On April 11, the "2024 Hard Technology Investment Summit - Hard Technology, Intelligent Manufacturing, and Creating the Future", hosted by the School of Economics and Management of Tsinghua University, undertaken by the Global Private Equity Institute of Tsinghua University, and supported by Huakong Fund, was successfully held at Tsinghua University.
Zhang Yang, Chairman of Huakong Fund, was invited to attend and delivered a keynote speech on "The Road to Venture Capital in Hard Technology".
The critical period of transformation of old and new drivers has boosted confidence and pushed China's economic development into a new stage
After 40 years of rapid development, China's manufacturing industry has become the world's largest and most complete manufacturing system. However, since 2022, China's GDP growth has slowed down sharply, the capital market has been declining, corporate profitability has declined, and household consumption demand has been sluggish.
Through the summary of China's economic growth momentum, China Holding Fund found that the old momentum, including globalization dividends, demographic dividends, infrastructure dividends and reform dividends, is further ineffective with the withdrawal of foreign investment, the increasing difficulty of technology introduction, and the precipitous decline in the birth rate.
In fact, in the past few years, China has been promoting new ideas and new methods to push China into a new cycle and stage of development.
For example, in response to the withdrawal of foreign investment, China has launched a policy of international and domestic dual circulation, which has greatly increased the proportion of Chinese manufacturing by accelerating domestic demand; in terms of technology introduction, especially in the field of chips, China has put forward the idea of upgrading the manufacturing industry and independent control; in the field of exports, it has actively built the Belt and Road Initiative and promoted the development of the international market through cross-border e-commerce; The disappearance of the demographic dividend has increased the development of artificial intelligence and robotics industries to increase the labor force, in terms of infrastructure construction, the construction of new infrastructure areas such as data China, and the release of positive signals for education, health care and housing to boost consumer confidence.
It can be seen that the new drivers are actively making up for the decline of the old ones, effectively promoting the return of China's economy to a new state of growth.
New quality productivity is the representative of future growth, which determines the investment strategy and the direction of economic development
If the economic growth rate continues to grow at a rate of 5% in the next decade, then GDP will create a gap of 110 trillion yuan in 2035. Where will the 110 trillion come from and what will it consist of? These components will also become an important area of focus for hard technology investment, because the new quality of productivity represents the future and represents growth.
Based on the judgment of the general direction, Huakong Fund sees future investment opportunities and constitutes an important part of the investment strategy.
The first important opportunity is the energy revolution. China is the world's most dependent country on foreign energy, with 72% of its oil and 46% of its natural gas imported, so it must establish an independent and controllable energy supply system to meet the challenges of geopolitics and energy security. Based on China's resource endowment of more wind, more light, more coal, less gas, less oil and less nuclear, it is necessary to increase internal supply.
In the future, China's energy structure will undergo tremendous changes, and the wind and solar resources in the west can be used to transmit electricity from the west to the east and gas from the west to the east through the development of energy storage technology; controlled nuclear fusion will become a new primary energy source, hydrogen energy will become a secondary energy source, and social life and production will move towards electrification in an all-round way. Huakong judges that the energy revolution will create an output value of more than 20 trillion yuan in 2035.
The second investment opportunity is believed by Huakong Fund to be the era of intelligence. With the comprehensive evolution from "Internet +" to "Smart +", mankind will enter a state of polarization in the future, that is, some countries will enter intelligence, while others will stand still.
In the era of intelligence, Huakong judges that the intelligent economy will create an output value of more than 50 trillion yuan in 2035 through the development of technologies including AI hardware, basic software, algorithm models, quantum information technology and autonomous driving.
The third important investment opportunity is the silicon-based era. With the development of cutting-edge technologies such as gene editing technology, brain-computer technology, metaverse, human-computer interaction technology, and humanoid robot technology, it will revolutionize the form of life and greatly promote the transformation of human society from carbon-based to silicon-based.
In the future, human-machine combined organisms with brain-computer products implanted and artificial organs will no longer be uncommon. Silicon-based life will create more than 7 trillion yuan in output value through the development of human-computer interaction, synthetic biology, cell and gene therapy, XR-enabled software, and virtual reality technology.
The fourth important investment opportunity is the advent of the space age. Space technology and interstellar development have provided unlimited resources and space for the development of human civilization, such as commercial spaceflight, satellite Internet, interstellar exploration, 6G and other fields, which will bring a market of 20 trillion yuan.
By integrating the market space of the above four investment opportunities, it will be possible to create an output value of 100 billion yuan by 2035, which is expected to become an important new engine for economic development.
