Recently, under the guidance of the Shanghai Municipal Financial Supervision and Administration Bureau, the 23rd China Equity Investment Annual Forum hosted by Qingke Entrepreneurship and Investment Circles was successfully held in Shanghai.
Focusing on the topic of perseverance and adaptation, He Zhiqiang, Senior Vice President of Lenovo Group, President and Managing Partner of Lenovo Venture Capital Group, Ni Zhengdong, Founder, Chairman and CEO of Qingke Group, Kuang Ziping, Founding Managing Partner of Qiming Venture Capital, Li Jiaqing, President of Legend Capital, Li Liang, Founding Partner of Hillhouse, Xiao Bing, Managing Partner and President of Dachen Caizhi, and Zheng Qingsheng, Partner of Sequoia China, had an in-depth exchange.
The new cycle of equity investment represented by investment in science and technology innovation has come, and "early investment, small investment, and hard technology" has increasingly become the consensus of the industry. At the forum, He Zhiqiang said that Lenovo Venture Capital has been focusing on early-stage technology investment since its establishment. In recent years, the maturity cycle of emerging industries has been greatly shortened, and the speed of a new industry from technology rise to commercial maturity and then to overcapacity has increased significantly, from smart phones, new energy vehicles to batteries and other industries.
As the CVC (Enterprise War Investment) of Lenovo Group, Lenovo Venture Capital has been giving full play to the advantages of Lenovo Group's industrial resources, promoting the industrialization of scientific and technological achievements, driving innovative technology from "laboratory" to "production line", and ultimately serving global customers. He Zhiqiang said that China Mobile Robotics is leading the world and has a strong advantage in going global. Many of the robotics companies invested by Lenovo Ventures have already reached cooperation with Lenovo's business units to serve overseas customers, and their turnover and profits have grown particularly fast.
Towards 2024, the dawn of hope has risen. He Zhiqiang believes that the artificial intelligence model and humanoid robot track are currently very hot, and there are huge opportunities in both fields, and will contribute great value to the society, but at present, the two tracks are facing the challenge of computing power and industrialization path have not yet been unified. And the more challenging times are, the more important it is to remain optimistic, restore confidence, and firmly support China's innovation and the technology entrepreneurs behind it.
The following is a transcript of the conversation
Edited by the Investment Community (ID: pedaily2012).
Ni Zhengdong:Hello everyone!This year's theme is perseverance and adaptation, and all of you here are representative organizations in the industryThen introduce the report cards of their respective fundraising, investment, and exit since the beginning of this year.
Year-end review of the primary market
He Zhiqiang:Lenovo Ventures is the corporate VC of Lenovo Group, which mainly invests in early-stage core technologies. This year, the amount and volume of our investments are basically the same as last year, and we have invested in more than 40 projects, including the addition of some of the projects we have already invested in. In terms of exits, there have been three IPOs so far, and several more will be listed in the next January and February, which is basically the same rhythm as last year.
Kwong Ziping:Qiming Venture Partners mainly invests in two major sectors, one is the healthcare sector and the other is the technology and consumer sector.
This year's investment progress has been slower than last year's. I roughly counted that this year we have invested in 40-50 companies, some of which are refinancing, and the new investment is roughly calculated to be about 30. Last year and the year before that, we invested relatively largely, and this year is about a third slower than last year.
But fortunately, we completed the fundraising of US dollars and RMB last year and this year, so we have relatively good hands this year. Since there are now appropriate investments in all aspects such as investment, we have also increased investment in some subdivisions of interest.
In terms of exit, there is pressure this year, and the overall exit environment in the first half of the year is okay, but there is great pressure in the second half of the year. This year, we have listed two or three companies on the A-share market, and we have several listed companies in the U.S. stock market, like one of our medical companies listed in the U.S. this year, which is still doing very well. However, the exit progress of U.S. stocks is also declining sharply, and the window for U.S. IPOs has not yet reopened. I believe that after the reopening, there will still be opportunities for good Chinese companies to go public in the United States.
Li Jiaqing:Like Qingke, Legend is also in its 23rd year this year and has been focusing on investment in the technology sector in the early and growth stages, mainly focusing on investments in the fields of digitalization, green carbon neutrality, and life and health.
