It is said that the venture capital industry is full of all kinds of big fools (big flicker projects and big fool investors), but no project has ever been like Ge Ling's deep pupil, which has been touted to the sky and then fallen into the deep valley; and no investor has ever had the courage to blow an AI startup to hundreds of billions of dollars like Xu Xiaoping and Shen Nanpeng.
$300 billion valuation "joke"
In early June, Geling Deep Pupil (Beijing Geling Deep Pupil Information Technology Co., Ltd.), a former star company in the AI field, submitted a prospectus for the Science and Technology Innovation Board to raise 1 billion yuan, and its final round of financing was valued at 3.7 billion yuan.
Founded in 2013, It entered at almost the same time as the first echelon of AI's SenseTime, Megvii, Yitu and other companies, but after eight years of hard work, whether in terms of financing scale, revenue or valuation, Geling Deep Pupil has been far from being left behind by peers and become a member of the second echelon.
To a large extent, Glen Deep Hitomi is an AI net red company that is more famous than business. Its founder, Zhao Yong, is one of the designers of Google Glass, a master's degree in Fudan University, a doctorate in computer vision and computational imaging at Brown University, and a former researcher at Google's headquarters.
It is said that it is precisely because of Zhao Yong's dazzling background that Xu Xiaoping of zhen fund, who introduced He Bofei, who graduated from Stanford Business School, to Zhao Yong as CEO. This pair of elite combinations from famous schools + foreign famous enterprises successfully obtained a round of financing from Zhen Fund and Sequoia Capital.
But, like any influencer, Glenn Deep Pupil also liked self-hype tricks at the beginning of its creation. In 2014, Glin Deep Hitomi published a recruitment article titled "Sorry, We Only Love Cattle People", which said that "the MBA of Harvard Business School can only be an intern, and it is more difficult to join us than to take the Harvard exam, and the admission rate is unimaginably low."
The article also claimed that Xu Xiaoping and Shen Nanpeng argued over the question of whether the future market value of Geling Deep Pupil should be $100 billion or $500 billion, and finally compromised on the "middle number" of $300 billion.
Whether at that time or at present, the so-called $100 billion, $500 billion market value is ridiculous, in 2014, Google's market value is only more than $300 billion. Today, Google's market capitalization is close to $2 trillion, and the valuation of Glenn Deep Pupil's 2019 Series D financing is only $600 million. If Geling Deep Pupil is fortunate enough to land on the Science and Technology Innovation Board, we must ask Xu Xiaoping and Shen Nanpeng to stand up and cheer up, so that the market value of China's AI enterprises will soon catch up with Google.
According to industry insiders in the Zhihu post, the original article was actually from the hands of the Pr of the Zhen Fund, and the effect of dissemination (chaozuo) was good, and afterwards Geling Deep Pupil received a mountain of "submissions".
In order to spread, the boss can not face, which is also a standard action of the big guys in the venture capital industry.
Zhen Ge will not say, why did the famous Sequoia Capital fall to this point? This bottomless operation may make the deceased Sequoia Capital founder Don Valentine feel ashamed.
According to the prospectus, Geling Deep Pupil is mainly engaged in the research and development and application of computer vision technology and big data analysis technology. The company's profit comes from the sales revenue of providing customers with application-oriented artificial intelligence products and solutions. The company's independent research and development of artificial intelligence products mainly include Zhiyuan intelligent front-end products, Lingxi data intelligence platform and deep pupil industry application platform, the company has applied the core algorithm technology in the main products, the formation of products and solutions for urban management, smart finance, commercial retail three major business areas of products and solutions sales.
At the beginning of the business, The scene targeted by The Deep Pupil was the retail industry, but it turned out that they chose the wrong choice. This also led to the final departure of CEO He Bofei in 2017. Since then, Gerin's deep pupils have turned to a business system of security, finance,and retail.
From 2018 to 2020, the company's operating income was 51.96 million yuan, 71.21 million yuan and 243 million yuan, and the net profit attributable to the shareholders of the parent company was -74.57 million yuan, -418 million yuan and -78.2 million yuan, respectively.
