The growth rate of Chinese capital investment overseas is slowing down, but the quality is improving.
Editor’s note: This article is from the micro-channel public number “IPO knew” (ID: ipozaozhidao), Author: Robin.
Airtasker, a labor service sharing platform born in Australia, was listed on the Australian Stock Exchange (ASX) on March 23, local time, with a market value of 400 million Australian dollars (approximately 2 billion yuan) on that day and close to 700 million on Friday. Australian dollar, 3.5 billion yuan. In terms of the number of service providers on the platform, Airtasker has become the largest service trading platform in the Australian market in 2020.
One of Airtasker’s early investors, MorningCrest Capital (MorningCrest Capital, hereinafter referred to as “Morning Peak”) is a cross-border asset management company. It has invested in Airtasker since 2015 until it went public. The IPO has long known that the recent exclusive dialogue with Chenfeng Bai Xiaofan, Managing Partner of Capital, shared why he is optimistic about the Airtasker track and his thinking on cross-border primary and secondary market investment.
Chenfeng currently only focuses on investment opportunities in the ability circle, and then expands its own ability circle. Therefore, there are currently no more than 20 investment projects, and the investment amount of the top 5 projects accounts for more than 90% of the total investment amount. For invested companies, Chenfeng will deeply participate in the company’s follow-up decision-making.
Due to the deep cultivation of the track that it invests in, Chenfeng has a clear understanding of the linkage between the primary and secondary markets. Bai Xiaofan said that the long-term funds managed by Chenfeng do not have too many time constraints (such as 7 or 9 years to withdraw). If the investment company’s growth and profitability are still excellent after listing, Chenfeng will hold it for a long time. Those who bring the most cost-effective return.
Bai Xiaofan (Source: Chenfeng Capital)
The following interview content (abridged):
Q: “IPO Knows Early”
A: Bai Xiaofan, Managing Partner of Chenfeng Capital
Q: How to understand the investment model of Chenfeng Capital, and what are its unique features compared with traditional VC/PE?
A: It should be said that Chenfeng Capital is a relatively special investment institution. We will focus on a few areas that we are familiar with, such as online service platforms, real estate technology and financial technology. There are currently about 20 The projects in the portfolio basically come from these three tracks. Our core philosophy is to find good companies in better industries, without paying attention to or betting on the so-called tuyere.
Our investment model may be more concentrated than some other traditional VC/PE. The most important point of our investment philosophy is to discover and understand our own competence circle, and then deepen in the existing competence circle. So we don’t look at industries outside the circle of competence. For opportunities within the circle of ability, once we decide to invest, we will generally follow up and even raise in every subsequent round. The investment amount of our top 5 projects accounted for more than 90% of the total investment amount. The better luck is that the final result of our heavy warehouse company is good.
We also have both a Chinese perspective and overseas project resources. In the traditional cross-border investment neighborhood, mature overseas projects or technology grafting and application in the Chinese market are the most conventional routines. Chenfeng has also helped many overseas projects try to land in China in the past. But in addition, China’s understanding and application of the Internet is at the forefront of the world. Chenfeng has also exported his experience and experience in China to overseas invested projects, helping overseas projects to better integrate into the Internet ecosystem .
Q: How did the capital and asset ends of Chenfeng Capital come into being?
A: The funds are mostly ultra-high net worth individuals or family offices in China. The number of investors is small, but the term is very long.
The source of the asset side is mainly from my own team to sourcing (discovering projects), and we will also cooperate with some organizations with similar concepts, styles or tracks to share project sources. Because of Chenfeng’s research and in-depth research on specific tracks, some projects from specific sources will also take the initiative to contact.
Q: How to understand the competitive advantage of Chenfeng Capital in overseas project investment and asset management? What are the manifestations of this advantage on the capital side and the asset side?
