Source丨IT orange
Author丨Fok Yingxian
Editor丨Wu Meimei
Cover picture source: Wenxin Yige
New materials are undoubtedly one of the hot investment themes in the capital market in the past two years. New materials refer to materials with excellent performance and function, covering high-performance structural materials, advanced functional materials, biomedical materials, intelligent manufacturing materials and other fields, regarded as the forerunner of the era of hard technology, and its development largely determines a country's scientific and technological competitiveness. Today, with the continuous evolution of the global economic pattern, the new materials industry, as an important part of the national strategic emerging industries, plays a vital role in the development of a new generation of information technology, high-end equipment manufacturing, new energy and new energy vehicles and other strategic emerging industries. Despite the lack of confidence in the primary market and the overall slowdown in the pace of investment in 2023, the new materials industry still shows strong development potential and attractiveness, and the market is still hot. The following IT orange will show you the investment and financing situation of the primary market of the domestic new material industry in 2023 through data combing.
Investment and financing over the years
From the data, it can be seen that from 2014 to 2023, the number of financing in the primary market of the mainland new materials industry has shown an overall upward trend, especially in 2019-2023, and the growth in the number of financing events is particularly significant. Even in the context of global economic fluctuations and capital market contraction, the new materials industry still maintains a trend of contrarian growth. From 2021 to 2023, the number of investment and financing events will exceed 200 per year for three consecutive years, and the number of investment and financing events will reach 240 in 2023, a record high. In the first quarter of 2024, the primary market financing of the new materials industry continued to maintain strong enthusiasm and ushered in a "good start", with 82 investment and financing events completed in less than three months, more than one-third of the total in 2023, fully demonstrating the continued high level of investor attention and confidence in the industry. It can be seen that the new materials industry will still be a favored track for investors in 2024. In terms of IPOs, the IPO events of the domestic new materials industry showed a fluctuating upward trend from 2014 to 2020. Specifically, the number of IPOs from 2014 to 2018 remained basically stable at about 10 per year, with the exception of 2017, when 45 new material companies IPO one after another and 5 listed companies increased their capital after the IPO; IPO in the new material industry ushered in an explosive period in 2019-2020, with an increase of 17 IPOs in 2019 compared with 2018, and a further increase of 42 in 2020; In 2021-2023, the industry entered an adjustment stage, and the number of IPOs per year decreased to Less than 30 strokes. Behind the analysis of the data, we can get a glimpse of the development process and policies of the domestic new materials industry and other changes in the market environment. As a key link in the upstream of the industrial chain, new materials have long relied on imports, and there is still a big gap between them and developed countries in terms of key core technologies. In the face of changes in the international situation and the requirements of domestic industrial transformation and upgrading, the demand for domestic substitution of new materials is becoming increasingly urgent, and the state has successively introduced a series of policy measures to support the development of the new material industry:
- In 2015, the "Made in China 2025" was introduced, emphasizing that the new material industry should be valued as the core of the transformation of the manufacturing industry;
- At the end of 2016, the State Council established a national leading group for the development of the new materials industry, composed of 48 top material experts, to regularly carry out the policy work of reviewing and implementing the new materials industry;
- In 2017, the Ministry of Industry and Information Technology (MIIT) and four ministries and commissions jointly issued the "Guidelines for the Development of the New Materials Industry", which became a programmatic document for the development of new materials during the 13th Five-Year Plan period.
- In December 2023, the Ministry of Industry and Information Technology (MIIT) issued the "Guidance Catalogue for the First Batch of Application Demonstration of Key New Materials (2024 Edition)", which mentions that it is necessary to focus on the application and promotion of three categories of new materials: advanced basic materials, key strategic materials and cutting-edge new materials, covering 299 products and demonstrating the latest achievements in materials science.
