Zhongzhong Network (https://www.chinaventure.com.cn)
On April 23-25, 2018, the "12th China Investment Annual Conference and Annual Summit" hosted by CIC Information and CIC.com and co-organized by CIC Capital was held at Grand Hyatt Shanghai. With the theme of "The Power of Value", hundreds of private equity institutions from home and abroad gathered to discuss the current hot topics in the industry.
At the summit, Chang Bin, a partner of Fengnian Capital, said in his keynote speech that in the past few years, Fengnian has created a capital structure that adapts to the development needs of the industry, which is a valuable wealth accumulated by Fengnian in the past few years.
Chang Bin believes that short-term funds and one-time integration into military-civilian integration are unrealistic. As a partner of Fengnian, he has been adhering to an ethical principle in the process of industrial management and project management: recognizing the industry, accompanying the industry, and taking time to be a friend with a firm heart and forge ahead.
The following is the transcript of Chang Bin's wonderful speech at the "12th China Investment Annual Conference", compiled by China Investment Network.
Chang Bin: It's quite interesting this time of year, because there will always be a hot spot in the first half, and a traditional one in the second half. Just after listening to the audience, you shared the industrial pattern of blockchain, investment strategies and the silver shining returns seen from the perspective of investors. The military industry I'm talking to you about today is not so glamorous.
How capital can help rather than constrain
Today's theme is capital to help military-civilian integration, when I received this theme, I was nervous, with this theme can summarize a lot of conclusions, called capital to help the integrated circuit industry, help high-end manufacturing, help blockchain and so on. But is capital all about help? Isn't it a constraint? As a person who has been engaged in the military industry for a long time, and as a capital that has been focusing on China's military industry, this is a very hot problem.
From the early days of the company to the present, this question has been in our own minds. In other words, whether we are in the whole industry, in addition to helping and abetting abuse, we always have to have a string in our hearts. This is the essence of our conscience as investors.
In addition to hesitation, the core partners of Fengnian Capital have been constantly reflecting and reviewing military products from 2001 to the present. Thankfully, we felt we had done a few things right. The first thing is the certainty of the entire wave of civil-military integration. Why do we say so, really do industrial investment to soberly realize that the firmness and passion for an industry is our cornerstone. At the earliest Fengnian Capital intervened in this field, we sorted out the domestic investors, managers, and invested enterprises, at that time, the entire military-civilian integration industry was blank, few people said that military products can still be listed, and few people know that military products can also intervene in the form of investment. In the past, we have been stimulating the passion of the industry. After several years of development, Fengnian has made achievements and has also been recognized by investment banks and invested enterprises. In the past few years, we have continued to bless the glory, and slowly feel that this industry is worth our lifelong struggle. Fortunately, under the tide of the times, we have pulled this industry, and we have also found for ourselves a deep industry that is worth taking root in the investment industry for twenty or thirty years.
In the past few years, China's military-civilian integration industry has undergone a policy adjustment, that is, the military reform that everyone is familiar with, which in the short term has affected the operating performance of a considerable number of enterprises, and in the long run, it has created a solid industry and foundation for the entire military-civilian integration and national defense system. This has been the policy orientation of the entire two decades. In the process of our military reform, we constantly ask ourselves whether we can remain firm and maintain that heart when the industry is at a low ebb. In fact, it is very difficult, many of these investors find us, they are basically in a state of tossing and turning, surprise and joy, why is the military product so small? Investing is so hard to understand? Why is it so difficult to do post-investment management? I would like to ask you if you are facing such an investor, how to use capital to do the so-called integration of capital assistance? In so many years of investment waves, we have found that it is very difficult to find qualified investors in the wave of military-civilian integration.
Over the years, Fengnian has continuously tempered our funds and projects, including our investors, managers and invested companies. In this process, he has continuously achieved his own achievements, and he has also achieved a fruitful investor system. Fortunately through our time verification, I think China's military-civilian integration industry at least 5 years to complete the verification of the first node, through ten years to complete a large closed loop, this is our definition of the military-civilian integration industry, including the next twenty years This is a long-term development of the foundation.
Therefore, in response to my firm words, it turns out how important it is to invest in an industry with unswerving faith and determination.