A: We can’t talk about competitive advantage. Our bigger characteristics are still more focused. We can watch longer, act faster, and participate more deeply. Our investor attributes allow us not to worry about how long it will take to spend all the funds in the fund, but we really have the projects we are looking for, and the funds will be in place soon. After the investment, there will be no restrictions such as 7 or 9 years. If the company’s growth and profitability are still excellent after the listing, then we will continue to hold it. We believe that this is the only way to give investors the most cost-effective return. For 99% of excellent companies, going public is only the first step.
The complementarity and synergy between Chenfeng’s partners also enables Chenfeng to gain a certain competitive advantage. First three partnersEveryone has a rich overseas resume, and has a unique understanding of overseas projects, attention to overseas markets, and awareness of overseas risks. The three partners have not only the actual controller (business manager) experience of listed companies, but also the experience of investment and research in the secondary market, and have a clear analysis of the linkage and business model of the primary and secondary markets; and overseas investment banks Background, has a strong ability to integrate resources.
Q: For the newly listed project Airtasker, what was the logic of Chenfeng Capital when investing in this project before?
A: We were very excited when we came into contact with Airtasker. Its market is very large. The labor market in all countries is the largest market in that country. We are also very familiar with Australia, Airtasker can solve a big pain point. The first wave of opportunities on the Internet are portals such as Yahoo and Sina. The second wave of rise involves transactions but commodity transactions. Taobao and Amazon have gradually expanded from standardized products (books, electrical appliances) to larger categories.
From a global perspective, there is no full-category service trading platform because it is difficult to do. Many services are difficult to standardize, but these long-tailed services add up to a staggering volume. Airtasker’s success in Australia may be the highest in the world from the perspective of a single market share, and it continues to increase. We are firmly optimistic about this industry and Airtasker itself. Of course, there is also trust and recognition for Tim, the founder of the project. No matter from the degree of hard work or the sharpness of thinking and logic, Tim has done very well.
Q: Compared with overseas platforms that provide services such as food delivery and taxi rides, what are the main differences in the business model of flexible industrial platforms such as Airtasker?
A: Airtasker is to provide a platform for more people to use their experience and ability to realize their own value. It is profitable through trading commissions. For users with strong ability (such as high praise) to provide services, The buyer may be willing to pay a higher transaction amount for it, and Airtasker receives a higher commission. The profit source of more standardized service platforms such as take-out and taxi-hailing is the difference between the order amount and the labor cost of providing the service.
In addition, Airtasker has the ability to “self-evolve”. It will generate demand for various services along with changes in the outside world and emergencies, bringing the possibility of transactions, so the response will be faster. Therefore, its non-standardized service transactions have a lot of room for growth.
Q: When choosing a track or underlying asset, what is the main line of Chenfeng Capital’s current and future stages?
A: As mentioned earlier, we are very optimistic about the service trading platform, which is very valuable and solves many people’s immediate pain points. Nowadays, there is often a surplus of goods in this society, and good goods are surplus, but services are scarce, and good service experiences are even more scarce. We have achieved a lot in the field of service transactionsUseful experience, I have a deeper look at this track, and continue to track and study different service trading platforms in many countries. Our judgment is that in the next 5-10 years, there will be a giant service trading platform on this track in every country, and it is not ruled out that it is a giant across the country. This will be one of our main lines.
Q: What is the stage of Chenfeng’s investment projects in China and overseas markets?
A: We are not limited to the financing stage. Some projects are invested very early, such as Airtasker. There are also pre-IPO projects, but the overall situation will still move forward. We hope to participate as early as possible and contribute our experience and resources to help the company grow together.
Q: How to understand the concept of “Chinese and foreign time machine”?
A: Our understanding is not necessarily comprehensive. Mainly, the development of each country and industry has certain laws that need to be followed. If you can travel from modern times to ancient times, then the cognition and information in your mind is very valuable. China used to be in a catching-up stage, far behind, and quickly catching up. Now China is already at the forefront of the world in many fields, even at the top level. This has formed a certain consensus in the investment circle, especially the technology investment and VC investment circle. At this point, we are very fortunate to catch the express train of China’s development, and we have already overtaken in many areas.
