Yida Capital Ying Wenlu: Venture capital should not create wind and chase the wind

According to Zero2IPO data, in the first three quarters of 2021, the total scale of fundraising in China's equity investment market reached about 1.27 trillion yuan, up 50% year-on-year; the total investment amount exceeded 1 trillion yuan, up more than 70% year-on-year; and the overall number of IPOs also increased by 20%.

At the 21st China Equity Investment Annual Forum held recently, Ying Wenlu, chairman of Yida Capital, said that this data result is expected and unexpected. Unsurprisingly, technology investment has become a track that the industry is generally optimistic about; unexpectedly, the industry growth data is particularly beautiful, and we feel that the development speed of the head institutions cannot catch up with the speed of the development of the industry.

He believes that the current development environment is quietly changing, and it is necessary to understand the new development environment from three sets of relationships. At the same time, being in the front line of investment, Innovative Capital must grasp the steering wheel in its hands, go beyond "traditional thinking", choose the right path, and be a good child in this industry.

The following is a transcript of the speech:

Hello friends! I am Ying Wenlu of Yida Capital. Every year when I come to the forum, I feel very popular, and the venture capital industry is still like a huge magnetic field, attracting the best young people.

We turned back the clock to 7 or 8 years ago, when the "PE for All" was still staged. Some investment institutions have been willful and called for rain, and have ushered in the hot situation of O2O, P2P, community group buying, K12 education and training, sharing economy, and virtual currency investment. But in 2021, the waywardness at that time is left with a chicken feather, and many people say that they can't understand it, thinking that the uncertainty of the venture capital market environment is increasing.

In my opinion, the industry has just returned to its proper appearance, venture capital should not create wind and chase the wind, and rational growth is the way for institutions to return.

01

From three sets of relationships, understand the new development environment

Since 2018, China's economy has been in a difficult climbing period, superimposed on the impact of the epidemic since 2020, especially the frequent emergence of various regulatory policies this year, and everyone has felt the pressure. Our development environment is quietly changing, and I think figuring out the trend of three sets of relationships may help us understand the present and predict the future:

The first set of relationships: the most familiar strangers rise and card necks of the Westerners.

In 2010, China overtook Japan to become the world's second-largest economy, and China's recovery is changing the world's economic map and geopolitical landscape. The rise of China, the most familiar stranger in the East, is impossible to change, and the autonomous and controllable industrial chain has become an internal driving force under high pressure. And trade between countries is also unstoppable, and various alliances are also unreliable, such as Nokia's withdrawal from the US 5G alliance.

The second set of relationships: demographic changes and people's livelihood security.

The seventh census of 2020 shows that the structure of the Chinese population has changed significantly over the past decade. Three characteristics are very obvious, one is that the population growth rate continues to slow down. The average population growth in 2010-2020 was only 0.53%, and the total fertility rate in 2020 was 1.3, below the warning line of 1.5. Second, the aging trend has intensified. The proportion of the population aged 60 and over has reached 18.70%, an increase of 5.44 percentage points over the sixth census. Third, the urbanization rate has increased rapidly. The population living in cities and towns rose to 902 million, accounting for 63.89%, an increase of 14.21 percentage points.

Before getting rich, demographic changes are ahead of the stage of economic development, and for many industries involving people's livelihood, they must accept changes in development logic. A change that touches the soul is coming, such as the introduction of a "double reduction policy" in the field of education, the "purchase with quantity" in the medical industry, and the real estate market "housing and not speculation", which is essentially to promote the reduction of costs and burdens of the whole society.

The third set of relationships: common prosperity and small and medium-sized enterprise development

A set of data in 2019 shows that the per capita deposit of China's 1.4 billion people is 58,000, of which 560 million people have a deposit of 0; the total debt of Chinese residents is as high as 200 trillion yuan, and the per capita debt is as high as 142,000 yuan; at the same time, 600 million people in China have a monthly income of less than 1,000 yuan.

