2024 is the year of reversal. As the finale of the 14th Five-Year Plan, scientific and technological innovation and industrial upgrading will be further deepened, the development of a modern industrial system will be accelerated, and the pace of optimizing and upgrading the economic system will be further increased. The equity investment industry has entered a new historical stage, and the industry needs to take advantage of the situation, take advantage of the situation, take advantage of the situation, and move forward lightly. Confidence is the greatest asset, love is the greatest motivation, and courage is the greatest strength.
Rongzhong Finance 2024 (13th) China Capital Annual Conference was grandly held, gathering LPs, VC PE investment institutions and innovation-leading enterprises such as state-owned assets and market-oriented parents, gathering **competent authorities, state-owned assets **guidance**, market-oriented parents**, etc., to conduct a comprehensive viewpoint mining and problems on the industry ecology under the new situation!
At the meeting, with the theme of "IPO Tightening, New Positioning of Active Exit Strategy", the conference entered the "exit session" discussion session. Dong Dongdong, partner of Tongchuangweiye, Li Zhanjie, managing partner of Qianhai Mu**, Liu Shuang, head of post-investment management of Shenzhen High-tech Investment, Ma Yun, founding partner and chairman of Yunze Capital, Pei Wanchen, managing partner of Jianggan Capital, and Song Yanyan, general manager of Linxin Investment, participated in the forum discussion, and Ma Weiguo, founding partner and chairman of Yichen Capital, presided over the forum.
The following is a transcript of the wonderful speeches in the exit special forum session of the "Rongzhong Finance 2024 (13th) China Capital Annual Conference", which was compiled by Rongzhong Finance.
Ma Weiguo: Good afternoon, everyone. Today's topic of our roundtable is about exit. In the past two years, the investment industry has been in the midst of involution, whether it is fundraising, investment, management and withdrawal, it is the same situation. In this exit session, we invited institutions that have invested in different fields in the industry and have done quite well to share with you the topic of exit. In such a difficult situation, share your experience, follow the process, and ask all the guests here to introduce themselves briefly.
Dong Dongdong: Good afternoon, ladies and gentlemen, I am Dong Dongdong from Tongchuangweiye. It has been responsible for the post-investment management of Tongchuangweiye, which was established in 2000 and has invested nearly 700 companies so far, with a management scale of 35 billion.
Li Zhanjie: Hello everyone, I am Li Zhanjie from Qianhai, we have managed Qianhai Mother**, with an initial scale of 28.5 billion, and we have also managed several regional **, including professional direct investment in smart interconnection, big health, electronic science and technology, new energy and new materials, and industry**. In addition, it also includes its own IPO**, Angel**, with an overall management scale of about 70 billion, and one of the largest market-oriented VC PE management in the Guangdong-Hong Kong-Macao Greater Bay Area.
Liu Shuang: Hello everyone, I am Liu Shuang, from Shenzhen High-tech Investment. Founded in 1994, Gaoxin Investment is one of the earliest state-owned enterprises engaged in venture capital in China. In that year, it successfully invested in Han's Laser, and it was also one of the first investment institutions in China to launch small and medium-sized board listed companies. At present, the overall management scale of high-tech investment is 15 billion yuan, and the total investment enterprises are 450.
Ma Yun: Thank you host, I am Ma Yun of Yunze Capital, Yunze Capital was established to today is the eighth year, mainly around the materials, military industry and electronic information three major tracks of in-depth cultivation, Yunze Capital investment colleagues are also from the industry, in the subdivision of the track, we have also invested in dozens of companies, from the underwater project excavation verification and empowerment, as well as the formation of a systematic exit transaction network, but also established its own party, I hope to share with you today.
Pei Wanchen. Hello everyone, I am Pei Wanchen, from Beijing Jianggen Capital, Xinjiang Capital was established in 2012, has invested in more than 90 projects, has withdrawn more than 20 projects, more than 70 projects under management, and currently has more than 20 in the listing stage or declaration stage, the scale of fund management has a certain volume, and there are actually a few US dollars ** are also managed, but the scale is not particularly large. Thank you for the invitation.
