Article from: China Business Network , author: Luo Ji, from the title figure: vision China
Different from inertial cognition, what kind of logic is there behind capital to stimulate innovation?
On December 12, at the “2019 Western China Capital Innovation Summit”, Tian Xuan, Distinguished Professor of the “Cheung Kong Scholars” of the Ministry of Education and Deputy Dean of the Wudaokou Finance School of Tsinghua University mentioned that in the face of how to stimulate innovation, Attach importance to “‘less active’ secondary markets, new venture capital organization forms, and healthy and developed capital markets” and other factors.
Frequent letter puts pressure on innovative companies
Supporting the innovation and development of physical enterprises is an important issue under supply-side reform. How to stimulate innovation, Tian Xuan mentioned from the macro policy perspective. The research results show that, “no matter whether the national policy is radical or conservative, it has little impact on innovation. Entrepreneurs are very smart, they can adjust their Investment decisions to adapt to policies. The biggest impact is actually policy uncertainty.
That is, when entrepreneurs do not know whether future policies are left, right, radical, or conservative, all they can do is wait and see and make short-term plans. And Innovation is exactly a long-term investment. So if we want to stimulate innovation, we must ensure that we can achieve a continuous, complete, and stable policy at the macro level, and form a continuous, complete, and stable expectation for the market.
At the micro level, Tian Xuan proposed that the “less active” secondary market has a boost to innovation. The so-called “not-so-active” secondary market is interpreted as: “Strong anti-hostile takeover clauses, long-held institutional investors and their relatively low stock liquidity, not too much Of analyst tracking and less frequent disclosures. “
This is a new perspective for traditional investors. For example, efficient, informative, and timely letters have always been considered the key to protecting investors. However, Tian Xuan mentioned from the perspective of supporting corporate innovation that when Trump issued a tweet on the proposal to cancel the quarterly disclosure and only retain the annual and semi-annual reports, the market performance of innovative and traditional companies was different. “Investing in innovative companies’ capital is more supportive of reducing the frequency of trusts, but institutions investing in traditional companies are more opposed.
This situation is that too frequent information disclosure by innovative companies may cause short-term performance pressures, which may lead to “shortsightedness” in the strategy.
Emphasis on the organization of venture capital
Among the elements that can stimulate innovation, “a new venture capital organization form”, according to Tian Xuan, is corporate venture capital (CVC) .
Tian Xuan believes that “CVC refers to the establishment of venture capital funds by non-financial companies and direct venture capital investment through affiliates. The characteristics of CVC is to prioritize the company’s strategic goals, not only for financial returns; Use the company’s own funds and have a longer investment duration. Based on the above characteristics, compared with traditional venture capital institutions, CVC investment companies have better long-term innovation, higher probability of successful exit, and higher market valuations. “< / p>
In comparison, the core of traditional VC is the limited partnership, which forms a pool of funds from LP financing, and then is managed by GP to invest in early-stage startups. Although CVC is the same as traditional VC in terms of investment direction, it is quite different in terms of capital. The source of CVC funds is the parent company behind it. It is not an independent entity. It is a venture capital fund set up by a non-financial enterprise. Venture capital is invested through its subsidiaries. At the same time, the main investment objective of CVC is to take strategic considerations as the goal, and to make the strategic layout of the parent company behind it, which can be the layout of the upstream and downstream industry chains, or cross-industry technology card slots. This also makes it different from traditional VCs that only pursue financial returns.
In this case, CVCs often last significantly longer than traditional VCs. Because of this, CVC can support those early-stage companies, and then slowly cultivate support, be able to tolerate failure, and inspire these companies to innovate. At the same time, its tolerance for risk and failure rate is also higher.
It can be seen that the leaders of the TMT industry in the United States, such as Google, Microsoft, and Dell, have their own venture capital. In the Chinese market, BAT and others also have CVC funds. As a domestic market with latecomer advantages, Tian Xuan called for attention to the development of CVC when improving the primary market.
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Article from: China Business Network author: Luo Ji