entrepreneur’s bad deeds all surfaced, and all kinds of doubts came in one after another, which was one of the hottest events in the venture capital circle in those years.
There is another post-90s entrepreneurial Star Yu Jiawen. The founder of the “super curriculum” not only publicly promised to “pay 100 million yuan to employees next year”, but also put forward some incredible management models, such as “employees’ wages are set by themselves”, “working hours are controlled by themselves”, “employees are encouraged to fight to solve problems”, which caused heated discussions for a time.
“Post-90s entrepreneurship” this tuyere, let a lot of big brand VC fall. Those shining entrepreneurial stars, in a hurry, disappeared in everyone’s field of vision.
However, at that time, this was just the tip of the iceberg for the whole industry. At that time, China’s venture capital industry, which had been baptized by the Internet wave, coincided with the advent of the mobile Internet, “tuyere” became a hot word pursued by all. Subsequently, venture capital circle ushered in a vigorous “tuyere” entrepreneurship.
At that time, the development of Internet finance industry was particularly brilliant, and P2P was set up as a typical example of Internet finance at that time. By 2016, the number of P2P platforms in China has exceeded 5000, and the situation today is deplorable.
Since then, more and more outlets have emerged one after another: in 2016, live broadcasting and bike sharing became popular; in 2017, venture projects such as knowledge payment, sharing economy, new retail, unmanned shelves, artificial intelligence, virtual reality and other entrepreneurial projects became the targets of VC pursuit; just after the Spring Festival in 2018, blockchain made many people sleepless at 3 o’clock. Among these outlets, e-commerce, social networking and mobile games are interspersed among them. Even the top VC in China can not be immune from vulgarity.
From “unicorn catcher” to “blower”, Zhu Xiaohu is undoubtedly the most attractive investor in the era of tuyere. Undeniably, Didi, hungry, Yingke, ofo These projects that Zhu Xiaohu has invested in, no matter how the outcome is, have quickly occupied the highlands of the industry with the help of capital.
The rise of new giants: pinduoduo, meituan and byte skipping
VC / PE ushers in a feast
Noise is just one side of it. At that time, China’s venture capital industry also staged a harvest season.
2017 is a magnificent year for VC / PE in China. With the rapid growth of IPO, the number of IPO issued each batch reached more than 10. At the same time, Hong Kong stocks and US stocks have burst out, and the exit channel has become more and more smooth. Various legends such as “harvesting three IPOs in seven days” and “harvesting two IPOs in 12 hours” have been staged continuously, creating a rare IPO feast.
This year, Ni ZEWANG’s Shenzhen Venture Capital was proud of 23 IPOs, followed by Dachen. At the 17th annual forum of China’s equity investment sponsored by Qingke, Ni ZEWANG, chairman of Shenzhen Venture Capital, Liu Xia, founding partner and chairman of Dachen financial intelligence, and Ni Zhengdong, founder and chairman of Qingke group, rarely talked about the secrets behind the great IPO harvest, leaving a precious scene.
In the same year, Xiong Xiaoge led IDG capital to successfully acquire the investment business of IDG group, completing a legendary stroke in the world investment history.
In 2018, super unicorns represented by Xiaomi, pinduoduo and meituan are going to IPO one after another, and the climax is coming.
In July 2018, Lei Jun led Xiaomi to be listed on the Hong Kong stock exchange. From Hong Kong to the mainland, Xiaomi is full of “millet flavor”. Behind Xiaomi, there are many top institutions such as Chenxing capital, Qiming venture capital and IDG capital. With this investment, Chenxing capital Liu Qin created a return myth. In Lei Jun’s words at that time, “the earliest venture capital of 5 million US dollars invested in Xiaomi, today’s return has reached 866 times.”

In the same month, e-commerce black horse pinduoduo successfully went to the U.S. for listing, which shocked the four sides. From 0 to IPO, Huang Zheng only took 34 months. Since its establishment, pinduoduo has obtained four rounds of financing, among which Sequoia China has led investment in many rounds; and Zhang Zhen of Gaorong capital has made a large stake in pinduoduo, creating one of the classic cases in the history of Chinese venture capital. In addition, IDG capital, speed of light China, Kaihui fund, etc. are all investors of pinduoduo.
