On April 12, the State Council issued the "Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market" (hereinafter referred to as the "New "National Nine Articles"), which also sparked heated discussions in the venture capital market.
Article 8 of the new "Nine Articles" points out that the cycle of "fundraising, investment, management and withdrawal" should be further smoothed, and the role of venture capital and private equity investment in supporting scientific and technological innovation should be brought into play.
Shen Zhiqun, vice president of the China Investment Association and chairman of the Venture Capital Committee, said that the "Eighth Article" is the implementation of the spirit of the important instructions of the Central Economic Work Conference at the end of last year on "encouraging the development of venture capital and equity investment". He hoped that the government departments would further concretize and implement the relevant policies of the new "National Nine Articles".
On the one hand, guide more long-term capital to enter the venture capital market and support the better development of science and technology enterprises, on the other hand, broaden the diversified exit channels of projects and further activate the equity investment market.
The reporter learned that at present, the venture capital market has encountered a large development bottleneck in both "fundraising" and "withdrawal". Specifically, on the "investment" side, the increase in macroeconomic volatility has led to a decline in the willingness of many investment institutions to invest in equity, and on the "exit" side, the tightening of IPO supervision and the decline in the secondary market have also made it more difficult to exit projects and the return on investment has declined.
"The difficulty of project exit and the decline in return on investment are affecting the fundraising process of venture capital institutions. A partner of a domestic venture capital institution told reporters. At present, many venture capital funds are facing liquidation at maturity, but the projects they invest in have not yet been IPO or M&A exit, resulting in a lack of interest in investing in the new fund.
At present, many venture capital institutions are looking forward to the third article of the new "National Nine Articles" as soon as possible.
Article 3 of the new "National Nine Articles" proposes to comprehensively improve the system of rules for reducing holdings. Issued measures for the management of shareholding reduction of listed companies, and implemented policies for different types of shareholders.
The reporter learned that at present, many venture capital institutions expect that the relevant departments can provide more flexible operational convenience for the reduction of venture capital shareholders of listed companies, so that they can complete the project withdrawal before the fund is due for liquidation.
Some venture capital institutions believe that in order to facilitate the "project exit" of venture capital, the relevant departments may, on the one hand, allow more regional equity markets to pilot PE/VC fund share transfer business pilots, vigorously promote the development of PE/VC share transfer funds (S funds), and on the other hand, allow more regions to pilot the distribution of shares in kind by equity investment funds.
"Especially in the relevant departments actively encourage listed companies to increase profit dividends and share buybacks, many PE fund investors (LPs) are also willing to hold high-quality corporate stocks for a long time, through the distribution of shares in kind, they can be exempted from the operation of re-purchasing shares after the liquidation of the fund's maturity funds, or can reduce their holding costs. The partner of the above-mentioned domestic venture capital institution pointed out.
Image source: Visual China
"Strictly control the entry of enterprises to go public" is conducive to the exit of high-quality projects
A partner of a domestic venture capital institution told reporters that as long as the investment company continues to increase investment in scientific research, build business competition barriers, and hand over real excellent performance, it has a higher chance of landing in the capital market.
He said that in the past, when the companies they invested in operated A-share listings, they often found that there were hundreds of companies queuing up for IPO in front of them, causing venture capital institutions to worry that the IPO time of the enterprise would be greatly delayed, affecting the rhythm of fund liquidation and project exit at maturity. Now, if the new "National Nine Articles" pass the "strict control of enterprise listing access", so that some enterprises with "flaws" will automatically withdraw from the IPO market, the IPO operation time of truly excellent enterprises will be shortened accordingly, which is conducive to the exit of projects.
The reporter learned that another problem that made venture capital institutions "nerve-wracking" in the past was that when they invested in the operation of A-share IPOs, they found that a number of companies in the same industry with "inferior performance" and scientific and technological research and development content had lined up for IPO, resulting in them likely to encounter a more difficult IPO process because of "the degree of competition among listed companies in the same industry" and other issues.
In the face of this situation, many venture capital institutions can only support relevant investment enterprises to operate overseas listings, but due to the low market value, fundraising amount and stock trading activity of enterprises that can be given by overseas capital markets, it not only affects the development of enterprises, but also lowers the rate of return on the exit of venture capital projects.
Therefore, many venture capital institutions expect that after the release of the new "National Nine Articles", the relevant departments can select enterprises with more outstanding performance and scientific and technological gold content to be listed first, so as to create more "opportunities" for venture capital institutions with better investment vision and stronger post-investment management empowerment results.
