36Kr Interview with | Huihe Capital Liu Anmin: In the era of hard technology, how to make money in the cognitive range?

Wen | elegant, Zheng Cancheng

Editor| Peng Xiaoqiu

At the beginning of 2021, a company that makes CNC blades was listed on the Science and Technology Innovation Board, with a current market value of more than 6.5 billion yuan. Behind it, the investment institution that earned 15 times the book return, Hpe and Capital, also surfaced. As early as October 2017, Hpewa Capital made a Series B investment in Sinovel Precision (Zhuzhou Sinovel), which was valued at less than 400 million yuan at that time.

Sinovel Precision's performance has maintained high growth so far, deducting non-attributable net profit of 147-157 million yuan in 2021, an increase of 66-78% year-on-year. For the cnc blade industry in mainland China, it has always been highly dependent on imports and urgently needs domestic substitution. Sinovel Precision seized this opportunity to specialize in turning inserts, milling inserts and drilling inserts. Note: CNC blade is the tool of CNC machine tool, in simple terms, it is the teeth of industry.

In the five years since its establishment, HPE Capital has invested in 12 projects with an average return of 5.7 times and a maximum book return of 15 times. It has always adhered to the principle that hard technology investment requires long-term companionship and a deep understanding of the industry.

In addition to Sinovel Precision, HPE Capital is also deeply involved in Shenzhen Han's Robot, a hard technology enterprise that also belongs to the upstream of the industrial chain, and has obtained 165 million A rounds and 395 million B rounds of financing in more than half a year.

In the past two years, collaborative robot companies have begun to sprout, and there are nearly 130 collaborative robot companies in the world. Compared with traditional industrial robots, collaborative robots are a step forward in industrial robots, this small step is to make robots better and safer, but easy to use and safe is not the ultimate form of robots, Han's robot CEO Wang Guangneng said, "The combination of robots and artificial intelligence is the development direction of future robots." ”

Specifically, combined with artificial intelligence technology, robots can perceive and interact with the environment, and can make it very easy for everyone to use, which is an important direction for the development of the robot industry.

"HPE Capital" research real-time map

In terms of 2022 planning, Liu Anmin, co-founder of "Hpewa Capital", told 36Kr that "HPE Capital" expects to add 2-3 more invested projects this year, amounting to about 200 million yuan. Looking to the future, "HPE Capital" will continue to pay attention to high-quality projects in the field of intelligent manufacturing, continue to accompany new materials, high-end CNC machine tools, high-end equipment and precision testing instruments in the direction of domestic substitution, and continue to take the selected investment path of specialized new areas determined by the HUIHe asset team. ”

So, on this path, what is the investment logic of HPE Capital? What is the core competitiveness of an investment institution? What do you think about the nature of the business model? 36Kr recently conducted an exclusive interview with Huihe Capital Liu Anmin.

The following is the transcript of the interview: (Edited)

Investing is the realization of cognitive abilities

36Kr: First of all, I would like to talk to you about the investment logic of "HPE Capital"?

Liu Anmin: When we invest in others, we will think about where your core competitiveness is and where the highlights are. We also ask ourselves why we do investment, how to find the real valuable enterprises in these unlisted companies, so we will be more concerned about how to form our core competitiveness, in the final analysis, cognitive ability, that is, the team's cognitive ability to realize.

Cognitive ability is a very relative thing, how to find our accurate cognitive ability to monetize? It's a process of constant polishing and thinking. We are building investment team talents, especially at the partner level, and always insist on putting the judgment and cognition of the team on each project in a full of uncertainty and long-term investment, which is not easy. After all, every project is unique, and all industries and technologies have personalities and genes.

Now the market is too short of funds, because the head enterprises account for 90% of the funds. More and more people are joining the entrepreneurial army, market funds are concentrated in the head institutions, and the projects are getting bigger and bigger. In solving these bottlenecks, how to achieve accurate attack, effective investment and ensure the success rate, HPE Assets will put 80% of the company's resources and energy on the mining, observation, cultivation and tracking judgment of the projects to be invested, as well as do a good job in the post-investment management of the invested projects.

Since each project is different, it is necessary to treat it as a work, do it to the best, and truly achieve common growth and mutual achievement. From the four perspectives of fund LP investors, project founders, fund managers and social values, we can achieve win-win results and achieve common prosperity.