Song Yanyan: Hello everyone, it is a great pleasure to participate in this event. I'm Song Yanyan from Shanghai Linxin Investment. Founded in 2015, from its inception to the present, it has been positioned as an industrial investment platform for hard technology. Founded more than eight years ago, along the upstream and downstream of the industrial chain, there is no limit to the stages around the world, from seed round to M&A. At present, a total of more than 100 projects have been invested, of which 17 have been IPOs.
Ma Weiguo: I would also like to introduce myself, I am from Yichen Capital, a company that has only been established for five or six years. I have been working in investment banking for 20 years, and I have been investing in PE VC for the last 10 years. The main investment is still in the new energy vehicle industry chain and the semiconductor industry chain. After the exchange just now, basically every institution has a joint investment company with us, so we usually communicate a lot. The following topic will be shared with you around the exit, and each guest can communicate with you based on their own cases and actual situations.
Exit case sharing of investors in 2023.
Ma Weiguo: The following topic will be shared with you around withdrawal, and each guest can communicate with you based on their own cases and actual situations. The first question is how to exit throughout 2023, and the other is how to deal with the trigger clause when it comes to VAM repurchase.
Dong Dongdong: In the past three years, Tongchuangweiye has mainly focused on IPO withdrawal, and the IPO exit results are not bad, and the number of IPOs from 2021 to 2023 includes 14, 17, and 13 respectively.
On the whole, after the adjustment of the IPO policy since the second half of last year, the IPO exit is under great pressure, and in fact, we have made a clear adjustment to the exit strategy at the beginning of 2023. In addition to ensuring the exit of existing IPO projects, it is necessary to focus on mergers and acquisitions, as well as opportunities for alternate rounds of exit and transfer. For early investment and small investment, if the growth is good, you can grasp some important refinancing exit opportunities, not just focus on the IPO exit part of the income, or pay attention to the investment income that the growth part of the enterprise can bring us.
For the implementation of buybacks and VAMs, in the past few years, considering the impact of the epidemic, we have a certain tolerance for the repurchase and withdrawal of enterprises. However, in the wake of the pandemic, we have been tightening our enforcement of buyback clauses. Now we basically have to communicate with the company half a year to a year in advance, which is now a very clear requirement for us to exit. At the same time, internally, we have also increased the frequency of post-investment meetings, and the system will sort out all projects in detail, and each project must put forward a clear exit plan. It is difficult to get through an exit from an uncertain project, so a clear exit plan is an exit strategy that we have been strictly implementing since 2023.
In addition, mergers and acquisitions are a task that we will focus on for investment banks this year, in addition to working with listed companies, industrial capital, and even with many places, we are promoting more interaction to promote transactions. At the beginning of this year, we are about to operate a project as an example, this project is currently an IPO yellow light enterprise, there is no A-share sector to receive, and the current ** index of the Shanghai Stock Exchange has not yet been reached. Therefore, we will do a good job of post-investment management in advance, and cooperate with securities firms and industry partners to integrate the industry of the project. At the same time of industrial integration, we will make arrangements for mergers and acquisitions and exits, which is a project that we will focus on at the beginning of this year.
Ma Weiguo: There are two revelations, which involve the need to arrange the gambling in advance and communicate with the company half a year in advance. The second is to do a good job of post-investment management in advance, communicate more with brokerages and investment banks, and use their resources, thank you.
Li Zhanjie: I use the project invested by our mother ** as an exit strategy. Overall, it is still dominated by IPOs, and 9 IPOs were achieved in the first half of last year. In the second half of the year, the IPO was suspended and had a big impact on us. As the main channel for exit, the possibility of the entire IPO is greatly reduced.