A number of venture capital institutions focusing on early-stage investment pointed out that after the launch of the new "National Nine Articles", they also expect the relevant departments to provide more operational convenience around the measures for venture capital shareholders of listed companies to reduce their shareholdings. Especially for venture capital institutions focusing on the investment of early-stage science and technology enterprises, they often enter the investment during the business incubation period, and have been held for seven or eight years when the company is listed, which is basically close to the time of liquidation of the fund.
Shen Zhiqun believes that PE/VC institutions are also investors in the capital market and should be strictly distinguished from the major shareholders/actual controllers of listed companies. Especially for venture capital institutions that invest early, invest in small, and invest in technology, the full implementation of the differentiated supervision method of venture capital enterprises, and the effective implementation of the "reverse linkage" system of venture capital equity reduction, will gradually solve the problem of "two ends of the road" in the venture capital industry from the fundraising end to the exit end.
The reporter learned that some venture capital institutions also hope that the relevant departments can provide a "green approval channel" for listed companies to acquire high-tech enterprises with venture capital support background, on the one hand, to promote the industrial upgrading and performance improvement of listed companies, to create a higher valuation effect and performance dividends, on the other hand, to create more diversified channels for venture capital institutions to exit from mergers and acquisitions.
It is expected that more long-term capital will enter the market to reverse the dilemma of "difficult fundraising".
It is worth noting that after the launch of the new "National Nine Articles", many venture capital institutions also expect more insurance funds to flow into the equity investment market as soon as possible.
Article 7 of the new "Nine Articles" points out that the policy environment for equity investment of insurance funds should be optimized, and the performance evaluation methods of state-owned insurance companies should be implemented and improved, so as to better encourage long-term equity investment.
This has led venture capital institutions to look forward to more insurance funds flowing into the equity investment market.
"The long-term investment attributes of insurance funds are highly compatible with the venture capital industry. In the European and American markets, insurance institutions have allocated more than 10% of alternative investments such as equity investment, and it has shown an increasing trend in recent years. A managing director of a venture capital institution in charge of fundraising told reporters. However, in China, many insurance companies may have less than 5% of alternative asset allocation such as equity investment.
The reporter learned that an important reason for the current downturn in the fundraising side of the venture capital market is the lack of long-term capital. Specifically, the main contributors (LPs) of RMB funds are local government guidance funds, state-owned enterprises, private enterprises and high-net-worth individuals. At present, local government guidance funds and some state-owned enterprises, as long-term investors, require other social capital funds to be injected after they arrive, but private enterprises and high-net-worth individuals have reduced their ability to contribute due to increased macroeconomic fluctuations, resulting in venture capital institutions falling into a kind of "dead loop" of fundraising, where all parties are "not in place".
In this case, if insurance funds continue to expand the territory of equity investment as new long-term investment capital, so that RMB funds can quickly complete the contribution of other social funds, it may improve the investment efficiency of long-term funds such as local government guidance funds and state-owned enterprises, and effectively solve the current dilemma of raising funds in the venture capital market.
At the end of October last year, the Ministry of Finance issued the "Notice on Guiding Long-term and Steady Investment of Insurance Funds and Strengthening the Long-term Assessment of State-owned Commercial Insurance Companies", which adjusted the performance evaluation index of state-owned commercial insurance companies from the current year to the assessment method of "3-year cycle + current year".
In the view of many venture capital industry insiders, this measure has begun to play a positive effect - some insurance institutions have begun to carry out pre-investment due diligence for more PE/VC institutions, and the latter are included in the "examination object" of insurance funds to increase the allocation of alternative assets.
The reporter was informed that after the launch of the new "National Nine Articles", a number of venture capital institutions hope that the relevant departments can make persistent efforts - to further optimize the investment performance appraisal methods of long-term capital such as insurance funds, encourage large insurance institutions to contribute to venture capital funds, and expand the proportion of insurance funds into venture capital;
However, in order to attract more insurance funds to equity investment funds, it is necessary for relevant departments to further improve the tax policies of the venture capital industry, so that insurance funds can obtain higher long-term investment returns.
Article 9 of the new "National Nine Articles" proposes to implement and improve tax policies for listed companies, such as equity incentives, medium and long-term funds, private equity venture capital funds, and real estate investment trusts. This indicates that the relevant authorities may soon introduce measures to give more tax incentive support to eligible PE/VC funds, encouraging them to focus more on early, small, and technology.
Shen Zhiqun pointed out that a stable and healthy development of the capital market is of great significance to the sustainable and efficient operation of venture capital. Venture capital institutions should not only have a unique vision to "invest well", but also need to smooth various exit mechanisms to "exit well" in order to attract more different types of long-term capital to enter the market.
For more information, please download the 21 Finance APP
![5 million Internet celebrity Li Minxuan cheated in the North Electric Art Exam! The results have been canceled, and the whistleblower has exposed more inside[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)