Zhang Lei, the founder of Hillhouse Capital, has returned to China, and the dollar VC has also stood up

Let's start with two interesting things.

First, Hillhouse founder Zhang Lei returned to China.

As soon as Hong Kong cleared customs, Zhang Lei returned to the mainland, and was obviously in a good mood, and also pulled the team to engage in a ski team building.

As far as I know, Zhang Lei has seen many companies and LPs overseas before, such as hearing that he went to Australia, and then Hillhouse really made a lot of moves in Australia, such as investing 51 million Australian dollars in Australian photovoltaic energy storage system distribution service provider OSW, and buying Australian clinical research institution George Clinical.

Zhang Lei's return, Hillhouse's investment in the domestic market is estimated to be lively again. In fact, this wave is really not only Zhang Lei, I have recently heard the news that several agency bosses have returned to Shanghai and Beijing, and the resumption of customs clearance in Hong Kong is good for many institutions that are eager to speed up.

Second, I was chatting with a due diligence researcher the other day, and I was shocked by a set of data he revealed.

In recent years, cross-border, enterprise service track is very hot, he also due diligence dozens of such companies, of which about 40% of the company data has problems, there is no lack of star companies in the primary market, among which it can be concluded that malicious data fraud, accounting for more than half, the remaining business obviously can not support the data, although it is impossible to judge whether it is subjective or objective, but there are some problems.

Shocking, comrades! But the follow-up story still made me breathe a sigh of relief, the pure dollar fund he served, basically passed the companies with these data problems, and combined with what I learned before, I still have that conclusion, due diligence can not be done, only want to think, fortunately, the bottom line of the venture capital industry, most dollar institutions can still hold.

And if the bottom line is guarded, the underlying logic of the operation of the industry will not come out of the big basket, and it will be able to wait for hope. From the end of last year to the beginning of last year, China Investment Network has written many articles arguing that some US dollar funds may be "left behind" in the next winter, with three main arguments:

First of all, on the fundraising side, US dollar LPs have less money to invest in China, and the circle of RMB is not so easy to finance, so last year, except for a few large US dollar fundraising, there were few good news of new US dollar fundraising;

Then there is the investment side, the main line of hard technology in recent years, dollar funds can only sigh, turn to the sea, consumption and other tracks, so that the valuation is rolled up, and there are fewer people who can invest;

Finally, the exit, the US stock market last year only 13, compared with previous years significantly reduced, Hong Kong stocks and other market liquidity is limited, last year listed companies, rarely not by the first and second price difference crit.

But fortunately, 2022 has passed, and a series of recent news are revealing, from fundraising, investment to withdrawal, in the end the dollar fund has "broken" news out, the dollar fund is going to stand up?

A few days ago, the article "Just now, $800 billion super PE, opened a Shanghai office" mentioned that Hanling Capital, KKR, Warburg Pincus, Fidelity, Morgan Stanley, BlackRock, Canada Pension Fund, Citadel, L catterton, Vertex and other investment institutions of different magnitudes and types are increasing their Chinese business.

Among them, there are such as Canada Pension, which invest heavily in domestic dollar funds, there are also Hanling Capital who come to China through the direct or indirect establishment of S funds, and PE such as KKR who directly comes to China to obtain private equity licenses.

Not long ago, Cao Xi's fund Monolith Capital also completed nearly 300 million US dollars of VC fund raising, and it took only three months from the beginning of fundraising to the first pass, LPs include many famous American university endowments, well-known domestic and foreign fund of funds, charitable foundations, and famous family offices at home and abroad.

The most important attribute of capital is circulation, and one of the findings I got last week in the "History of Venture Capital" is that the wave of globalization after 2000, especially the rise of China, is also an important factor in the growing prosperity of VCs in the United States. It is no wonder that even if some LPs are questioned by foreign media and institutions, they still invest heavily in China.

For example, Canadian pension has been questioned by foreign media and politicians about the legitimacy and necessity of investing in China, and in its financial reports in the past two years, there have been statements such as "reconsidering investment in China", but as a result, everyone has also seen that Sequoia China, Hillhouse, Xinchen Capital... The shot has not stopped, specifically see "Cast Sequoia, Hillhouse's top LP, come to the bottom of China|Super LP".

In short, from the perspective of the world, China is still the fastest growing and largest incremental economy, and after last year's collapse in asset prices, the deregulation of the virus has made it more attractive to foreign investment. Of course, if the partner goes to North America and can't raise money, it is not an overnight achievement to improve, after all, the relationship between the big countries is so tense now, you have to allow people to wait and see.

Next is the recent fire of ChatGPT, if not so depressed in investment in previous years, it is difficult to understand why ChatGPT can be so hot, even Wang Huiwen, who has retired, was "fooled" into posting a circle of friends at a dinner with US dollar VC and said that he wanted to take $50 million to enter the group with a salary.

Since the 50s, venture capital has gradually flourished because of TMT, and today, more than half a century has passed, during which countless great innovative companies have been born, most of which are inseparable from the support of VC, and in China, TMT has directly spawned VC1.0/2.0 investment institutions such as Sequoia China and Source Code.