We are in every strategy, every case, every cognition is the whole process of participation and mutual multi-angle communication, listening, our partners are also in the project line, so everyone is very hard, but the harvest is great. Because you are making decisions on the front line, make sure that the information you have is true, timely, comprehensive, and constantly revising and improving your cognitive ability.

The five partners have different emphases, chairman Dr. Chen is responsible for industry analysis and investment research, has nearly thirty years of financial investment analysis experience, after several large cycles, to see the ups and downs of many listed companies. Mr. Yi and I have nearly 20 years of entrepreneurial experience in the fields of manufacturing, business management, materials and chemicals; the partner Dr. Tan is a senior banker with a risk control background and more than 30 years of experience, which is a rare and valuable experience for the depth of understanding of corporate management and macroeconomic policies.

The younger partner, always from Peking University and Fudan University, has been working in the field of biomedicine and intelligent manufacturing for more than 10 years and recently joined our team. It is a fresh force for HPE to invest in the biomedical field. So far, we have mainly invested in A and B round projects, which require in-depth exchanges and high value recognition between the founding team and the investment team. As an investment institution, to consider whether the company is likely to grow into a towering tree in this track, we need our partners to come up with forward-looking suggestions and strategies, and have inspiration for the founders.

36Kr: Where is the core competitiveness of investment institutions? Where are the advantages of HPE Capital? What targets will you be looking for in the future?

Liu Anmin: I think the core competitiveness of investment institutions is still in people, HPE Capital is an investment team composed of senior partners from five different industries, and everyone's background complements each other, and even their personalities complement each other. In line with the concept of "wisdom in the heart, and in the line", we jointly founded HPE assets and deepened the investment of specialized new tracks.

The advantage of the HPE team is that the five partners have rich resources in industry and capital, finance and industry, such as high-end talent and industry analysis, corporate strategy, financial management, supply chain, channel construction, etc., which help to assist the early entrepreneurial team, quickly lock in the right talents and choose their own entrepreneurial path, step by step development.

For example, an excellent leading technical talent of an early start-up enterprise is often more difficult to find, unless the boss himself is a technical background, he needs to introduce talent into the company first, and then the person will bring this line and this network of people over. Thus forming the company's own competitiveness and forming a virtuous circle. In this way, we maintain good interaction with many well-known industry professors and graduate students of well-known 985 universities, forming a continuous talent base for the technical talents of entrepreneurial enterprises. Instead of letting everyone go through headhunting, digging and digging.

Especially for the enterprises we invest in, they are all intelligent manufacturing with technical thresholds and import substitution application scenarios. The demand for high-end technical talents is huge, but it cannot be given high-tech treatment according to the market, and can only be endorsed by our way: emotional contact, HPE asset investment, and career inspiration and retention.

36Kr: Are HPE's investment philosophies all in their own areas of expertise? Unfamiliar with the field? Will you choose to invest?

Liu Anmin: Yes. We are sure to understand this area of expertise before we can invest. Although there are some areas we do not understand, but we can find cooperative institutions, understand the industry to understand, to see the source of his technology, this is still reflected in the only ability to earn cognitive ability of money, fear of the market.

All cognition is a process, but the market is too hot for projects, we will not invest. We hope to find a good seedling, and in the A round and the B round, we can vote for him, help him, and accompany him to grow. What we do best is to innovate in technology and process, and get preliminary verification, empower him with talent, market, supply chain, give him capital, management and capital strategy advice.

The essence of the business model is to be altruistic

36Kr: In your area of focus, what kind of business model do you approve of?

Liu Anmin: All business models are actually altruistic, that is, to help customers save money, improve efficiency, reduce costs, investors often do not need to be demanding details, do not need to be too addicted to technology, this is also cognitive ability. Be sure to consider how to monetize and choose a sustainable monetization path. This is to judge the core competitiveness of enterprises, technology is only one.

Entrepreneurs who start a business in the high-end equipment track are often very confident, thinking that technology is the sky and the secret of success. We prefer to invest in entrepreneurs who are relatively technologically advanced and highly sensitive to business, and many projects are difficult because the boss's business sensitivity is not good. The market is open, the technology leadership is also relative and temporary, and it must be leading in the time dimension and the market dimension at the same time, in order to continuously form its own competitiveness and moat, including capital, talent, market strategy, product positioning, price strategy, etc.