We are at a node where we can learn from many Chinese experiences, and these Chinese experiences are our first-hand experience. Of course, if you arrogantly think that the business model or technology established in China will be successful if you copy it abroad, and you will suffer a big loss. Many foreign companies have suffered big losses in China without success. Just as modern people do know a lot of modern knowledge and concepts when they go back to ancient times, but in terms of human relations and etiquette, we may run into walls everywhere. What’s more, they will not chop wood and make fire and hunt, and may starve to death. It is still necessary to deeply understand the characteristics of the market in which the invested company is located, and understand the development conditions and pain points.
Q: How to understand the current stage of Chinese capital investing in overseas projects, and what new opportunities are there? What are the traditional challenges?
A: Our perception is not necessarily correct, but the current stage is a bit subtle. Before the epidemic, there was a honeymoon period. Whether it was the willingness of capital to go overseas or the macro policy, there was a relatively large increase from pure capital to industrial capital. In the past 2-3 years, the situation has changed rapidly, and the increase rate should have slowed down, but the quality has improved instead. A lot of hasty, blind investment has decreased. We have also seen a lot of high-quality investments, and the return on investment is also very good, some of which are even higher than those of domestic star projects. In the past, Chinese capital paid more attention to overseas physical assets, such as real estate. However, in the early investment stage, no “cost-effective” gains were made.
Now after 10 years of baptism, on the whole, Chinese capital’s investment in the world is moreDecentralized, the investment logic is more detailed, and the participating investment team has an international perspective. With the initial liberalization of China’s capital market, at present, Chinese capital’s overseas investment has only taken a small step, and there will be more international exchanges in the future.
Q: What is the current state of overseas companies’ perception of Chinese capital?
A: It should be said that it has improved a lot, especially in other markets outside the United States. China’s well-known entrepreneurs and venture capital institutions are well-known overseas, and Jack Ma and Elon Musk should be equally well-known. Tencent, Alibaba, and some Chinese venture capital companies are already very popular investors in the eyes of overseas companies. I believe this is a process. With the continuous development of China’s economy, enterprises will continue to grow, and so will capital. With the emergence of successful cases, overseas companies are definitely more and more welcome to the blessing of Chinese capital.
To give a small example, the success of Airtasker has also made many overseas companies around the world that have started businesses in similar tracks to come to us. This is a positive cycle. In the past, overseas projects believed that Chinese investors were “a lot of money and people are stupid”, and they often faced Chinese capital with an attitude of overlooking. However, as outstanding Chinese companies represented by BAT go global, overseas projects now regard Chinese capital as an active force and will seriously examine and treat Chinese capital. This attitude of mutual respect is also the basis for cooperation.
Q: What things have changed by the epidemic?
A: Judging from the track of the service trading platform, the world is surprisingly similar, and its acceptance and popularity have greatly improved. Regardless of the breadth, depth, security, and screening that the platform can provide, the platform has great advantages. The experience of online selection is much better than offline, with high efficiency and high quality.
We see that as long as the city is not blocked, the scale of global service trading platforms is reaching new heights. In 2020, the overall transaction volume and transaction amount are record highs, and this is a new high after being suppressed by the blockade caused by the epidemic. If city blockades are no longer a common occurrence in 2021, the transaction volume of service trading platforms will grow very fast, which is one of the reasons why we will continue to focus on this field in the next few years.
From a relatively macro perspective, in response to the epidemic, developed countries headed by the United States are seeing floods and raging liquidity. Whether it is the continuous new highs in the secondary market or the investment and financing enthusiasm in the primary market, it has gone further. However, we feel that the next 1-2 years will be a real test of “removing the fake and keeping the truth”. Only business models and start-ups that can really create cash flow and prove scale effects can stand out.