From 2018 to 2020, the net cash flow from operating activities of Geling Deep Pupil was -110 million yuan, -110 million yuan and 0.35 billion yuan, respectively.
In the first half of 2021, revenue was 72.19 million yuan, net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was -54.74 million yuan, and net cash flow from operating activities was -44.04 million yuan. This means that after a brief positive turn in net cash flow from operating activities in 2020, in the first half of 2021, Glenn Deep Pupil cash flow turned negative again.
From the perspective of revenue sources, urban management (security), smart finance and commercial retail accounted for 51.5%, 31.5% and 17% respectively in 2020.
In the past three years, the proportion of revenue from security products has gradually declined, while the proportion of smart finance and commercial retail revenue has gradually increased.
The prospectus discloses that the main customers in 2020 are Agricultural Bank of China, Shang Bo Xin, China Gold and Silver Li, Yi Hualu and Chaoyang Development and Reform Commission, except for agricultural banks and Chaoyang Development and Reform Commission as end customers, the other three are integrator customers.
The company frankly said in the prospectus: "The customer concentration is high, and the downstream field is mainly concentrated in the more competitive urban management and financial fields, compared with the artificial intelligence enterprises in the same industry, the company's operating scale is relatively small, and the comprehensive competitiveness still needs to be further enhanced." ”
Transferred 60 million yuan of shares to mystery consultants
According to the prospectus, the company is an AI algorithm company, and the core technical team has strong scientific research strength. As of the end of the reporting period, the company's R & D staff was 146 people, accounting for 55.51% of the total number of employees. Among them, the number of people with master's degree or above is 67, accounting for 45.89% of R&D personnel. The company's core technical team consists of 7 people, including the company's founder, chairman and general manager Dr. Zhao Yong.
From 2018 to 2020, the company's R&D expenses were 72.85 million yuan, 95.95 million yuan and 114.28 million yuan, accounting for 140%, 135% and 47% of the revenue in the same period.
However, this technical team and R&D investment of Glending Deep Pupil can only rank last in the AI industry. According to public information, SenseTime has 3,593 R&D personnel, and the R&D expenditure in 2018-2020 is 849 million yuan, 1.916 billion yuan and 2.454 billion yuan, respectively; Megvii technology R&D personnel are more than 1,400 people, and from 2018 to 2020, the R&D expenses are 606 million yuan, 1.035 billion yuan and 999 million yuan, respectively; the R&D personnel of YITU Technology have a total of 837 people, and the R&D expenses from 2017 to 2019 are 101 million yuan, respectively. 291 million yuan and 657 million yuan.
Judging from the main technical backbone, the technical strength of Geling Deep Pupil is also slightly weak. According to the prospectus, Zhao Yong is the founder of Geling Deep Pupil and one of the core technical backbones of the company; the other core backbone is Li Xinghua, who graduated from Fudan University with Zhao Yong and a master's degree from the Shanghai Institute of Technical Physics of the Chinese Academy of Sciences, and currently serves as the head of the Geling Deep Pupil Intelligent Hardware Research and Development Center.
In August 2016, Deng Yafeng, a senior scientist at the former Baidu Deep Learning Research Institute, joined Geling Deep Pupil as a technical director, mainly responsible for the research and development of face recognition algorithms. In March 2020, Deng Yafeng suddenly announced his resignation.
Zhang Debing joined Glin Deep Pupil as an algorithm engineer in July 2015 and became the head of the algorithm department in July 2018, mainly responsible for the research and development of vehicle recognition algorithms. In August 2020, Zhang Debing left the company due to personal career development planning.
Compared with the weak technical team, Glenn Deep Pupil's investment in marketing can be described as a big deal. From 2018 to 2020, the sales expenses of Glen Deep Pupil were 24.87 million yuan, 74.59 million yuan and 85.28 million yuan, respectively. In the past three years, compared with companies in the same industry, the sales expense ratio of Glenn Deep Pupil is high. It also suggests that Glenn Deep Pupil relies more on sales drive than its competitors.
How much Göring's deep pupils attach importance to pioneering product scenarios and expanding sales scale can be seen in the details of the company's generous engagement of consultants.