Therefore, we are constantly looking at the possibility of gradually increasing the possibility of the rear wheel exiting. The general strategy is to take the method of alternate round withdrawal, after the previous round of withdrawal, the next round will not be withdrawn temporarily, and the next round of financing will be withdrawn. Relatively easy to accept for businesses. It's an adjustment we've made.
The second is to strengthen the exit of VAM repurchases. For example, in the first year, the signing rate of VAM repurchases of investment enterprises was about 56%, but in recent years, it has gradually increased to more than 60 or even 70. This is more of a psychological comfort, the company can't do it, and it is actually very difficult to talk to it again. We are also actively working in this regard. For normal VAM repurchase enterprises, the strategy adopted is nothing more than the first talk, and if you can't get along, you can talk while fighting, and if you can't do it, you will fight hard, and open such a strategy.
The cases I want to share today are not cases where an agreement was signed for VAM repurchase, but some cases where VAM repurchase was not signed. One example is the angel round project of a cat food company. The company later went bankrupt, and it stands to reason that the three million will be gone, but from the perspective of post-investment responsibility, I still want to fight for it, and finally found the evidence that the company's founder has untrue capital control, so that the founder paid 800,000 yuan out of his own pocket to compensate us. In fact, in many cases, most venture capital institutions choose to lie flat, but I think in such a difficult environment now, to get back a penny more is to contribute a penny more to LP, and it is too difficult to make money now. Therefore, we want to find relevant loopholes in the legal contract for some projects that do not have VAM repurchase, protect rights and interests with the law, and ultimately strive to maximize benefits, which is what I want to talk about in the VAM repurchase.
Ma Weiguo: In the past two years, business has not been good, but the lawyer's business has increased, because it involves ** litigation and investment litigation. Mr. Li said very well, even if he did not sign a VAM repurchase agreement, he could still seize the irregularities in the operation of the enterprise, and there would be opportunities for litigation.
Liu Shuang: Now it is indeed more and more difficult to exit from IPO, and the exit results of high-tech investment in 2023 are relatively good, about 30 projects have been withdrawn.
Around 2020, a company made electronic adhesives was invested, and the downstream market demand is large, but the industry introduction cycle is long. In 2023, this company has been introduced to the new energy track, gained a lot of attention in the capital market, and obtained a new round of financing. Therefore, with the help of this time window, Gaoxin Investment has obtained 5 times the income on this project by retreating in alternate rounds. On average, the annualized return is also more than 150%, and we believe that the transfer and exit can also obtain relatively high returns on some projects.
In summary, the requirements for the development of the enterprise itself are still relatively high, one is that the development of the enterprise itself must meet expectations, and at the same time, it also needs to have a clear expectation for future growth.
In addition, the second point talks about if the project is triggered by a performance VAM, there is a project that we invested in in 2020 to make precision pharmaceutical drug delivery pumps, because during the epidemic, the company's overseas performance declined sharply, triggering the performance VAM. At that time, through comprehensive consideration, the company's performance has now declined sharply mainly because of the impact of the epidemic, and secondly, its core advantages, customer barrier advantages still exist, and our investment logic at that time is still valid. We predicted that in the later stage of the epidemic, the company still showed signs of performance recovery, so it was exempted from performance compensation at that time. Indeed, in the second half of 2022, the company's performance has grown more clearly, and at the same time, a new round of financing has also been obtained in the second half of 2022. This solution not only helps the company tide over the difficulties, but also reduces our own investment risk.
Therefore, on the whole, it is necessary to make a comprehensive solution for it in combination with the actual situation of the enterprise.
Jack Ma: Considering that the number of investment projects of each institution is different, which is reflected in the absolute number, we place more emphasis on the "deposit-to-retreat ratio", and in 2023, Yunze Capital has maintained a relatively high deposit-to-retreat ratio, and it is expected that the performance in 2024 should exceed that of 2023. Based on this, our first phase ** achieved MOIC to 5 and DPI to reach 1 within three years, and the second phase ** also achieved a relatively good level of DPI in two and a half years. In the form of project exit, we not only rely on IPO, but also for enterprises with a relatively high shareholding ratio, on the basis of comprehensive consideration of MOIC and DPI at the highest level, we realize partial transfer transaction exit, and through mergers and acquisitions, to achieve project exit.
