1,500 billionaires will win the "second share of VC"

Source: Hunting Cloud Selection (ID: lieyunjingxuan) Author: Wang Fei

The assets under management exceed 10 billion.

After failing to compete with Tiantu Investment for the "first VC share", this well-known institution with a management scale of more than 10 billion yuan continued to work hard towards the "second VC share".

On June 30 last year, Bojiang Holdings Limited (hereinafter referred to as Bojiang) submitted a listing application to the Hong Kong Stock Exchange to be listed on the main board. In January this year, its listing application materials showed "invalid". After nearly a year, Bo will submit its listing application again on June 27.

From the completion of the filing of the first private equity fund in May 2016 to the end of 2023, the total assets under management of Bojiang, who is close to 19 years old, has increased from 100 million yuan to about 10.2 billion yuan.

"High-net-worth individuals (those with investable assets of more than 6 million yuan)" has always been the focus of Bojiang's services.

According to the prospectus, the number of fund investors has increased from about 1,200 in 2020 to 1,525 by the end of 2023, of which about 97.8% are individual investors (i.e., individual LPs), about 1,491.

In other words, nearly 1,500 high-net-worth individuals are about to support a Hong Kong stock IPO. If all goes well, Bo is expected to ring the bell for listing within the year.

01

Serving individual LPs, the management scale exceeds 10 billion

The 52-year-old founder and CEO of Bojiang, Luo Tian, holds a master's degree in business administration from Macau University of Science and Technology and is currently the vice president of the Changjiang International Chamber of Commerce. From 1999 to 2005, he successively served as a marketing agent and assistant general manager of Ping An and Taikang Life Insurance, and can be regarded as a "veteran" in the financial industry.

According to the prospectus, Rakhotan holds 10.82% of the shares through its 61.71% BroadLakeside, 23.08% of the shares of BroadMaster, 10.00% of the shares of BroadHonor, and 10.00% of the shares of BroadLucky. In addition, Luo Tian and his spouse Yang Mengqiao formed a group of controlling shareholders, controlling a total of 61.90% of Bojiang's shares.

In 2005, Luo Tian founded Shanghai Bojiang Investment Management Co., Ltd. (hereinafter referred to as Shanghai Bojiang), which initially relied on investment and financing intermediary services, high-end headhunting services, enterprise management consulting services and other businesses, and reached cooperation with large groups such as Focus Media, Wahaha Group, Sinochem Group, and Hanergy Group.

After eight years of exploration, in 2013, Luo Tian spun off executive search services and corporate management consulting services from Shanghai Bojiang, and has since focused on private equity investment funds.

Different from most investment institutions, institutional LPs with "large capital volume, long term and rich investment experience" are used as the source of fundraising. Since the beginning of the day, Bojiang has been carried by individual LPs.

At the beginning of the prospectus, Bojiang "is a private equity investment fund manager focusing on serving high-net-worth individuals and empowering China's high-tech enterprises." ”

Data shows that the number of high-net-worth individuals in China has grown from 1.8 million in 2019 to 2.4 million in 2023, with a compound annual growth rate of 7.4%. It is expected that the number of high-net-worth individuals in China will further increase to about 3.4 million by 2028, which will further drive the demand for asset management services.

As one of the earliest private investment fund managers for high-net-worth individuals in China, Bojiang has a loyal group of LPs, with about 1,491 individual LPs by the end of 2023.

According to the prospectus, since the completion of the filing of the first fund in 2016, a number of loyal investors have continued to invest for more than 7 years, and more than 30% of investors have reinvested. From 2020 to 2023, the reinvestment amount of Bojiang investors accounted for 43.6%, 48.1%, 69.2% and 69.1% of the financing amount in each year, respectively.

According to Frost & Sullivan, as of the end of 2023, Bojiang, with a total AUM of 10.2 billion yuan in terms of assets under management, is the second largest private investment fund manager in China focusing on serving high-net-worth individuals.

In addition to individual LPs, Bojiang is also different from other VCs in that most of the funds issued by it are single funds or special funds.

According to the prospectus, by the end of 2023, Bo will manage a total of 80 funds. According to the rough calculation of the management scale of 10.2 billion yuan, the average size of each fund is about 127.5 million yuan.

02

Invested in 94 companies: the exit rate was 3%, and the yield dropped to 14.7%

For project investment, with more than 18 years of investment experience and fund management experience, Luo Tian has gradually led Bo to explore a set of his own investment logic, that is, one center, two dimensions, and three standards.

Among them, the "two dimensions" are to invest in "unique" and "leading" enterprises, that is, the invested enterprises must have unique competitive advantages and leading market positions.

The high standard also means that the number of projects that Bo will screen and complete the investment is not very large. Luo Khotan once revealed that out of 100,000 business plans, 1,000 entered the discussion meeting, 500 were interviewed, and only 50 would do in-depth due diligence, and about half of the companies with in-depth due diligence reached effective investment.