In 2023, the fundraising and exit scale of Legend will be around 10 billion, and there will be 4 listed companies and 4 companies that have passed the meeting to be issued. The pace of investment has slowed down, but we are still sticking to long-term sustainable investments, so we can maintain a stable operation for the next three years.
Li Liang:Hillhouse was founded in 2005 and this year marks its 18th year. As an equity investment institution, our mission is to serve real enterprises, and we have invested in more than 600 enterprises mainly around the main lines of scientific and technological innovation, advanced manufacturing, green and low-carbon. In addition, Hillhouse also has a more distinctive point is that we have a DVC service team of two or three hundred people, which is called the deep value creation department internally, which can provide enterprises with systematic and professional services at different latitudes, including digital upgrading, lean management, and chain management, and I am also in charge of this part.
Our investment this year is more consistent with the overall market experience. In terms of exits, we have more than 10 IPOs in A-shares, Hong Kong stocks, and U.S. stocks.
My experience is that in the overall uncertain environment of the past two or three years, the high-quality development of portfolio companies is very important. No matter what field you are in, even if the environment is challenged by many challenges, a high-quality management team and high-quality business development are still giving birth to great companies. As an investment institution, in addition to the traditional discovery of value, we have also been committed to creating a model that can better help and serve enterprises, and improve our ability to support the development of enterprises from all aspects. This is what Hillhouse has been doing for nearly 20 years.
Xiao Bing:I'm from Dachen Caizhi. Dachen has a history of 23 years and is a typical local RMB**. At present, the overall market environment is changing, and we judge that it is more favorable to ** like Dachen, so we will be relatively positive and optimistic. For example, in fundraising, there are some LPs, including some insurance companies, who originally did not invest in institutions like ours that focus on advanced manufacturing and hard technology, but now they are starting to do more, so we have achieved good results in fundraising this year.
Of course, now that these directions are more popular, the competition in investment will be more intense, but based on the industrial base and ecology that we have gradually grown, we still have great confidence in this regard.
Ni Zhengdong:Institutions like Dachen are more popular and fit China's national conditions in the new changes.
Zheng Qingsheng:Founded in 2005, Sequoia China has been one of the most active investment institutions in China for nearly 20 years. Technology, healthcare and consumption are the three main areas we cover, starting from the early and mid-term investment, we have successively established seeds, mergers and acquisitions, etc., to complete the product line covering the whole stage and the whole chain, and support the development of the company in the whole life cycle of enterprise growth.
In the past year or two, we have put a lot of effort into post-investment management. At present, Sequoia China has established 6 incubators across the country, and the 7th is also in the process of landing. At the same time, we also set up an incubation program to serve angels and pre-angel round entrepreneurs last year, the Yue Entrepreneurship Accelerator. These are all to pave the way and prepare for the development of enterprises at all stages and to achieve a good exit in the future.
In such a season that seems to be relatively cold, we are still active. Because we think this could be the beginning of another tech cycle, especially when different hard technologies are in a state of breakthrough. So despite the challenging macro picture, we remain moderately optimistic.
Ni Zhengdong:Sequoia is very active indeed. Looking at the data, Sequoia is also one of the most active institutions in the market today in terms of fundraising and investment. Today is also the first time that Sequoia China's new logo appeared at Qingke's annual meeting - Hongshan, which is one of the most influential changes in the industry this year.
Something exciting this year
What are the top VCs investing in
Ni Zhengdong:All the investors talked about the situation this year, although everyone is very anxious, but they are still working very hard, so what is the industry or project that you are most excited about this year?
He Zhiqiang:From the perspective of technology investment, the challenge in the past two years is that the maturity cycle of emerging industries has been greatly shortened, and the speed of a new industry from technology rise to commercial maturity to overcapacity has increased significantly, from smart phones, new energy vehicles to batteries and other industries. In this case, it will test the investor's ability to judge the time node and timing of industrialization.
This year's hotter tracks: one is the artificial intelligence model, and the direction is definitely very valuable. But while there are opportunities, China still faces huge challenges in terms of computing power;The second is the robot track. We are optimistic about human-machine collaboration in the long run, and have begun to invest in humanoid robots, but what kind of technical path can humanoid robots be used to achieve them, the academic and industrial circles have not yet reached a consensus, which is also an opportunity and a challenge for investors.
Kwong Ziping:On the technology side, I think one of the most exciting investment directions in 2023 is generative AI. In the long run, this large field will change every aspect of life and work. We have invested in several businesses in this area this year.