According to the prospectus, Geling Deep Pupil hired two external consultants Zhu Ying and Xiao Qiulin through equity incentives. In September 2020, Lingzhi Zhongzhi transferred 1.65% of the shares of Linghui Zhihao for 7.7615 million yuan. Lingyi Zhihao is a shareholding platform for the external advisers of the issuer, and the equity incentive objects of the platform are Zhu Ying and Xiao Qiulin, the external advisers of the issuer.
According to the company's post-investment valuation of 3.7 billion yuan in 2019, the actual value of the above equity is about 61 million yuan, and the transfer price is only 13% of the actual value.
If The GridIng Deep Pupil is successfully listed, according to the 3 times increase of the listed companies on the Science and Technology Innovation Board, the market value of the Greening Deep Pupil will exceed 10 billion yuan. The market value of this part of the shares bought at a low price will exceed 150 million yuan, and the book return will exceed 20 times.
So the question is, who are Zhu Ying and Xiao Qiulin? Is it worth Glenn Deep Pupil to pay such a high fee for external consultants? As a proposed listed company, is it not rigorous enough to pay such a huge external consultant fee without disclosing the details of the consultant?
Glenn Deep Pupil did not disclose any details in the original prospectus. Subsequently, the SSE raised questions in the inquiry letter, asking for answers to the resources, service content and actual effects provided by external advisers to the issuer, and the reasons for the issuer to provide equity incentives to the issuer.
Geling replied that since 2019, the company has hired Zhu Ying as the company's external consultant, mainly providing consulting services in smart buildings, potential customer exploration in real estate-related industries, marketing strategy advice, sales channel development and other aspects.
During her tenure as an external consultant, Zhu Ying assisted the company in formulating the company's sales plan and strategy for real estate customers, prompting the company to successfully introduce well-known domestic real estate leading enterprise customers, from 2018 to 2020, the sales revenue of the company's real estate customers was 630,900 yuan, 699,100 yuan and 2,486,000 yuan, and from January to June 2021, the cumulative amount of signed orders was 4.0401 million yuan, and the income was 1.5876 million yuan, and the business grew rapidly.
In addition, the company has hired Xiao Qiulin as the company's external consultant since 2019, mainly providing technical consulting and product solution consulting services for the application of artificial intelligence technology in the field of DMS (driver status detection system).
During his tenure as an external consultant, Xiao Qiulin participated in the company's product prototyping in the DMS field, and assisted the company in introducing well-known investors in the field of Hyundai Motor and Hyundai Mobis automobile industry; assisted the company to commercialize DMS technology in the product line, such as expanding the new function of personnel status monitoring in the company's Haomu behavior analyzer, including condition monitoring and behavior anomaly analysis for operators, as well as launching related derivative products. During the reporting period, the sales amount of Haomu behavior analyzers was 4.7544 million yuan, 15.0951 million yuan, 35.4955 million yuan and 10.9962 million yuan, showing a rapid growth trend.
According to the prospectus, in April 2019, Glend deep pupil obtained a series D financing from Hyundai Motor and Hyundai Mobis, with a post-investment valuation of about 3.7 billion yuan. From this point of view, Xiao Qiulin's main contribution should be to help Ge Ling Shenyi introduce new investors. His role should be fa, but it is also rare to reward fa with equity incentives.
In short, Zhu Ying and Xiao Qiulin helped Gerin Deep Pupil expand sales in the real estate and DMS field, introducing customers or well-known investors. However, judging from the sales situation in the past two and a half years, Zhu Ying's contribution to the sales of Geling Deep Pupil in the real estate industry is not outstanding, and Zhu Ying's shareholding in equity incentive companies is as high as 60.46%, corresponding to the value of shares after listing is close to 100 million yuan, compared with the sales revenue of millions of yuan a year, this equity incentive is inevitably too generous. What is the reason for this? I am afraid that this is something that Glenn Deep Pupil did not explain clearly.
In addition to generously giving huge shares to external mysterious consultants, Glenn Deep Pupil also transferred some of the consultants to external companies at a low price before the sprint to go public.