Luo Tian also publicly said that Bo would rather be slower, not grab the track, and not blindly invest in the project.

By the end of 2023, Bo will invest in a total of 94 projects, covering companies at different stages of development, including start-up, growth and post-stage development. Among them, XGIMI Technology and Zhiyun Health have landed on the Mainland Science and Technology Innovation Edition and the main board of the Hong Kong Stock Exchange in 2021 and 2022 respectively.

In the start-up investment, Bojiang has invested in 68 companies, 57 of which belong to the high-tech industry, accounting for about 34.3% of the total investment cost. Compared with the end of 2022, its early-stage investments have increased by 3, and all of them belong to the high-tech industry.

MindMinds Technology, Antai Composites, Fumi Technology, Digital Technology, Enewan Technology, etc., are all representative projects of Bojiang's early investment. By the end of 2023, 24 portfolio companies had doubled their valuations, and 13 of them had more than tripled their valuations.

In the growth and later stage of investment, Bojiang has invested in 45 companies, accounting for about 65.7% of the total investment cost. Specifically, it focuses on investment in Series B financing, and has participated in Series B financing of 27 companies, 26 of which belong to high-tech industries, mainly covering high-tech services and advanced manufacturing and automation.

In terms of project exits, by the end of 2023, Bojiang has achieved a complete exit of 3 companies, and another 7 companies have achieved partial exit; The total exit investment cost was approximately RMB557 million, and the realized exit value was approximately RMB1.7 billion.

Based on this calculation, the exit rate of Bojiang is about 3.19%. Even if the partial exit part is included, the exit rate barely reaches 10%, about 10.64%.

By the end of 2023, Bo will achieve an overall internal rate of return of 14.7%. Among them, the Bojiang Fortune Series Fund performed the best, with the corresponding internal rate of return (IRR), net internal rate of return (NIRR), investment capital multiple (MOIC), ratio allocated to paid-in capital (DPI), and ratio of total fund value to paid-in capital (TVPI) of 18.6%, 17.9%, 3.1 times, 77.2%, and 3.0 times, respectively.

It should be noted that among the 9 funds disclosed by Bojiang, none of them has achieved DPI back to 1.

03

Performance warning: revenue has fallen and profits have been cut in half

As the first mainland venture capital institution to go public in Hong Kong, Tiantu Investment has been highly anticipated by the VC industry.

However, due to the impact of "the decline in the fair value of the portfolio due to the continued downturn in the capital market", the 2023 annual report released by Tiantu Investment on April 30 shows that the company's revenue is about -744 million yuan, a year-on-year decrease of 163.67%; The net loss was about 876 million yuan, a year-on-year profit turned into a loss, and a net profit of 533 million yuan in the same period last year.

"A leaf falls and you know the autumn of the world", Bo Jiang's performance is also unsatisfactory.

According to the prospectus, Bojiang's income mainly comes from the fee income (fund management fees and carried interest) from the fund management business and the investment income obtained from investing its own funds in the funds under management. Among them, like most institutions, 2% of the management fee income, "drought and flood income".

According to the prospectus, from 2021 to 2023, Bojiang's fund management fee income will be about 100 million, 117 million, and 113 million yuan respectively, accounting for about 46.49%, 54.99%, and 72.61% of its total income, showing a trend of increasing year by year.

In contrast, from 2021 to 2023, Bojiang's net investment profit and loss will decrease year by year, about 84.732 million, 17.251 million, and 510,000 yuan respectively.

From 2020 to 2022, Bojiang's revenue will be about 122 million, 215 million, and 212 million yuan respectively, which is relatively stable; The profit during the year was about 53.597 million yuan, 99.227 million yuan and 107 million yuan respectively, showing steady growth.

However, the performance in 2023 is not optimistic, with revenue falling 26.96% year-on-year to 155 million, which is also the second consecutive year of revenue decline, and the profit for the year is halved to 44.117 million yuan, down 58.88% year-on-year.

At the moment of poor performance, Bojiang is still trying to seek listing, or to solve the problem of "difficulty in fundraising".

A senior person from a Hong Kong venture capital institution said, "Venture capital listing is one of the most effective ways to support the development of the real economy, which is conducive to the expansion of funds, matching long-term capital investment in innovation and entrepreneurship, and promoting the development of the real economy." In addition, the funds raised from the IPO can be used as long-term core funds for GPs to drive more LP funds and help activate the liquidity of the capital market. ”

It is also mentioned in the prospectus that Bojiang plans to use the proceeds from the IPO to maintain and expand the high-net-worth customer base; Enhance research and investment capabilities to capture strategic investment opportunities and continue to empower China's high-tech industry; increase the investment of own funds; Continue to strive to attract, develop and retain employees with core competencies.

After the successful listing, what kind of performance can the Bojiang who won the "VC second share" achieve? Let's see.

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