Guo Ruyi, founding partner of the Thai joint venture
On April 20th, the “Open Source Iteration·Decoding the Future†source code capital 2018 annual meeting was held in Beijing. Mr. Guo Ruyi, the founding partner of the Thai joint venture, shared the wonderful speech of “Positive Cycle, Iterative Evergreenâ€.
Guo Ruyi said that before 2017, the speed of the vents and the investment theme were concentrated, and the rhythm of capital was very comfortable. In 2017, the vent is short-lived and the money is cautious. Capital rationality and policy are terrible. In 2018, Q1 showed a new trend, summed up in 16 words: "Capital shuffling, renewing food, embracing integration, and iterating forever."
The cycle is objective. Guo Ruyi believes that to be calm, entrepreneurs should achieve “four iterations†at the cognitive level: strategic cognition iteration, organizational cognition iteration, capital cognition iteration, and policy cognition iteration.
The following is the full text of Guo Ruyi's speech.
Thanks to the source friends for their invitation. I just listened to Mr. Hu’s speech and I was very emotional. The growth curve of Huawei since its establishment in 1987 to the present 30 years is actually a curve drawn by the entrepreneurs we want to help us. The most emotional thing is that after many twists and turns and cycles, Huawei still maintains such a steep growth curve, thanks to the continuous iteration of the vitality of the entire organization. There is a saying that "there is no great enterprise, only the enterprise of the times." How to keep pace with the times, how to deal with the low and peak of the economic cycle, we must be prepared.
First take a few minutes to introduce the Thai joint venture. Since our establishment more than five years ago, we have done 60 projects and more than 80 financing rounds, with a total financing amount of 55 billion. In 2017, we relied on a team of 20 people to complete the private equity financing amount of 20 billion yuan. In the case of simple benchmarking, in the secondary market IPO financing scale, our performance is second only to CITIC Securities 600030, stocks (21 billion IPO underwriting amount). We serve customers in the mid to late TMT industry, usually with an average single financing amount between $50 million and $100 million. The Thai joint venture is actually the FA that is the least like FA. Some people say that we are the brains of enterprises. Some people say that they are also friends with entrepreneurs. Our mission is to be the future business leader and partner with the most pioneering entrepreneurs and investors in the new economy. In addition to helping each round of financing, we also hope to see the fundamentals of the company's own value, hope to see entrepreneurs grow into entrepreneurs, and hope that the cooperation we bring to entrepreneurs can lead to more The same chemical reaction.
Closer to home, today I want to share with you the judgment of the Thai joint venture on the capital market situation in 2018. Before 2017, the gulf was concentrated and the rhythm of capital was very comfortable. In 2017, the vent is short-lived and the money is cautious. Capital rationality and policy are terrible. In 2018, there was a new trend in Q1. We summed it up to 16 words, “Capital shuffling, renewing food, embracing integration, and iterating foreverâ€.
US stock market broke into the normal state
A-share new stock returns continue to decline
For a long time, Taihe has liked to look at the market with a method of finalization. In the end, the financing purpose of the primary market is ultimately to withdraw, and listing is one of the key indicators. In the past six months, among the 15 TMT-related companies with a market value of more than 500 million US dollars listed on the US stock market, 12-13 are unicorns with more than $1 billion. But the most used word in the media at the time of listing is "breaking."
We look at the data, breaking more than 30% on the day of listing, and more than 75% of the companies below the issue price. Among the three or four companies that did not break, the individual price only exceeded the issue price by less than 10%. The average share price of 15 companies fell more than 20%, and the unicorn company fell nearly 30%. This is a terrible thing. This means that the secondary market price is shrinking rapidly. If you invest in a higher price in the primary market, the listing may become visible. In particular, after the latest new policies and new regulations for individual investors' compliance, the return of individual investors has gradually shrunk and regulation has become increasingly strict, and financial capital has become increasingly difficult to invest in emerging GP companies. These signs have worried investment institutions.