At the same time, the investment boom in new materials has also benefited from the rapid development of downstream industries, especially the rapid growth of new energy vehicles, consumer electronics, semiconductors and other industries, which has promoted the increase in investment and the expansion of upstream material projects. For example, the application of carbon fiber composite materials in new energy vehicles, the application of special glass and advanced ceramics in the field of consumer electronics, and the application of silicon wafers and high-purity chemicals in the semiconductor industry. Driven by both national policies and downstream demand, the primary market investment in the field of new materials in mainland China has increased from 2014 to 2023, and the new materials industry has achieved rapid development. However, at present, the mainland's new material industry is still in the transition stage from self-sufficiency in low-end products to independent research and development of high-end products, import substitution, despite rapid development, but there is still a certain gap with the United States, Japan and other advantageous enterprises, and the localization process of the new material industry is still promising. At the secondary market level, the launch of the Science and Technology Innovation Board in 2019 has provided a new financing channel for new material companies. At the same time, the Science and Technology Innovation Board clearly proposed to focus on supporting high-tech industries such as new materials and strategic emerging industries, especially the relaxation of financial indicator requirements, which provided the possibility for loss-making enterprises to go public, thus promoting a wave of listings. In the past two years, the China Securities Regulatory Commission (CSRC) has strengthened its review of corporate IPOs, with stricter listing standards and a slowdown in IPOs.
Combined with the distribution of investment and financing rounds in the new materials industry over the years, in the past ten years, the investment in the new materials industry has been dominated by early-stage investment (including seed round, angel round and A round), of which the A round accounts for the largest proportion, the growth stage investment (pre-B round, B round, B+ round, C round, C+ round) accounts for about 20%, mainly B round of financing, C round and subsequent rounds of financing activities are relatively rare, and the proportion of mid-to-late stage investment (D round to pre-IPO stage) has always been below 5%, in 2018 and 2019 years and even zero records. The proportion of strategic investment in the overall market has shown a steady growth trend since 2014, reaching a high point of 30% in 2020, and the proportion of strategic investment has decreased between 2020 and 2023, mainly due to the continuous increase in the number of overall investment and financing events, while the number of strategic investment events has remained at about 45 per year. To sum up, the investment and financing activities in the new materials industry are mainly concentrated in the early stage, especially the A round of financing, and as the enterprise develops to the middle and late stages, the financing events are significantly reduced, and the middle and late stage financing is almost at a standstill. The data as of March 20, 2024 shows that the distribution of investment and financing rounds in the new materials industry in Q1 2024 is consistent with the trend of the past decade, and early-stage investment is still the mainstream. Combined with the characteristics of the new materials industry, this distribution characteristic is not difficult to understand. In view of the characteristics of high investment, high difficulty, high threshold, long R&D cycle, long verification cycle and long application cycle of new materials, most investors prefer early-stage angel round investment or Series A investment, which is also in line with the investment logic of "early investment and small investment innovation" in the hard technology track.
It can be seen from the distribution of the amount of investment events in the primary market of the domestic new materials industry over the years that except for 2019 and 2020, a single investment of 10 million yuan has always accounted for nearly half of the country, while the proportion of a single investment of 1 million yuan has been continuously compressed from 24% to 10%, and the proportion of large investment of a single 100 million yuan or more is increasing in a fluctuating type. From 2014 to 2016, a single investment and financing event below the level of 100 million yuan accounted for nearly 80%, which reflects that the domestic new materials industry is in its infancy, and the primary market is mainly start-ups and small investments. With the development of the new material industry, the demand for capital of enterprises has also increased, and the continuous progress of new material technology and the improvement of market recognition have also made investors more willing to make large investments in potential enterprises. Since 2017, the proportion of single investment transactions with a level of 100 million yuan or more has basically increased steadily.
IT orange data shows that when domestic new material companies are listed in IPOs, 60% of them are established for 11-20 years, and 20% of them are established for 21-30 years. It can be said that most new material companies usually need a long cycle of at least 10 years from technology research and development to profitability to final listing, which even exceeds the entire life cycle of some investment funds. Therefore, unlike the TMT field, which pursues short-term investment returns of "hot spots and outlets", investment in the new materials industry requires a long-term vision and extreme patience.