In terms of models, there is a particularly exciting model this year, that is, Chinese products are going global. Whether it is the medical and health industry, the number of licenses-out (external licensing) of domestic innovative pharmaceutical companies exceeds the number of license-in, or other industries, China has many very excellent products to the world, not only "cheap and good" However, some of China's products have strong competitiveness in the international arena, which I think is a model worth cultivating in the future.
Li Jiaqing:The first is generative AI itself. In addition to large models, almost all of our software companies, professional services, and enterprise service companies have installed the application of generative AI and large models as an engine on their own "cars", and the transformation speed is still very fast, but it is still in the early stages.
Second, green energy-related fields. We look at batteries, photovoltaics, and energy storage, and now the valuation in the primary market has been the best, and the market opportunities for the energy Internet and new power systems on the user side have begun to appear. Because the upstream cost has decreased, there are still many downstream changes and applications that can be done, and now this market has begun to rise rapidly.
Third, the internationalization of the medical field represented by biomedicine, which has not been seen before, is now large-scale license-out, and the scale of down payment is very large, in fact, biomedicine, life and health are ahead in technological innovation and global cooperation. The real high-level innovation started from the biomedical and medical field, and I believe that it will spread more and more to other industries in the future.
Li Liang:Unlike previous cycles, there is an elasticity of demand. After the large-scale price reduction in the upstream, more demand can be stimulated. For example, when you look at electric vehicles, the first thing you see is the new energy alternative to petrochemical, but in fact, there are many technologies that have been accumulated, and the added value of new products is much higher, which includes both the combination of software and hardware, as well as the rapid iteration of engineering. China has a very large number of engineers, including our earliest incubator, Horizon, which completed a 2 billion euro cooperation with Volkswagen this year.
One of the most impressive projects this year is an electric bicycle company in Shenzhen that we invested in. From last year to this year, electric bicycles have developed very well in the European market. Our ebike company has done a very good job from the entire product definition, the best chain management ability, to the iteration of the software. From this point of view, I am very optimistic about China's first-chain innovation and rapid iteration of engineering capabilities to go global.
Another exciting project this year is a humanoid robotics company that we have supported since the incubation period. Since last year, we have been looking for a team in this field, and we are working with the team to find a combination scenario with the industry, especially the to b scenario. In August of this year, they did a new product launch, and the first prototype (humanoid robot) was able to stand on its own, and I was very happy to see it.
Another project from Hillhouse's long-term investment in the life sciences and healthcare industry. In recent years, among the many innovative drugs approved by the FDA, Chinese companies have become more and more present, playing a very important role in the global industrial chain. In this regard, in addition to investing in individual companies, we also supported a special program this year called Dart Accelerator, which provides a standardized, world-class R&D ecosystem and high-quality services to life sciences innovators, and has served hundreds of life sciences companies and projects so far. Its first acceleration center is located in Zhangjiang, Shanghai. By supporting an ecological service-oriented platform like Darts, we are able to serve more innovative medical enterprises and serve the overall progress of the industry chain more efficiently.
Xiao Bing:I also see two new, longer-term systemic opportunities. One is the direction of artificial intelligence, the new generation of artificial intelligence may change many industries, and many industries can be redone and need to be redone. This is a new systemic opportunity, including underlying technology and model innovation. We've seen some early projects that are exciting for the team, but of course the risks are higher, so we need to control them and settle our own accounts.
The second is the opportunity to go to sea. Especially in the past few years, we have seen that some companies have gone to the sea of stars in the global market after they have come out of the domestic market, which is what a particularly excellent world-class enterprise does. We have noticed that many enterprises do not only export very low-value things in the past, but high value-added, technology-based, and self-owned brands, relying on China's advanced Internet experience and accumulated methods, using the advantages of China's technology and industrial chain groups, to export to the world, which is not just an opportunity for a few products, but a long-term trend. We see a lot of young new generation of entrepreneurs with world-class and international vision and capabilities, and we feel very hopeful.
He Zhiqiang:China Mobile Robotics is the world's leading, and many of the robot companies we have invested in have cooperated with Lenovo's business units to serve overseas customers together, and their turnover and profits have grown particularly fast, and Chinese young people have a natural advantage when they go out.
Ni Zhengdong:There is also Bubble Mart in Thailand's first store.