Two months later, another big Mac, meituan review, went to Hong Kong to ring the bell, and VC / PE ushered in a feast again. Sequoia was the earliest investor of meituan. Wang Xing once recalled that Sequoia stood with meituan in every important node of meituan’s development, whether it was its first investment in the early stage of meituan’s development, or its subsequent participation in multiple rounds of financing, and at every important node in the development process of meituan. Behind the gradual growth of meituan, Hillhouse capital has been firmly supporting it since round D financing.
It was a year worth remembering. Take IDG capital as an example, in 2018, 16 companies invested in the capital markets of the United States, Hong Kong and the mainland, including millet, bilibilibili, pinduoduo, Weilai automobile, iqiyi, kovos and other industry leaders.
In 2019, the pattern of China’s Internet will change dramatically. The market value / valuation of meituan review, pinduoduo and byte jump exceeded US $100 billion, becoming the three new economic giants rising after bat. And behind them are the figures of Sequoia China. Just comment on meituan’s investment, the return surpasses any project of Sequoia for more than 40 years, including Google. The sports business plate of Belle International has made a successful IPO in the world, and Hillhead capital and CDH investment have created a classic investment in the history of China’s PE industry. However, the most sensational one is still hillhood capital’s entry into Gree.
When it’s quiet, good things appear,
A new round of qualifying starts
But after all, the feast belongs to a few people.
In 2018, it was called the most stringent “new regulation on asset management” in history, and the voice of “difficult to raise funds” was on the noise. It is said that after returning from the Spring Festival in 2018, except for the front desk, all the VC firms, which have been established for nearly five years, will carry the KPI assessment of fund-raising on their backs, which can be said to be full fund-raising.
The reality behind “difficult fund-raising” is that VC / PE industry is staging a silent life and death elimination competition. The essence of the difficulty in fund-raising is that the market is eliminating unprofessional and incompetent players. “For two-thirds of VC’s, their first fund will also be their last fund”, which is not an exaggeration.
However, it needs to be emphasized that for the old investment institutions that have experienced the business cycle and the new generation of investment institutions with strong professional ability, the cold winter does not exist. In their eyes, market cooling is not a bad thing, return to value investment can really reflect their own ability.
In fact, good investment institutions always go through the cycle. “Now the venture capital circle is a little confused, many people can not raise funds, many people leave.” Xiao Bing, executive partner and President of Dachen financial intelligence, once said frankly that China’s venture capital industry has experienced a period of youth agitation, and now it is entering a mature and rational period.
“Now the industry is slowly entering the mature stage, much quieter than before. Returning to the true face of the industry and returning to a quiet state is conducive to our investment. ” Xiao bing used a poem to describe this feeling – beautiful things will appear when it is quiet.
Just as in the past two years, the launch of the registration system of the science and technology innovation board and the growth enterprise market has inspired China’s venture capital industry. Chen Wei, chairman of Dongfang Fuhai, said frankly that this has not only changed the phenomenon that China’s capital market has been affected by policies and human factors for a long time in the past 30 years. More importantly, it has enabled the capital market to go on the right path to support scientific and technological innovation with market-oriented methods, and the exit of venture capital ushered in the best period.
“I think 2020, 2021 and 2022 are the best and unprecedented exit three years in China’s equity investment market.” For the current venture capital industry, Ni Zhengdong still maintains a positive and optimistic attitude.
Nowadays, the Internet is no longer the only “granary” of VC / PE industry, and the speed of “wealth making” in semiconductor and health industry is even more amazing. In the semiconductor industry, the opening price of Xinyuan microelectronics soared by 290%, which also made many VC / PE companies who had been dormant in the semiconductor industry for a long time.
Looking back at the past 20 years, the tide has been rising and falling, and people are coming and going. Some people continue to maintain vigorous vitality, while others quietly fade out of the public view. At present, a new round of qualifying competition in the investment field begins. Who will be the strongest VC / PE in China in 10 years?