From the perspective of regional distribution, China's new material industry is mainly concentrated in the eastern coastal areas, such as Jiangsu, Guangdong, Zhejiang, Shanghai and other provinces and cities, these provinces have superior industrial base conditions, downstream manufacturing industry is large and close to the application market, so it has obvious advantages in the development of new material industry. It is worth noting that Shandong, which has only 7 investment and financing events, has become the province with the highest amount of financing for new materials, mainly because Shandong Hongtuo, a non-ferrous metal alloy manufacturer, has received a strategic investment of 2.96 billion yuan, and the investors include CITIC Juxin, China Huarong, Oriental Assets, Juntai Capital, Ningbo Xin Aluminum, and Tiancheng Fund, which has raised the level of regional financing. In addition, some western regions, such as Shaanxi, Gansu and other provinces, are also actively developing the new material industry, forming some regional characteristics. For example, in 2023, Gansu Hailiang will receive a strategic investment with a total amount of 1.8 billion yuan, led by Shenzhen Capital and followed by ICBC Capital. Gansu Hailiang is a business company of Hailiang Group engaged in high-performance copper foil material projects, and is committed to technological breakthroughs and industrial applications of high-quality copper alloys such as copper tube microalloying and high-strength and high-conductivity alloys. With the rapid development of high-end industries such as aerospace and military manufacturing, Shaanxi has formed a unique competitive advantage in the new material industry by relying on its rich mineral resources and scientific and educational resources. For example, Tiancheng Aviation Materials, a titanium solution provider, has designed and built the first domestic aviation-grade titanium alloy full-process dynamic multi-directional temperature-controlled rolling production line, which can provide ultra-fine crystalline titanium rods and high-quality titanium coils for users in high-end fields such as aircraft, engines, aerospace, ships, and medical treatment; In addition, Shaanxi has also established a number of industrial parks and bases dominated by the new material industry, including Baoji High-tech Zone, Xianyang Jingwei New District, Ankang New Material Base, etc., forming an industrial agglomeration effect. The establishment of Qin Chuangyuan's innovation-driven platform has injected a strong innovation impetus into the development of Shaanxi's new material industry, attracting and cultivating a large number of scientific research and innovation enterprises and talents.
In 2023, the three cities with the largest amount of financing in the new materials industry are Suzhou, Shenzhen, and Hangzhou. The ranking of these cities not only reflects their position in the new materials industry, but also shows their respective industrial advantages and development potential. As the leader of the list, Suzhou benefits from Suzhou's strong manufacturing base and the government's support for high-tech industries, such as the "100 billion-level" new material industrial cluster in Wujiang District, which not only attracts a large number of new material enterprises to settle in, but also forms a complete industrial chain and innovation ecology, and in 2023, Xinghan Technology, a photovoltaic N-type battery paste developer that has received hundreds of millions of yuan in Series A investment, is headquartered in Wujiang Science and Technology Pioneer Park. As a frontier city of China's scientific and technological innovation, Shenzhen has a well-established innovation ecosystem, providing new material enterprises with full-chain support from idea to market, reducing the risk and cost of innovation. At the same time, the Shenzhen Municipal Government has also actively introduced policies to support the development of the new material industry, and in September 2023, it issued the "Several Measures of Shenzhen Municipality on Promoting the High-quality Development of New Material Industry Clusters", aiming to promote the further development of the new material industry. Hangzhou's new material industry is also performing well, and new material enterprises can use Hangzhou's e-commerce, Internet technology and other fields of technology and market resources to accelerate the process of product development and marketization. Xi'an, as the only non-eastern city on the list, can occupy a place in the new materials industry, mainly thanks to Xi'an's unique scientific and educational resources, Xi'an Jiaotong University, Northwestern Polytechnical University and other universities have not only cultivated a large number of outstanding scientific research talents, but also provided strong technical support and innovation power for the industry, such as 2023 Xi'an Smowei New Materials, which has received two investments in the year, was born from the professor team of Xi'an Jiaotong University; Cheng Yonghong, the founder of 1908, is also a professor of Xi'an Jiaotong University; Lu Wei, the founder of Chaonan Hi-Tech, is an off-campus graduate tutor of Xi'an University of Posts and Telecommunications; and at the same time, the investor list of Chaonan Hi-Tech also appears in the 1896 capital of Xi'an Jiaotong University; and Aine Shunneng was founded by Zhao Yuqing, a professor of Xi'an Jiaotong University, in the general window of Qin Chuangyuan.
In the financing currency structure of the new materials industry in 2023, whether it is an IPO listing or the primary market, RMB financing occupies an absolute dominant position, which also shows that RMB investors have strong confidence and willingness to invest in the new materials industry. In 2023, there will be only one US dollar investment in the domestic new materials industry in the primary market, which is a US$2.5 million seed round investment from Alibaba Venture Capital and Gobi Ventures. In the current mainstream context, domestic enterprises and investors generally tend to use RMB for equity investment and financing transactions.