Zheng Qingsheng:The first is the development of generative AI. We see that every development of the Internet is actually a redistribution of traffic. Generative AI leads to opportunities for reshuffling and distribution of the entire traffic. Of course, in the end, at least half of the winners come from the traditional big factories, because the big factories have a resource advantage in them. But at the same time, there are also opportunities for entrepreneurs in every reshuffle, so we hope to see new "big factories" appear.
The second is the development of science and technology on the first chain side, and investment opportunities are emerging in robots, biomedicine, new materials, etc. With the development of information technology, many talents, product models and services that could not flow internationally before can be internationalized to a certain extent. Therefore, it is likely that we are experiencing a second "WTO era", and more excellent Chinese products will be sold overseas.
Two thoughts: about going to sea and consumption
Ni Zhengdong:Twenty years ago, Chinese VCs went to the United States to have a dialogue with them. After another 20 years, Chinese investors have to go outside, to the United States, to the Middle East, to all parts of the world. For example, in the new energy vehicle industry, ideal cars sell particularly well in Central Asia, and BYD's cars also sell well abroad. Many Chinese products, even sweeping robots, are selling very well overseas, and many companies even account for 80% of their overseas revenue. That's why I think we should go overseas.
Li Jiaqing:I still combined with what you just said about going overseas, at this stage, Chinese enterprises are facing the problem of going global and glocalization. Going out and internationalization is not only a matter of selling products, doing business and doing the best, which is very important. Internationalization is not to do "out-volume", and the problems caused by "out-volume" consumption of the stock market without innovation may be seen in the next two or three years, which needs to be highly valued.
Second, in the process of global expansion and global localization, enterprises still need to have technological innovation, otherwise the problems encountered in the local market will still be encountered when they are transferred overseas. Therefore, it is still necessary to emphasize that in the process of enterprise internationalization and global localization, we should pay attention to real innovation, including many private small and medium-sized technology companiesSecond International Expansion;Third, to solve the problem of employment, these three points must be blended. International expansion must be premised on scientific and technological innovation and innovation leadership, otherwise no country can carry such a large scale of China's collective going to sea.
Many companies in developed countries rarely talk about going overseas, or even have the concept of going overseas, because these companies are born global, and global localization landing, attaches great importance to cooperation, attaches importance to innovation to do increments, rather than to "roll" stock. Enterprises that want to go overseas in the future should also learn and pay attention to this aspect.
Ni Zhengdong:One is to go to sea, and the other is to downgrade consumption. Represented by Pinduoduo, there are also phenomenal companies such as Mixue Bingcheng and Tustin that have become popular, what do you think about this?
Li Liang:When it comes to consumption, China has a huge consumer market, and it is a multi-level consumer market, and there are better ways to meet consumer needs at each level at different stages. We have two invested companies that are doing very well overseas, one is MINISO and the other is Mixue Bingcheng, which is to meet the needs of customers with good enough products, and the entire chain including the first chain, production and business model is sustainable. Both of these companies have strong digital capabilities, and in the context of their globalization and cross-regional development, the management radius has been greatly expanded, which is difficult to imagine without the blessing of digitalization. The other thing is that their ** chain management is excellent. Consumption is always a very large market, and it needs a healthier and more sustainable push.
Ni Zhengdong:VC and PE are now mainly investing in technology and advanced manufacturing, but we still have to leave some space for consumption, and I believe that consumption will definitely come back in a few years, just like the chip industry - there has been more than ten years, and the investment industry does not invest in chips. When the industry was the loneliest, it was the early layout, such as Walden invested in chips in the past, and today they have gained the most. Let's not give up on the consumption track, there are still opportunities in the future.
Zheng Qingsheng:It should be said that with the deepening of consumption, the public's appeal to the brand has been expressed more. In the past, consumers were very scattered or even had no brands, but more and more mass brands have emerged, so that we can see the consumption demands of the public on brands.
2024, the protracted war
Ni Zhengdong:It's 2024 soon, and I often bump into VC PE peers on morning and evening flights. Our industry is like a group of soldiers, and there are many words to describe the combat state of each organization, such as fighting more and more bravely, calmly responding to the battle, fighting against the odds, disarming and returning to the field, leaving the country, failing to form an army, following the trend, going against the trend, winning by surprise, and ......winning a big victorySome of us have left for other places, and some have been disarmed and returned to the fields. If you had one word to describe your state of fighting, which word would you use?In 2024, what kind of expectations do you have, both for yourself and for the industry?