Looking at the A-shares, the return on the listing has fallen by more than 70% since the end of 2015. The average daily limit of the daily limit also reflects the state of the A-share market tending to be rational. The reason is the alleviation of the entire A-share dammed lake. In 2017, it was obvious that the A-share market was accelerating and a large amount of capital poured in. Beginning in Q1 in 2018, the A-share meeting rate has slowed down significantly. The number of IPOs has dropped by 70% compared with the first quarter of last year. The withdrawal of material companies has appeared in large numbers, which means that the IPO exit channel is gradually tightening. The reduction of new regulations has caused a large number of GP companies to become worried about exits. It is optimistic that the reduction period will be extended by at least 1-2 years and pessimistically for 4 years. Most GP companies have a duration of only 8-10 years. The uncertainty in this area is greatly increased, the expected return rate is lowered, and the sensitivity to the price of investment assets will increase significantly.
Raising the Matthew effect
Investment institutions first winter but the transmission mechanism lags behind
From the point of view of fundraising, the scale of annual fundraising continued to rise in the past three years, and the total fundraising in 2017 exceeded US$260 billion. In 2016, there were more than 13,000 fund companies registered in the venture capital ten countries. There are more than 2,000 institutions in the database of the Taihe organization. When any company contacts the 100th institution in the financing process, it generally means that financing has been quite difficult. It seems that the organization is redundant. In 2018, the fundraising scale of Q1 fell by 2/3 year-on-year, but it actually returned to normal. What impact will this have on the primary market?
In absolute terms, the investment scale of Q1 in 2018 is up year-on-year, and it seems that there is no direct impact. First, in 2017, Q1 was affected by the cold winter of the previous year, and the capital recovery was lagging behind. Second, in the second half of 2017, many head capital institutions raised funds, fully reserve for 2018, and accelerate investment in Q1 in 18 years. Third, many of the cases disclosed in Q18 in 2018 were completed at the end of 2017, and there are certain data deviations. Accordingly, in the next six months, or at the end of this year, the shortage of the entire capital market will lead to more cautious investment. Due to the difficulty of fundraising for a large number of GPs, existing GPs must be self-disciplined and value the return on investment, which may become more sensitive to prices.
Positive cycle objectivity
Iterative organization, strategy, capital and policy awareness
How should entrepreneurs respond to the trend of tighter fundraising and more cautious investment?
First, clarify the objective existence of the cycle. In several financial crises in the past 30 years, it is difficult for us to grasp the inducing factors or make regular pre-judgments in advance, but the expectations must be the key factors affecting the capital market. Why are US stocks fluctuating sharply in the near future, and even Trump’s twitter has become a market vane? It is because the market sentiment is very sensitive, leading to expectations of caution and transmission to the capital market. Many investors have asked us that US stocks have continued to rise for 10 years, which is higher than the high point of the Internet bubble period. Will it fall soon? From a fundamental point of view, we don't think there is much bubble, but the downside expectation does exist. Another interesting small cycle, or window period, is the window period of the TMT. In 2000, Netease, Sina, Baidu, Focus, around the year of 2005, 360, Youku, SouFun, around 2014, Ali, Jingdong, 2014, to the recent iQiyi, and clear expectations of Xiaomi, Ant Jinfu, Beauty Mission and so on. We can remember these key moments because the capital market and the company's development have a certain period of time. The emergence of each good asset takes time. After the good assets are concentrated in the window period, there will be a period of 3 to 5 years. Empty period. Therefore, we must be rationally aware that the cycle is objective, and only bad assets can hardly come out.
Second, there are four aspects of cognitive iteration.
1
Strategic cognition iteration
Practice internal strength, efficiency, deepen and expand boundaries. For entrepreneurs in all fields, we must practice internal strength. The technical team needs to be productized as soon as possible, and the business team should optimize efficiency as soon as possible. To prove it with data as soon as possible. From our 2017 internal data, not all projects are as hot as we might think. In the field of intelligence, the average financing period of the AI ​​project in the middle and later period is 6.5 months, and the big data project is more popular. why? Regardless of productization or commercialization, big data projects are showing clear breakthroughs, which is a fundamental improvement. Some AI projects are good in technology and good in team. When you are financing, you will still see your scenario penetration rate, commercial landing and productization. The big consumer sector is also very similar. New retail is a hot topic, but the future after the C round is uncertain. The investor judgment cycle is more than 6 months. It needs to look at very fine indicators, single store output, scale verification, and human effect. Upgrade and so on. The education project has a financing cycle of only three months, because the education project has ushered in an incredible explosion of online and offline. Opportunities for liquidation have emerged, and the efficiency of liquidation has increased. Many projects have been accounted for, or have been verified by scale, and investors naturally like it.