In the 20s of the 20th century, although the wave of digitalization in China has not faded, the protagonist in the eyes of VCs has become a domestic replacement of hard technology and new energy, and the dollar fund has been abandoned, so they are rushing to chase the meta-universe and web3.0, and the Crypto market capacity is limited after all, the volume of splash has not been able to splash much, and only the high peak of the secondary market concept stocks can remain.

Compared with the metaverse, which is still out of reach, web 3.0 is more aimed at reshaping production relationships for distribution and privacy security, and products such as ChatGPT are different, and generative and decision-making AI are obvious productivity tools. As early as last September, Sequoia Capital released a report that "generative AI has the potential to generate trillions of dollars of economic value", and the launch of ChatGPT has brought the technology closer to the boundaries of ordinary people.

As soon as the news of Baidu's development of "Wen Xin's word" came out, various companies rushed to release the news of the "first batch of access", and even if many people thought that Wang Huiwen's $50 million could not stir up waves, they had still negotiated a follow-up $300 million investment with VCs. The vast space of software + hardware, the dollar fund finally has a clear consensus, only hope not to fight too much, and finally like group buying, sharing just end up in the chicken feathers.

On February 17, the China Securities Regulatory Commission officially issued the "Trial Measures for the Administration of Overseas Issuance of Securities and Listing by Domestic Enterprises" and its related supporting regulatory guidelines, marking that the overseas listing of Chinese enterprises has entered the era of filing system, especially the VIE structure, the filing can meet the compliance requirements, and the boots related to the exit of US dollar funds have finally landed.

As for the US market, in August last year, the China Securities Regulatory Commission and the Ministry of Finance signed an audit supervision cooperation agreement with the Accounting Oversight Board of American Public Companies (PCAOB), temporarily lifting the risk of Chinese concept stocks being forced to be delisted and delisted, and then US stocks ushered in a wave of small climax of Chinese concept stocks, such as Dajian Yuncang, Atour Group, Leia Power, etc. have completed their listing in the United States.

At the end of last year, the US Public Company Accounting Oversight Board (PCAOB) issued a report, announcing that for the first time in history, the review of the draft of Chinese concept stocks was completed, and the pace of listing in the United States was further accelerated.

This focuses on Hesai Technology, which can be regarded as the debut of Chinese concept stocks new energy superimposed hard technology after the audit turmoil, and the performance is quite good, compared to the issue price of $19, now Hesai has risen by more than 10% in more than a week, which is much stronger than the NASDAQ index and the Chinese concept stock index.

Lightspeed China, after 5 rounds, at a cost of about $100 million, earned a return of more than $500 million, with a book return of more than $300 million, or more than 2 billion yuan. If placed in the era of mobile Internet, this return magnitude is not up to home run, but now the dividend period of the Internet has long passed, and the myth of a hundredfold and thousand-fold book return such as Wuyuan Investment Xiaomi, Jingwei Investment Momo, and Zhenge Investment Jumei Youpin has rarely appeared, not to mention that Lightspeed China has also invested in the VC stage in addition to Growth.

Strategically, this is also the US dollar fund is far better than the RMB fund, before Kwong Ziping also wrote an article about this, RMB fund investment strategy, there is really a lack of "overallocation, heavy injection" this item, almost no RMB institutions have the ability and strategy to invest 1 billion to 3 billion yuan in a project, which is also destined to be far lower than the US dollar fund.

To say that there are many projects that are about to rust and are eager to exit in the hands of US dollar funds, this duet between Lightspeed China and Hesai undoubtedly gives a shot in the arm to the exit of US dollar funds in hard technology projects.

But there is a lot of good news, and the cold water still has to be splashed a little. There are also some long-standing questions chosen at the top of the dollar VC.

The first is industrial attributes. Now looking at the fundraising market, we all know that LPs like GPs with strong industrial attributes, and entrepreneurs like funds with industrial empowerment, but this is not the case from the exit side. Liao Ming, managing partner of PAC, told me that from 2011 to 2021, in the US stock market, 8 large investment banks underwrote 119 Chinese concept stock ADRs, distributed in many industries, generally all of them are tech companies, and there is no obvious industry focus.

"So in this sense, doing sector-focused funds is risky, because the industry is focused, so the number of companies that can IPO in the United States must be small, so the exit will be limited, and the DPI of such funds must not be high."

In addition, going back to the data mentioned at the beginning of the article, I said that most dollar funds can hold the bottom line, so is there a counterexample? Yes. For example, the "bad blood" case, professional investors in Silicon Valley avoided it after due diligence, but tycoons and family offices in various fields such as Wal-Mart Family Fund and Murdoch took over hundreds of millions of yuan in financing, and everyone saw it.

Another example is Wework, after introducing Benchmark's Series A financing, the next few rounds of financing introduced "non-mainstream" investments such as JPMorgan, and they wanted much more than Benchmark's purpose of "obtaining financial returns by releasing enterprise value", especially JPMorgan's bottomless connivance of Wework's founders for subsequent bank account opening, wealth management, IPO counseling and underwriting, which gradually led to the situation getting out of control.

I mean, VC is a professional financial investment plus corporate consultant, can not carry too much social vision, on the basis of guarding the bottom line plus appropriate fundraising, investment, management and exit skills, is the fundamental through the cycle. Even if the industry ushers in the beginning of recovery, it falls to the individual, I am afraid that it is cold and warm to self-knowledge. (Text/Zhang Nan, source/Touzhong.com)