After the comprehensive poverty alleviation at the end of last year, common prosperity was put on the important agenda. In his recent speech, Liu He, vice premier of the State Council, stressed that small and medium-sized enterprises are important creators of national wealth, the main channel for providing employment, the main force of scientific and technological innovation, and the reservoir for creating large enterprises. The overwhelming number of small and medium-sized enterprises is being placed high hopes, and the times need small and medium-sized enterprises to take on more responsibilities.

I think you can feel why the platform monopoly is restricted, giant enterprises are no longer "big and not falling", in the past, some large real estate developers and platforms because of the absorption of a large amount of social funds, not only precipitated too many social resources, and even affected the security of the financial system, the venture capital industry should deeply understand the relationship between common prosperity and the development of small and medium-sized enterprises. The rapid and healthy development of small and medium-sized enterprises is an important reliance on common prosperity, and how to support the development of small and medium-sized enterprises is not excessive, how to support scientific and technological innovation is not excessive, and how to support the development of the real economy is not excessive.

02

See the direction and grasp the steering wheel of innovative capital

Spring River Plumbing Duck Prophet, we are in the front line of investment, so where should the billowing tide of money flow? Innovative capital must grasp the steering wheel in hand.

(1) Ride the wind and climb with the Chinese economy.

The discussion of the market environment is currently very similar to that of 2018 in many aspects, such as: the pressure of economic growth has increased; the restriction of high emissions in 2018 is now the restriction of high energy consumption; the view of the private economy has fluctuated in stages; and the uncertainty under the Sino-US game has increased.

At the same time, we have also seen that we have repeatedly emphasized the "two unwavering" recently, repeatedly emphasized scientific and technological self-improvement, industrial change, scientific and technological revolution and environmental fairness, and repeatedly emphasized data security, network security, financial security and national security.

At the end of 2018, I publicly said that "the biggest risk at the moment is the risk of not investing". After 3 years, time has given the answer. Today I would like to repeat this view that "the biggest risk at the moment is still the risk of not investing." ”

Thirty years east of the river, thirty years west of the river. In the next decade, before the arrival of carbon peak, development is still the main theme, for the venture capital industry, the next 10-15 years may also be the best period of development, we must have the courage and determination to enjoy the climb with the Chinese economy. I think everyone here will probably have the privilege of witnessing China's emergence as the world's largest economy.

(2) Assist to build a deep industrial chain of strategic emerging industries.

From the industrial level, the original horizontal division of labor model of the global industrial chain has been broken, vertical reconstruction has begun, China's scientific and technological self-reliance and industrial chain safety and controllability is an unavoidable topic; whether it is semiconductors, new materials, new energy, intelligent manufacturing, biomedicine, we need to create a deep industrial chain from materials to terminal applications, which brings rich opportunities to the majority of small and medium-sized enterprises in technological innovation and integration into the high-end industrial chain. For venture capital institutions, missing this transition period is missing the golden decade ahead.

(3) Make progress, invest in small and medium-sized enterprises, and invest in specialization and innovation.

Real estate inflection point has been determined, "three stability", stability is expected to be the most difficult, once the expectation is bearish, real estate prices are difficult to stabilize, even first- and second-tier core cities, land transaction willingness declines, new house purchases cool, second-hand houses sell under pressure, such news is endless. Where will the huge amount of money hoarded in the real estate sector in the past go?

I think the capital market must be an important flow. The secondary market has responded, the transaction volume has been maintained at trillions for a long time, the specialization has been favored, and recently many of the small giant enterprises we have invested in have been widely recognized in the secondary market, such as Lixing Steel Ball, Huachen Equipment, Sleek, Huichuan Technology, they are the hidden champions of their respective industries.

The primary market is also an important flow, supporting the development of small and medium-sized enterprises, supporting the development of entity enterprises, and supporting the development of specialized and special new enterprises, which has become an important choice.