In recent years, because of the rapid progress of IPOs, all investment institutions have ushered in the feast of IPOs, but in the case of the overall tightening of IPOs in the future, it is of great significance for an investment institution to form a systematic approach to transfer transactions and mergers and acquisitions. We see that the current primary market stock is 15 trillion yuan, there are a large number of assets to be traded, and at present, everyone is staring at the S mother, most of which are concentrated in very developed areas, and the scale is still very small compared to the scale of the primary market stock, and there is a serious oversupply, so in the face of the S mother, the discount of project transfer, the selection of the best of the best, and the complex due diligence process are very unfavorable to our investment institutions. Based on this, we have shifted our attention to the neglected third- and fourth-tier cities with more developed economies, the areas with few hard technology listed companies and the transformation of traditional industries.
In these target areas, we have established stable GP partners, and at the same time, the cooperation strategy is more reflected in S+D, both the transfer of old stock assets, and also some co-investment opportunities at the level of direct investment in the later stage. Last year, we also successfully achieved the exit of the transfer transaction of the invested project, and we had more than ten times the income in less than three years after the A round of investment, and achieved a partial transfer exit, and now the latest round has reached 20 times.
What I share is a case completed in the M&A exit last year, this project was reported by a competitor on the second day of the meeting, and the actual controller was involved in cooperating with the investigation, so the listing process was terminated. After completing more than 4 months of cooperative investigation, the company's shareholders and investment banking institutions at that time were all suggesting mergers and acquisitions with listed companies. However, we believe that the company's net profit of 70 million or 80 million yuan at that time, and it is not a very beneficial way for the company to negotiate mergers and acquisitions with listed companies. Therefore, we proposed at that time that the company fully embrace state-owned assets and realize industrial synergy, according to this idea, and finally persuaded the actual controller that he also fully accepted our suggestion and quickly reflected it on this road. In this process, we continue to help the actual controller and various state-owned institutions to contact and negotiate, so as to enhance the acquisition, after half a year of joint efforts, smoothly let the enterprise and Shenzhen's largest state-owned assets to achieve the embrace. In the acquisition of 40% of the shares, in addition to the actual controller and the team of 32%, in the remaining 8% of the acquired shares, we ** held 2% of the shares to achieve mergers and acquisitions.
Pei Wanchen. Among the more than 20 project cases we have withdrawn from in the past, they are basically concentrated in three ways: IPO exit, M&A exit, and repurchase exit. In the process of investment, in fact, every investment institution wants to develop together with the company when investing in the company. But we stand in the middle and want to guarantee the interests of LPs. At the time of investment, everyone can say that it is the honeymoon period, but once the corresponding repurchase clause is triggered, if the time node of the listing is not reported on time, there will be various disputes later.
We are more optimistic about the path of M&A exit. In fact, at the beginning of its establishment, the main business of Jianggan Capital was to do mergers and acquisitions and investment. Therefore, when we are dealing with the projects that we are now preparing to exit, we may think more about mergers and acquisitions.
Just now, Mr. Li also said that today's secondary market is not performing well. The roles of the primary and secondary markets are actually complementary, and venture capital has not said before that we must achieve counter-cyclical mutual adjustment of the primary and secondary markets, and mergers and acquisitions have played a greater role in it. In fact, we think that mergers and acquisitions are a major or important way to optimize resource allocation and stimulate market vitality.
The company is also laying out a large number of S** business this year, because the LP** expired before, there are DPI requirements, and the state-owned assets will return to the main business, and they will not continue to invest after the funds expire, so the opportunity for S** in the market will be relatively large. While doing a good job in post-investment management, we will also pay attention to the relatively good S** investment opportunities in the market, including the stage where there are currently more than 40 high-quality S** targets in the pool for overall screening.