According to the label data of the invested companies in the new materials industry in 2023, IT Orange has sorted out the top ten hot keywords that attract the most attention in the travel industry - building materials, polymer materials, battery materials, carbon, etc. The emergence of these high-frequency keywords reflects the investment trend and preference of the capital market for the new materials industry. It is worth noting that battery materials have become the focus of investors because of their application prospects in the field of new energy vehicles and renewable energy, with the rapid development of 5G and artificial intelligence technology, the performance requirements for semiconductor materials are also increasing, and non-metallic mineral products such as advanced ceramics and special glass are a branch of the new material industry, and the investment enthusiasm cannot be ignored. These fields have great market potential and strong innovation, and the investment and financing events of related new material companies are more concentrated.
Among the TOP20 companies with the largest financing amount in the domestic new materials industry in 2023, there are 8 companies established in the past 5 years and 14 companies established in the past 10 years, accounting for 70%. In terms of geographical distribution, Zhejiang has the largest number of companies, with 3 companies, namely Tuoene Technology, a high-end polymer new material developer, Wuken New Materials, a carbon fiber product manufacturer, and Tianneng New Materials, a lithium battery recycling service provider, and 2 companies in Beijing, Fujian, Jiangsu, Shanghai, and Sichuan 5 provinces. In terms of financing amount, among the 20 companies with the largest financing amount in 2023, non-ferrous metal alloy manufacturer Shandong Hongtuo stood out with a single strategic investment of 2.96 billion. Shandong Hongtuo is mainly engaged in the manufacture of non-ferrous metal alloys, the sales of new metal functional materials and the research and development of new material technology. Among these 20 companies, four companies have received two financings, namely Topene Technology, Nuoken New Materials, New Silicon Polymerization, and Dezhi New Materials.
By combing through the active investment institutions in China's new materials industry in 2023, we find that Yida Capital has performed particularly well, making 7 investments, covering many companies such as WSP Biotech, China Machinery New Materials, and Zhiren Jingxing, followed by Shenzhen Capital Group and China National Building Materials New Materials Fund, both with 6 investments, tied for second, and 9 investment institutions have completed 4 investments each.
In the composition of investment institutions, we note that the influence of state-owned capital in the new materials industry is significant. Shenzhen Capital Group's New Materials Fund for Manufacturing Transformation and Upgrading (with a total scale of 27.5 billion yuan) and China National Building Materials New Materials Fund (with a total scale of 20 billion yuan) are both ranked in the top 3 on the active list. For well-known VC institutions such as Northern Light Venture Capital and Xianfeng, there are cases of multiple shots against the same company in the same year. For example, Northern Light Venture Capital made angel round and Pre-A round investment in Yingke Materials in January and August 2023 respectively, Angel round and Pre-A round investment in Velocity Technology in February and November 2023 respectively, and two angel round investments in Carbon Technology in April 2023.
2023 New materials industry unicorn
According to statistics, there are 7 unicorns on the list in the new materials industry in 2023, of which two companies will be on the list in 2021, 3 companies will be on the list in 2022, and 2 companies will be newly on the list in 2023. With its R&D strength in the field of electrochromic technology, Lenright Technology was listed on the list of new material unicorns in November 2021, and it is also the earliest new material unicorn company in China. In terms of valuation, Pilot Film topped the list with its latest valuation of $2.769 billion. Pilot Film, a subsidiary of Pioneer Group, is engaged in the research and development, production, sales and recycling of sputtering targets and evaporation materials for vacuum coatings. The company was established in July 2017, received an angel round of investment from Hefei Industrial Investment in December of that year, and was promoted to a unicorn after receiving a B round investment of 4.5 billion yuan in 2022. In terms of the number of financings, Tongguang Co., Ltd. and Blue Crystal Microorganisms are ahead of other unicorn companies with 8 rounds of financing respectively, showing their continued attractiveness in the capital market, and these two companies are also new unicorns in 2023. 