On August 26, 2020, Deep Pupil Zhishu, which Zhao Yong actually controlled, transferred the us$88,300 capital contribution (0.40% of the registered capital) held by Geling Limited to Liding Kaide for a total price of 8 million yuan; Huang Huidong, the person in charge of sales, transferred the us$66,300 capital contribution (0.30% of the registered capital) held by Geling Limited to Pingyang Proverbs for a total price of 6 million yuan through Aolin Spring, and the Lingling Zhongzhi actually controlled by Zhao Yong transferred the capital contribution of Geling Limited held by him to Pingyang Proverbs for a total price of 6 million yuan, and the Lingling Zhongzhi actually controlled by Zhao Yong transferred the capital contribution of 22,100 US dollars (accounting for the registered capital) of Geling Limited held by Zhao Yong 0.10%), transferred to Pingyang Proverbs for a total price of 2 million yuan.
It is worth noting that the corresponding valuation of this transfer is 2 billion yuan, which is about half of the valuation of the 2019 Gerin Deep Pupil D round of financing.
Gehring explained that the reasons for the low transfer valuation are: (1) the market financing environment is relatively sluggish due to the impact of the epidemic in 2020; (2) due to the lock-up period, reduction and other constraints in the transfer of old stocks, the transfer pricing takes into account the liquidity discount.
But these points are hardly convincing. The market financing environment in 2021 is worse than in 2020, why does Geling Deep Pupil dare to raise 1 billion yuan when submitting a prospectus for the Science and Technology Innovation Board? Shouldn't valuations be lowered and financing cuts?
The two new companies do not have much public information. The main body of Liding Kaide is Jiaxing Liding Kaide Investment Partnership (Limited Partnership), the executive partner is Shenzhen Liding Fund Management Co., Ltd., and the legal representative of the company is Wu Chaoyang.
According to public information, Wu Chaoyang has 27 years of experience in the capital market, successively serving as deputy general manager of the investment banking department of Junan Securities, general manager of the asset management department of Junan Securities, deputy director of Guotai Junan Securities Asset Management Headquarters, and vice president of ProMed Trust. In 2007, he founded Liding Capital, focusing on equity investment and mergers and acquisitions, and organized the implementation of investment and mergers and acquisitions of nearly 100 enterprises with more than 10 billion yuan, of which more than 20 companies such as Tianhe Energy Saving, Guanhao Biological, hangke technology and so on achieved IPO listing.
The other company, Pingyang Proverbs, is the Pingyang Proverbs Ouhao Investment Management Partnership (Limited Partnership), and the managing partner is Zhejiang Proverbs Investment Management Co., Ltd.
Baidu search shows that Nanyun, a partner at Zhejiang Proverbs Investment Management Co., Ltd., is also a well-known person. Nanyun's profile shows that she is a native of Wenzhou and studied psychology at Wenzhou Radio and Television University in March 2018. He is now a partner and senior management engineer of Zhejiang Proverbs Investment Management Co., Ltd. Winner of the National May Day Labor Medal, National Outstanding Trade Union Worker, Pacesetter of Poverty Alleviation in Old Areas of China, Representative of the 15th National Congress of Chinese Trade Unions, Model Worker of Zhejiang Province, March 8th Red Banner Bearer of Zhejiang Province, The First Charity Ambassador of Wenzhou City, and Top Ten Local Female Talents of Wenzhou.
In April 2012, on the occasion of the 10th anniversary of the establishment of Wenzhou Charity Federation, Nanyun became the first charity ambassador of Wenzhou. In March 2016, the Bonus Scholarship Cloud Fund, which was established by himself, was established in Wenzhou City University.
Nanyun turned from a private enterprise executive to an investor, jointly founded Zhejiang Proverbs Investment Management Co., Ltd., and successively invested in more than 20 influential projects such as Himalaya, JD Finance, JD Food, Minsheng Easy Loan, Ying spectrum technology, Kangsheng Global, Manbang Logistics, etc., and wrote another wonderful professional life in the field of venture capital.
Being able to invest in so many well-known projects such as JD Finance, Yingpu Technology, Manbang Logistics, and Himalayas, it can be seen that the connections of Nanyun and Zhejiang Proverbs in the investment circle are indeed extraordinary.