The performance of the secondary market has further strengthened the confidence of venture capital institutions in investing in specialization and new technology. Hidden champions and small giants must come from specialized new small and medium-sized enterprises, they are building a series of technological peaks, creating a long board of the industrial chain, forming an industrial highland, and bringing value synergy. In this context, the Beijing Stock Exchange came into being to guide more social capital into the capital market and support more entity SMEs to obtain direct financing support.

Venture capital institutions should continue to improve to help small and medium-sized enterprises build viability, development, competitiveness and sustainability, cultivate specialized new small and medium-sized enterprises, small giants and hidden champions, and establish global influence.

03

In the age of awakening, everyone needs to go beyond "traditional thinking"

The general environment has undergone great changes, and the underlying logic of future development is also very clear, and some of our old thinking patterns need to be changed or even redefined.

(1) Abandon the thinking of "real estate to create wealth" and embrace the era of "venture capital and wealth creation"

The real estate market has created enormous wealth over the past two decades, but it has also hijacked the Chinese economy. The future must get rid of such a situation, and the era of real estate wealth has ended. So who can take over the baton of real estate and become a channel for creating wealth in the new era? I would like to say with certainty that the venture capital industry must be one of the important forces. After twenty years of development, the venture capital industry still seems to be a niche industry, and many people do not understand it, which can be described as "hidden in the deep and unknown". However, in the next ten years, the space for wealth growth is in the industry, relying on industry, and fighting technology, venture capital will definitely "create wealth".

(2) Beyond egoistic thinking, calling for "the wind of other forces" with "altruistic hearts"

The financial industry is too close to money, and it is particularly easy to be bound by egoistic thinking. For example, we will see the industry calling for a shortage of medium- and long-term funds while complaining that government guidance funds are "money with shackles". The root of this contradiction is actually egoistic thinking.

Many of the direct investment funds managed by Yida Capital have taken government guidance funds, and in recent years, we have also assisted local governments in managing nearly 10 billion yuan of fund of funds. Market money and guidance fund money, under our management to achieve an increase in value and the goal of win-win. Why?

I think the fundamental starting point lies in "altruism", "altruism" must first "understand him". On the one hand, understand the government and understand the policy. It is necessary to fully understand the policy intention of the guidance fund and meet the demands of the government guidance fund for industrial incubation, scientific and technological innovation, investment attraction, wealth attraction, and assistance in professional judgment; at the same time, understand the industry and the market. Cherish every penny of investors and let every penny be used where the most value can be generated. If we can all make good use of the joint efforts of the two hands of policy and the market, do a good job in multi-structure fund management, and create value for them, we will certainly be able to call out the "other wind" of society to the venture capital industry.

(III) Go beyond the IPO thinking and establish the investment institution's own moat

Benefiting from the deepening reform of the capital market, 17 companies in our portfolio have successfully achieved IPOs in A-shares this year. The speed of this kind of IPO is something that we could not have imagined before the reform of 2014.

However, I believe that with the establishment of the Beijing Stock Exchange, enterprises at different stages of development and enterprises with different industry attributes have their own living and development space in the capital market, and IPO issuance will enter a new normal, and in the past, everyone would take the number of IPOs as an important criterion for measuring institutions. But I think this is still far from enough, if you want to be an evergreen organization, I think the following three aspects can not be less:

First, is the performance, whether to really invest in a number of valuable enterprises, whether to bring LP real returns, the core indicators to measure performance are DPI and IRR;

Second, it is culture, the core of culture is the value, in fact, the embodiment of a company's character, the core indicator is ESG;

Third, self-discipline, compliance development, self-restraint, and stability can go far.

This year's capital market fire has "lithium", "lithium cobalt oxide" and "lithium iron phosphate" behind the old man, he is the father of lithium batteries, Nobel Prize winner in chemistry - John Goodenough. At the door of his office, a poem was posted that read, "Do good anyway." Today, I would also like to encourage you with this sentence: I wish everyone in the new development environment, can hold the steering wheel in their hands, choose the right path, and be a good child in this industry.

Do good anyway！ Thank you.