Create the capital structure needed for industrial development
In addition to faith, let's be realistic. In the past few years, Fengnian has done several things right. In addition to unwavering confidence, we have also done several things to create a capital structure that is suitable for the development of the industry, which is a valuable asset accumulated in the past few years. Regardless of the funder structure, the fund cycle includes the total amount of funds. Some of the investors here today said that I graduated from my PhD in 2013 and that I am now in charge of billions of dollars in capital. I've achieved 20x or even 100x returns over the last two years. I think the traditional industry we have not yet seen, in other words, in the traditional industry may be the first closed loop has not yet been completed, this is the investment in the traditional industry, investing in a traditional industry requires patience, so the investor structure we must be prepared. Cham is always in charge of our institutional financing, and in the past we have made a lot of difficult choices, the most difficult choice is to refuse. There are foreign investors with a lot of US dollars, there are also industrial investors with a lot of policy funds, basically tens of billions of scale want to invest in the harvest system, and there are many overseas Chinese with overseas identities. We also see that many industrial parties, including funds that are not suitable for the needs of industrial development, want to enter, and it is difficult for us to choose. It is difficult for RMB funds to raise funds, and it is even more difficult for the military industry, which is the current situation of the military industry. In the past two years, it has only been a short period of military reform, and many colleagues have come to me, and they feel that in the military reform, they seek three boards, or short-term interest rate differentials, and they cannot seek to find a good year. I think such investors and institutions, how to use capital to help the development of the industry.
The second thing to do right is that we build our own ecosystem. We have always had a dream, we have a complete ecosystem, when each invested company joins the harvest year, we can quickly contact the customer system. Just like an Internet company that can quickly access bat, it is so difficult for military companies to access their own ecosystem. But after more than ten years of development, this system has been established since the first day of the company, and this has become an insurmountable barrier for our peers. More than thirty enterprises have created a system of fengnian in various equipment and sequences, which have built a chain of fengnian from government agencies to industrial sectors.
As more enterprises flock to the good year, with the synergy of supporting units, we find that our ecosystem has completed the first big closed loop, which is about equal to the ecosystem of the Internet, which has played a major role from the past to the present. In 2015, we invested in a company that specializes in launchers, when it was invested, it was about equal to a loss, 16 million profits in 2016, and then after two years of adjustment, now in the first hospital 15, the second hospital 46 the entire all the companies that do launchers to complete the supporting, 2017 is about equal to 50 million profits, to now reserve 900 million orders, which are all dependent on our ecosystem to complete the closed loop. There are also a lot of investors here, which ecosystem, including we used to do comprehensive investment, we have also built an ecosystem like this, there are very few people who really play a role in the investment of the investee enterprises, but fortunately we have found an example.
When we invest in a chip company, only 20% of the military products are invested, and it is electronic radar and electronic countermeasures. When we were supporting several edge suppliers, but now after combing, this company is already a supplier of 13, 10, 618 and other units. Last year, the revenue of military products increased by 4 times, and this is the role of our ecosystem. From the perspective of representation, the ecosystem of the harvest year provides space and channels for enterprises to grow. But what is the substance? It is an effective tool that is very conducive to accelerating the allocation of national and military-civilian integration resources.
At the same time, since 2016, on the basis of the platform of Fengnian, several companies have also been acquired, because the original major shareholders have chosen to quit when they are older. At that time, we began an arduous struggle, and through this process we discovered several characteristics that were fed back into the management of China's military industry. We find that entrepreneurs in the military, relative to entrepreneurs in the national economy, are below the horizontal line. At the same time, private military enterprises are at a disadvantage compared with state-owned military enterprises, including personnel and resources. However, private enterprises have advantages in efficiency and mechanism, and how to give full play to their advantages and suppress their own shortcomings is the practice we have explored in the management of the entire military enterprise. This runs through a series of chains such as project management, qualification management, quality system management and customer comprehensive system combing, and today, in addition to having its own investment attributes, Fengnian also has the attributes of doing industry.
Of course, there is nothing to be done. As mentioned earlier, in the funds managed throughout the harvest year, short-cycle investment funds are rarely seen, which is the adaptation we have made for ourselves in the industrial fund. At the same time, many companies and listed companies have come to us and said whether they can deliver two targets for us. Yes, but everyone just wants to label themselves a military industry in this way, and everyone can go around. Short-term funds and one-time ways of integrating civil-military integration are unrealistic. Including our fund wants to talk, and cooperation such as industrial parks is not in line with the positioning of our fund. Therefore, the so-called military-civilian integration is still the needs of everyone.
Send a word to everyone, as a harvest year, as a partner I have been adhering to an ethical code in the process of industrial management and project management, recognizing the industry, accompanying the industry, and being a friend with a firm heart, moving forward, thank you!
(Editor: Zhai Zhaorui)
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