The basis and exploration of these decisions require in-depth exchanges and discussions at multiple levels between our HPE team and the core founders of the project side. Our role is to invest +, add talent, add strategy, add capital, and standardize business suggestions, so as to promote the company, continuous development, and constantly go to a new level. From the perspective of investment institutions, this is an important task of post-investment management. This is often an advantage for those of us who are select fund managers.

Compared with other head institutions, we are deeply rooted in the post-investment, based on the background and resources of the partners, we have done a lot of value creative post-investment management work in obscurity, and obtained the recognition of the bosses of the invested enterprises.

36Kr: How did HPE's projects come into contact? Is there a project that is good in itself, but the current time node can not invest money?

Liu Anmin: The source of the project is our five partners, which is related to our background, in fact, one of the core competitiveness of investment institutions, high-quality and sustainable project sources is a very important factor. Contacting and discovering the seedlings of really worth investing, high-quality, Maxima is the core competitiveness of the institution.

The project itself is very good, but it is not yet the investment node of the project we will provide free help, such as providing equity structure combing, market pattern analysis and potential customer recommendation. We do not invest does not mean that the enterprise itself is not good enough, but there is a gap with the nature of our management funds, and our cognition does not match, we are also responsible for our funds, to invest in what we think is relatively certain target.

Taking the Guangdong Covectives project as an example, we took its business plan in May 2017, but after 2020, we went all out to do due diligence and completed the investment in mid-2021. This is because we have two requirements for investing in enterprises, with revenue of more than 100 million and profits of more than 10 million. There is also a principle that the market competitiveness of the company's core products has been preliminarily verified, and "the small lotus shows its sharp corners". With the landing of the registration system, more and more enterprises are listed, and the valuation of many enterprises will be very differentiated after listing in the future.

Therefore, we must analyze and judge that the target of the proposed investment, from the team to the product, from the market value of friendly businessmen to the capacity of the track, is enough to support several listed companies with a market value of 10 billion, that is, through the efforts of the next 5 years, the project side may achieve more than 1 billion income and about 2-3 billion profit scale.

As an investment institution to understand entrepreneurs, we must think in a different position, how to communicate with entrepreneurs in depth, explore, find executable solutions and paths, including where the professionalism shown by our partners is, we must continue to learn from these excellent entrepreneurs with an open mind to create our core competitiveness.

In equity investment, the problem of human nature is the most vivid, a good project, the boss from the beginning to know how to plan the future things, good but also to look forward to, bad also to do a good job of prevention; including equity structure, equity incentive suggestions, our investment institutions at the beginning to help sort out, leave room. The first is to have its own core supporting elements for the value judgment of the project, and the second is that the team must have the attitude and ability to help the project party to go all out.

36Kr: When technical talents come out to start a business, they are prone to encounter 2 commercialization problems, and the cost control is not good and the technology is difficult to land. From the perspective of investment institutions, what can we give?

Liu Anmin: The cost assessment at each stage is different, for example, we invested in a robot company, and the cost of robots has no advantage, but why do we dare to invest? First of all, you can't look at whether his cost has an advantage, the most important thing to pay attention to is the landing, the landing depends on the enterprise itself, whether it can be done well, the first customer wants the enterprise to find itself, many enterprises can only be verified in a small range.

High-end technology landing usually has two problems, one is too early, the downstream application risk is too large, many people are not willing to try; the second is that the verification cycle is too long, so high-end, so expensive equipment and products, downstream customers are generally very cautious, so many high-end products, the development is very slow, if the cash flow is not planned, financing is not smooth, it is easy to fall into a passive situation.

For start-ups, the most important thing is to survive first, valuation is unnecessary, find suitable investment institutions and funds, burn the first fire, make preliminary market verification and customer recognition, and lay the data and customer foundation for the next stage of financing.

The final business model is altruism, which includes employees, partners and customers. The business model is also an evolving and optimized one, and it cannot be carved into a sword. A lot of times, we talk about business models too early, and in fact, I think, these are not the core.

The core is still the founder's business landing ability and market sensitivity to changes, and some for-profit businesses are temporary, sudden factors, and cannot be sustained. If we look at PE and talk about business valuation and value, it's easy to fall into the trap. Enterprises must gradually accumulate long-term advantages, that is, gradually build a high moat, and return to the mission of the enterprise itself and the essence of business - continuous innovation ability and sustained profitability.