2023 China New Material Industry Unicorn Case Study of New Material Unicorn "Tongguang Co., Ltd.": Tongguang Co., Ltd., the full name of Hebei Tongguang Semiconductor Co., Ltd., is located in Baoding High-tech Zone, Hebei Province, and has ushered in rapid development in recent years, from a little-known enterprise to a new unicorn emerging in the field of third-generation semiconductor materials in China. Since its establishment in 2012, Tongguang has focused on the R&D and production of silicon carbide (SiC) materials, and has completed 8 rounds of financing. The company's core product, silicon carbide wafer, is a new type of semiconductor material, which has significant advantages in high frequency, high efficiency and high voltage resistance. With the growing domestic demand for the localization and substitution of emerging technologies, the third-generation semiconductor materials represented by silicon carbide have received great attention from downstream customers, industrial capital and local governments in the industrial chain, and have broad market prospects. In 2016, Tongguang Co., Ltd. received an exclusive angel round investment from Agricultural Development Focus, a wholly-owned subsidiary of the Agricultural Development Bank, which laid a solid foundation for its subsequent development. In December 2020, Tongguang Co., Ltd. completed Series A and B rounds of financing within one month, the A round was jointly invested by SDIC Venture Capital and Xiaomi Group, and the B round was exclusively invested by Kunlun Capital. In 2021, Tongguang's financing pace was more compact, and 4 financings were completed during the year. In January, it completed the C round of financing, led by CPE Yuanfeng, followed by the old shareholder Kunlun Capital, in May, it received the D round of financing, and 6 institutions including Haolan Capital, BAIC Industrial Investment, and Yunhui Capital jointly invested, and in July, it again obtained hundreds of millions of yuan in Pre-IPO financing, with the participation of many investment institutions such as Red Horse Capital, Inovance Industrial Investment, and Lianxin Capital, and the old shareholder CPE Yuanfeng Investment continued to increase. In December of the same year, Great Wall Motor, a local auto giant in Baoding, also joined the investment ranks, led by Great Wall Motors and followed by Junxi Capital. By December 2023, Tongguang Co., Ltd. completed a super financing of 1.5 billion yuan. The financing was led by Shenzhen Capital Manufacturing Transformation and Upgrading New Materials Fund and Beijing-Tianjin-Hebei Collaborative Development Industrial Investment Fund, and jointly invested by Baoding High-tech Zone Venture Capital Co., Ltd. and Hebei Industrial Investment Zhan New Industry Development Center, with a post-investment valuation of 7.5 billion yuan, and was successfully promoted to a unicorn enterprise. Founded in October 2016, Bluepha is an innovative company focusing on synthetic biotechnology. The company is committed to the development and commercialization of novel bio-based molecules and materials, including PHA materials with autonomously complete degradation properties, functional beverage ingredients for anxiety relief, and novel probiotics to supplement the body's metabolism. These innovative products enable Blue Crystal Microbes to provide a unique competitive advantage to corporate customers in a variety of industries, including consumer goods, healthcare, agriculture, environmental protection, and electrical and electronics. IT orange data shows that since its establishment, Blue Crystal Microbiology has completed 8 rounds of financing, with a total of more than 2 billion yuan of financing disclosed, and investors include top institutions such as Tencent and Hillhouse, as well as national teams such as the National Mixed Reform Fund. Especially after 2021, with the rise of investment boom in the field of synthetic biology, Blue Crystal Microbiology has accelerated the pace of financing, and has completed three rounds of Series B financing one after another, with a cumulative financing amount of 1.5 billion yuan, of which the B1 round of financing is nearly 200 million yuan, the B2 round of financing is 430 million yuan, and the B3 round of financing is jointly led by Yuansheng Capital and China State-owned Enterprise Mixed Ownership Reform Fund (Mixed Ownership Reform Fund), with an amount of 870 million yuan. With more than 100 million yuan of financing in a short period of time, Blue Crystal Microorganism has properly become the "darling" of the capital market. The success of this series of financing not only provides sufficient financial support for Blue Crystal Microorganism, but also provides a solid foundation for it to leapfrog the "valley of death" from laboratory R&D to industrial mass production. The company's R&D infrastructure, Synbio OS (Synthetic Biology Operating System), extends the DBTL closed loop of synthetic biology from the laboratory to the industrial level, significantly improving the efficiency of technology development and product delivery. In 2023, Blue Crystal Microbiology will launch the B4 round of financing again, successfully raising more than 400 million yuan, led by Zhongping Capital, followed by Jiangsu Huanghai Financial Holding Group (Huanghai Financial Holdings), and Mingde Capital serves as the exclusive financial advisor for this equity financing. The post-investment valuation reached 7.5 billion yuan, and Blue Crystal Microbes was promoted to a unicorn. Although the overall investment in the domestic primary market will slow down in 2023, the overall popularity of synthetic biology has been increasing.
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