Growth is no longer the only criterion for testing projects, it is important to be efficient. According to our internal statistics, the barbaric projects will receive an average of 2-3 terms, and everyone will like the fierce project, but there will be concerns about this growth, and the efficiency of accounting growth, such as every dollar of growth. GMV, how much it costs. In the process of growth, the losses gradually shrink, the efficiency is improved, and the scale effect is verified. Such project investors can't stop it. Beyond the scale indicators, you should pay more attention to your own efficiency indicators. If entrepreneurs find that their business is growing rapidly, they must find the core driving factors of business growth in time, and grasp the common factors to see whether they can form standardized replication.
In the upstream, downstream and capital levels of the industry, we will deepen and expand the border. In the past six months, more than 60% of the projects we have served have begun to expand business or capital cooperation in the upstream and downstream of the industry. Some companies invest in a more traditional field and complete a closed loop of transactions. For example, source-investment logistics projects do mergers and acquisitions across the country, which is an interesting trend. Entrepreneurs must not only make a single breakthrough in their business as the key, but also work hard in the strategic direction and strategic rhythm. They must have a higher pattern to expand the border, use resources to open borders, and cooperate with the upstream and downstream industries to use their allies. It is possible to realize the redistribution of industrial profits by making an equal and open mindset to optimize the industrial chain.
2, organizational cognitive iteration
I used to say that early investment looks at people, and the investment in the middle and late stages is good. In fact, it is not. In the middle and late period, it is also important to look at people. For example, in the internal evaluation of Taihe, there are usually only 2-3 projects in a field that have been integrated into the C round. The amount of funds and business volume have not been widened. We would like to have a team with mild anxiety and benign redundancy. While rushing to performance, there is still room to think about innovation and management, and to incubate new business outside of internal business innovation, and such a team has room for continued growth. On the other hand, the team is struggling for the existing business and fighting around, and the internal organizational system may have bigger problems.
From the data, there is a doubling of the Term that the team with or without benign redundancy receives. The one-word team received an average of 4 Term, because the decision-making efficiency is high enough, the following execution is usually the most efficient, so the data is not bad. But we are more concerned about the wolves team. Such a team may have opposition voices and different ideas for the business, but the organization allows for the existence of activity and has the opportunity to bear huge challenges. Such team investors prefer.
More and more teams pay attention to the mechanism construction. Even in the initial stage, these mechanisms are relatively rough, such as the commission of the front-end sales commission, but as the business develops, it will be gradually optimized. We have served a company and incurred a loss of 10 million in a single month. We started to make a profit in the third month. By the end of the year, we had a profit of more than 100 million. We found that the team has a very clear set of horse racing mechanisms, with its own knowledge community, brand community, and interest community. Based on the community, it is able to give the front-end product manager enough innovation, vitality and support. On this basis, there are 2 internal teams that run very beautifully and contribute more than expected. This is the value of the dynamics of the mechanism.
Another new trend, from the Q1 data of Taihe Service Enterprise, nearly 40% of the projects are the big group split or the internal innovation incubation. On the one hand, the company has the vitality of continuous innovation, on the other hand, it indicates that there may be a new trend of motivating the team, such as the redistribution of equity. The best way is to split the financing, and the incentive component may be greater than the capital operation component.
3. Capital Cognition Iteration
In the past, entrepreneurs generally thought that financing was a hammer sale, and the rounds were not related to each other. More and more entrepreneurs now recognize that financing is an important part of their business strategy.
First, professional division of labor is becoming more and more important. For example, we are very happy to see that the probability of using FA in the middle and late financing is getting higher and higher. From the perspective of the company's organizational structure, 60% of the AI ​​projects we have served in the past have specialized financing leaders, and their qualifications and titles are not low. Most of them are recruited from Hong Kong investment banks. On the one hand, it shows that Hong Kong investment banks are under great pressure. On the other hand, it shows that startup companies, especially early-stage entrepreneurs, clearly perceive the important strategic value of capital and will seriously look for so-called financing partners.
Second, financing is normalized. When you feel that the market is tight, you should make a financing arrangement as soon as possible. Some founders said that I don't need money now, but in the long run, I always need funds for ten or three years. The best way is to get as much as possible to help you develop your own funds and ensure a certain amount of financial redundancy. In the past six months, the number of projects with a round of financing in the services of the Taihe service accounted for 50%, and the frequency of financing continued to accelerate.