Hard technology investment is different from model innovation, which requires the accumulation of massive cutting-edge technologies
Unlike the very hot model innovation, Internet innovation and consumer innovation in the past decade, hard technology investment has the following characteristics:
First, hard tech investment is intellectually cutting-edge. Technological innovation usually relies on the accumulation of a large number of cutting-edge basic sciences and underlying technologies, such as high-energy physics, mathematics, biology, computer science, quantum physics, flexible neuroelectronics, etc., and hard technology investment closely follows the development of basic disciplines to advance simultaneously.
Second, hard technology investment has a cyclical nature of R&D. It takes a long time for a technology to go from basic principle to product, and the cycle is insurmountable. It is necessary to have a deep understanding and clear judgment of cyclicality in order to accurately judge the investment node.
Third, hard technology investment technology has rapid iteration. Once a technology becomes a product after a long R&D cycle, the iteration speed will exceed imagination, and hard technology investors must always pay attention to the cyclical law of the development of these technologies.
Fourth, the hard tech investment industry is often disruptive. New technologies and products not only lead to the replacement of old and new industries in the industry, but also may replace other industries.
Finally, hard tech investment is about creating new demand. Different technologies jointly create new needs in the superposition, taking the low-altitude economy, the representative of new quality productivity, as an example, eVTOL is actually generated by the intersection and integration of multiple technical routes, including UAV vertical take-off and landing technology, Osprey tiltrotor technology in the military, power battery technology in trams, and carbon fiber technology in materials science. The integration of these technologies will not only subvert the future of general aviation, but also subvert the application scenarios of trams, and become an important way for people to travel in the future.
Hard technology investment requires multi-dimensional analysis and consideration, and value is by no means a simple arbitrage
It is precisely because of the above characteristics of hard technology that Huakong Fund creatively put forward the view that hard technology investment is a multi-dimensional investment model. Huakong believes that it can be analyzed and considered from six dimensions: product, graph, competition, time, space and substitution. Only through the six-dimensional thinking model can we clearly see the past, present and future value of a technology, and obtain the real investment value.
Huakong believes that the true value of hard technology investment is reflected in the following four aspects. The first is cognitive value. Through the cognitive advantages of knowledge and technology, we can make advance judgments on R&D prospects, so as to lay out in advance and obtain dividends from valuation improvement.
This is followed by growth value, with innovative company valuations climbing as key milestones are achieved. Taking Junshi Biosciences, an investment company of China Holding Fund, as an example, as a leading PD-1 company in the world, Junshi Biosciences' valuation has achieved rapid growth with R&D milestones, and the valuation of Zhipu Huazhang, a third-generation artificial intelligence leader, has also increased significantly with the advancement of new R&D and the launch of new models.
In addition, there is stock value and incremental value. That is, the value of new technologies is realized by replacing old technology products. Incremental value is the need to create a new market without any demand from the original market.
The integration of investment and research establishes cognitive advantages, reduces risks and reaps high returns
China Holdings Fund has always adhered to a top-down investment philosophy, looking for high-growth technology industries and leading enterprises. Growth is the core of investment concern, and only by finding and investing in leading companies in high-growth industries can LPs create high returns.
As a high-growth economy, China's cyclical nature is significant, and the valuation of enterprises in the rising period of the industry has skyrocketed, but once the industry declines, there is a risk of disruption, and the cyclical nature of the industry determines that the control of investment risks is crucial.
In the past 17 years, Huakong Fund has sorted out the investment strategies of more than 1,362 sub-sectors in four major areas in detail, and further screened 190 sub-sectors for focus on this year, and helped improve the industry map, consolidate investment strategies and find high-quality targets through Top-Down industry scanning.
Through portfolio investment, Huakong distributes its investments in a number of low-correlation high-growth industries and different stages of development to balance risk and return and reduce systemic risk. This determines that the return of the overall fund will not be affected by the fluctuation of a certain industry, so as to obtain high returns with a high degree of consistency.
In the high-growth industrial chain and value chain such as power generation and energy storage, hydrogen energy industry chain, low-altitude economy, electric vehicles, artificial intelligence and quantum technology, autonomous driving, brain-computer interface and metaverse, embodied intelligence, gene therapy, 6G, commercial aerospace, aviation industry chain, high-end equipment, etc., Huakong has found the best and most valuable enterprises for investment and layout.
In general, at the moment of the transformation of China's economic growth from the old to the new, the energy revolution, the era of artificial intelligence, the era of silicon, and the age of space will become the most important components of new productivity, and will also give rise to hundreds of billions of emerging markets and investment opportunities. Huakong Fund will continue to uphold the concept of top-down, integrated research and investment, deeply analyze the changes in the industry, achieve comprehensive coverage of research in the field of hard science and technology and precise positioning of major opportunities, strive to continue to create excellent investment performance, and continue to practice the mission and pursuit of "committed to becoming a leader in hard technology innovation investment".