Ma Weiguo: Thank you, Mr. Pei, when an enterprise encounters a VAM repurchase, the first thing to do is to see how to help the company tide over the difficulties, which is really not good, and try to focus on mergers and acquisitions and exits, which is better for the enterprise.
Song Yanyan: The main exit path of Linxin Investment is three ways, the first is the most mainstream IPO listing exit, the second is to be merged, and the third is equity transfer.
In 2023, among the more than 700 billion exits, nearly ten projects will be covered, and the yield will be very good, close to the 7 times level. From the exit above, it is true that we have a very big bright spot in the industry. In fact, from the perspective of exit, the company does not mean how clever the means of exiting are. Exiting it is just a consequence, what is the reason for it, or the quality of the investment itself. One is that you can invest in a good project, and the other is whether you can continue to empower it and enhance the value of the industry after investing in the project. Therefore, the essence of attention should be how to make better investments. Even if the IPO is tightened, the leading companies must still have the opportunity to go public. Even if it is not listed through IPO, it can still be transferred through equity transfer or merger and acquisition. Scarce assets and good assets will never worry about exit paths and channels. Therefore, it is necessary to pay attention to the end of "investment" and grasp the core essence, in fact, exit is a matter of course.
At present, among the more than 100 projects we have invested in, none of them have been liquidated or repurchased. When a company triggers a VAM and when dealing with the situation, we do have to think about how we can help the project correct the deviation. Because it is possible that its short-term deviation will not affect the long-term fundamentals of the project, the more it needs to be sent in such a situation, the more it needs the support of shareholders for itself. At the same time, share compensation will be discussed, which is also within the company's reach. If we really implement the buyback, or liquidation, in fact, I think the final result is still a lose-lose situation without a final winner, and it is very difficult in practice. We still have to work how to continue to empower and help the project correct deviations and help it grow.
Ma Weiguo: The key is to invest in high-quality projects. Linxin's performance as a professional investment institution in the vertical field is still outstanding.
Investors' views on the Beijing Stock Exchange and the Hong Kong Stock Exchange.
Ma Weiguo: Time relationship, only ten minutes, the last question, the Beijing Stock Exchange is very active during this time, and it is also more encouraging everyone to go to the Beijing Stock Exchange to be China's NASDAQ, and another way is to go to the Hong Kong Stock Exchange. In this case, what do you think about the Beijing Stock Exchange and the Hong Kong Stock Exchange?
Dong Dongdong: In June last year, after the first threshold of the Science and Technology Innovation Board and the Growth Enterprise Market was raised, many companies began to convert. However, there is still some hesitation between the Beijing Stock Exchange and the Hong Kong Stock Exchange. From our point of view, we have always encouraged and promoted companies to go to the Beijing Stock Exchange. Because the Beijing Stock Exchange is currently the only sector in the capital market in the dividend window period, this period will be a better choice for companies that meet the listing conditions of the Beijing Stock Exchange to be listed on the Beijing Stock Exchange.
Li Zhanjie: We are also relatively similar, if the company goes to the Growth Enterprise Market and the Science and Technology Innovation Board, it may be able to go on the board in a few years. If you go to the Beijing Stock Exchange, you can get on it right away, or it will be very important. At present, we are also actively promoting enterprises facing the impact of red and yellow lights to actively move to the Beijing Stock Exchange. But for the better ones, there is a chance to become a small leader in the GEM or the Science and Technology Innovation Board, we will advise the company to wait a little longer and fight again.
For the Hong Kong Stock Exchange, we still do not recognize it. Because the valuation and liquidity of the entire Hong Kong Stock Exchange are indeed too different. But for this kind of enterprise that can't get on the science and technology innovation board and can only go to the Hong Kong Stock Exchange in exchange for a certain amount of liquidity, he is still persuaded to go to the Hong Kong Stock Exchange to give it a try.