Third, actively embrace the war. In the past six months, we have completed projects in Taihe, 85% of the projects are involved in war investment and industrial capital, of which Tencent accounted for nearly half. In the past, the battle capital, the early capital when they were the pick-up man, is completely different now. The layout of the war is more and more advanced. The most typical one is Tencent, including the headlines, which are very positive.
Financial investors are very anxious. Except for the money, there seems to be nothing compared with the war. Everyone thinks that you picked up my disk before, now you are licking my bowl. In fact, it is not all, it is also a healthy competition for financial investors. From an entrepreneurial perspective, we call on everyone to actively embrace good industries and strategic investors.
First of all, they can bring a different industrial perspective. Entrepreneurs may be a small player in a single breakthrough in the industry chain, but the entire industry chain is very complicated and lengthy. It would be very valuable if you had a broader perspective or gained valuable experience from a large industrial group that had experienced cycles. Secondly, investors like BATJ are still in a flat state of mind. Especially Tencent, we don't think it is a purely strategic investor. Funding support and brand endorsement are even more important. In some highly competitive areas, entrepreneurs will also turn Tencent's investment into an important financing strategy.
4. Policy Cognitive Iteration
Since 2017, the so-called policy risks have become important in the capital market.
But the policy itself has no risks, and non-compliance is the risk. There were a lot of new projects in the market in 2010-2013. Did you say that it was compliant at the time? It is a new species and there is no new policy to bind it. And now there is almost no such disordered development window.
First, we must pay attention to the trends and policies that occur in the middle of our industry. From the results, the 2017 policy is sensitive to three relatively large directions, involving human life, involving ideological content, and involving systemic risk finance. Projects in these areas have encountered more or less serious flyers (that is, investors have given up the offer), and it is simply that they cannot pass the policy, or the policy is unclear, or the policy is risky. Even if the financing is finally obtained, the safety of the project itself is not enough. If you are framed by the ceiling of the policy, you must first find ways to open up other markets. Secondly, consider how to refine operations in the existing market, improve efficiency, and draw your own profits. Of course, the policy is also good. For example, the logistics and manufacturing sectors have recently had a series of tax reduction policies. It seems that there are only 1-2 points of influence, but the impact on the profit margin in the entire industry is likely to be very large.
Second, do not blindly pursue hot spots. For example, the recent unicorn is actually just a concept and a result, not a hot spot. The industry hotspots that people usually understand are brought about by the rise of a certain industry and a new technology, rather than a hot topic. Why do I say that the unicorn is poisonous? Because I feel this is very similar to the situation in 2015. At that time, the capital market was also very hot. At the end of 2014, a VC partner asked us that the mobile Internet field is so embarrassing to spend money and money. Is there a bubble? We asked all the projects in Taihe to be delivered before the 15th Spring Festival. However, after March 2015, a strategic emerging board was expected, and a large number of RMB funds became active, and a demolition brigade was established. Demolition V back to A has become a hot spot in the industry. This kind of hotspot should be very vigilant. Now I still feel that the lessons are painful. More than 90% of the projects have not been returned to A shares. This year, there was another wave after the New Deal of the Unicorn came out. But everyone must think about their strength and ability to be picked up by A shares? The key is that the unicorn is the result, not the cause, and is the natural result of your own business value. If you don't appear on the list of the first unicorns to return to China, don't think too much, don't join in the fun, do your own business, and let yourself be among them. This is the most crucial. To respect common sense, prices revolve around value fluctuations, and it is fundamental to do a good job of fundamentals and value.
In summary, the cycle always exists, and the market may become less optimistic in half a year or three quarters. How should we deal with it? We have experienced several cycles in the industry ourselves. Looking at the economic cycle and watching the historical cycle, the historical scene is much more peaceful. The market is not so good when it is good, and the market is not so bad. No matter how the external environment changes, the only thing we can do is to try to grasp ourselves. As the NBA often says, "GO BIG OR GO HOME", you have the ability to continue iterating and have the ability to adapt to the challenges that this era has brought you, you can be powerful. You don't have this ability, sorry, you go home.
thank you all!
(Editor: Zhao Yanping HF094)
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