He Zhiqiang:There is a sentence that I agree with, in the investment industry, we should be afraid when everyone is greedy, and we must be greedy when everyone is afraid. So I think the more challenging times are, the more hopeful the light is already rising. In 2024, my expectation is that entrepreneurs' confidence will be restored, which is very important.
Ni Zhengdong:Everyone's faith needs to be restored.
Kwong Ziping:Since its establishment 17 years ago, Qiming Venture Partners has always been calm and follow the trend. We won't be particularly excited when it's particularly prosperous, and we won't be particularly anxious when it's a little stormy, anyway, it's just down-to-earth, and I think there are still a lot of opportunities.
Li Jiaqing:We often talk about protracted war, because the venture capital industry still has to eat the protracted war thoroughly, and the longer the time, the more we can see the changes in the situation, so as to find a strategy from holding each other to being the best. Last week, we just held the 23rd CEO Club Entrepreneur Annual Conference of Legend with the theme of "Harnessing Change and Seeking Innovation, Moving Forward with Resilience". In the investment industry, it is still necessary to use a relatively long-term protracted war mentality to do things. In the face of short-term ups and downs, gains and losses, it is still necessary to stretch the time span to a longer time. We believe that the past few years have been a good gestation stage, and the industry may usher in a new wave in the year. Don't worry too much about short-term fluctuations today, what should come will come. Therefore, it is more important to use the mentality of protracted war, move forward with resilience, and do what needs to be done well.
Ni Zhengdong:We still have a long way to go, a long way to go.
Li Liang:Looking back at the really outstanding battles in history, such as the Roman battles, they were not so dramatic, and most of the time was about how to dig trenches, how to do a good job of infrastructure, how to repair roads, and how to do a good job of internal skills step by step, and the same is true for our industry. When the industry fluctuates, look at what excellent peers are doing, what good companies are doing, and we, as investors, are also looking at what other capabilities we can make up for and improve now. For example, is the research capability sufficient, and is the comprehensive service and support ability I want to build for the enterprise sufficient?Wait a minute.
Then there is the mentality of resilience. We are always optimistic, and at the same time we have to be stable, we have always said this to the team, the most important thing is to go to the front line, this industry will always have access to the best entrepreneurs and companies every year, from them you can feel the real grassroots business, real development and innovation beat.
Just now, I read Mr. Ni's sharing report that venture capital accounts for 0 percent of the entire GDP6%。Therefore, I think that as a venture capital institution, the main thing is to do a good job in the role of service and practice our basic skills well, rather than waiting for the general trend in the short term, which is always to provide opportunities for those who are ready.
Xiao Bing:I would like to use one word to describe our strategy for next year, which is to make progress while maintaining stability. "Stability" is to stabilize the fundamentals, and we are more confident in this regard. But we still have to have a little ambition to make an investment, that is, the enterprising side, we especially hope to invest in some cutting-edge technologies, so that the social value, brand and influence of the ** are higher, rather than simply having some returns. Finally, he still emphasized that it is necessary to maintain concentration and practice internal skills.
Zheng Qingsheng:The first is the same as always. From 2005 to the present, we have been active, maintaining support for entrepreneurs and respecting the entrepreneurial spirit. So in the future, we will also treat the entire venture capital market with such an attitude.
The second is to look forward to a breakthrough. In the last 20 years of investing, I have never looked forward to technological breakthroughs as much as I do now. In the past, many Internet innovations were breakthroughs in product models, so many CEOs came from the product side, but today more and more CEOs with technology backgrounds are emerging. I have always believed that there is no leap in nature, and that the development of science and technology should be a continuous function. But the emergence and breakthrough of generative AI has changed my thinking a lot.
Ni Zhengdong:Everyone is still full of confidence in the future, and the protracted war that Jiaqing said is indeed a long-term optimism about China. Mr. Kwong was in the seat of the guest 23 years ago, and you are a real long-term person in the industry. We are one of the staunchest supporters and participants of China's innovation and entrepreneurship. In 2024, we are still optimistic about China, and we believe that there will always be a turning point in the industry. This year we are 23 years old, and I hope to be able to host until the 50th year. Thank you!
*: Investment community.