Liu Shuang: With the improvement of policies and the demand driven by the market, the activity of the Beijing Stock Exchange is gradually increasing. In December last year, the stock price of the Beijing Stock Exchange reflected a certain degree of recognition by the capital market. Then, since the second half of last year, many companies on the Science and Technology Innovation Board have been laid off, and it is obvious that the recognition and acceptance of the Beijing Stock Exchange are gradually improving. As our institution, the attitude is also to support enterprises to apply for the Beijing Stock Exchange.
Jack Ma: As I mentioned earlier, the price-earnings ratio of the Beijing Stock Exchange is gradually increasing. However, judging from the current state, the Beijing Stock Exchange is still an overall stock game market, and whether the future liquidity will have a long-term sustainable and stable state is an important indicator for us to observe. For the companies we invest in, we encourage them to go to the Beijing Stock Exchange, but there are several principles: the first depends on the quality and future growth of the invested company itself;The second depends on the liquidity of the market as a wholeThe third depends on the margin of safety of the overall valuation of the investment project. We encourage some companies whose price-earnings ratios can be basically in line with the Science and Technology Innovation Board and the Growth Enterprise Market to continue to precipitate and continue to develop bigger.
Pei Wanchen. 
On the side of the Beijing Stock Exchange and the Hong Kong Stock Exchange, the Hong Kong Stock Exchange performed badly last year, so maybe we have a more reserved attitude towards the Hong Kong Stock Exchange. But at the beginning of the Beijing Stock Exchange, we felt worried about its liquidity, but from the second half of last year to the present, we have also seen the growth of the Beijing Stock Exchange, including the back, it may be rumored that the market will have a direct way in March and April, so if the companies we have invested in are listed on the Beijing Stock Exchange, our side is a state of comprehensive encouragement, so we also hope that the invested companies can successfully land on the Beijing Stock Exchange.
Song Yanyan: Our basic attitude is that the company chooses where to go public and decides what the problem it will ultimately solve. For example, if there is a shortage of funds now, if the Beijing Stock Exchange can help you solve this problem, we have no objection. There is still uncertainty about what kind of performance the Beijing Stock Exchange will eventually be and whether it can meet everyone's expectations.
From our point of view, if there is a company that has such an attempt, we will not object. However, enterprises are still encouraged to continuously improve their hematopoietic ability. Then other paths can be actively tried.
Ma Weiguo: Thank you, ladies and gentlemen. Exit is indeed a big problem, we have invested in 11 projects, listed two, 5 in the will review, and four can go to IPO this year, this year we are also mainly encouraging companies to go to the Beijing Stock Exchange. Because of the two boards in Shenzhen and Shanghai, it took too long to wait for the report. And the tightening is likely to continue, and it is impossible to say that it will end in a year or two. As for the Beijing Stock Exchange, there is still a window period, and if you don't hurry up to the Beijing Stock Exchange, the estimated standard will also increase rapidly. It is also difficult to go to the Beijing Stock Exchange again.
Therefore, my feeling for investment banking and investment is to seize any opportunity in the capital market, as long as you meet the conditions, you can do it early, don't wait and see. Everything is dynamic, and in two or three years, it is possible that the standard will be raised very quickly.
Summing up today's roundtable, I think everyone talked about it, very good and comprehensive, from the path of exit diversification to the possible future changes of the entire investment strategy, to sum up, the first diversification exit, everyone should think of their own ways, the second pair of investment strategies, one is more willing to invest in the early stage, if the investment project *** Linxin I vote well, don't worry about how to exit, will definitely exit.
The second is the future M&A opportunities, I think there may be more M&A opportunities after this year, it is difficult to go public, many shells have the value of the shell, or many listed companies, traditional industries to protect the shell, to do mergers and acquisitions, to acquire some high-tech enterprises.
That's all for today's roundtable forum, thank you.