State-owned capital has also gradually become the main fund-raising “live water” in China’s new economy venture capital.
Editor’s note: This article is from WeChat public account “ IT Orange ” (ID: itjuzi521 ), author: Hilda
After the overheated and extensive development stage, the “capital winter” has swept China’s new economic venture capital sector. In the so-called “cold winter”, we saw that corporate financing became more difficult, and we took it one step further-VCs were also caught in a fundraising dilemma. Things haven’t changed in 2019.
According to Zero2IPO data, China’s equity investment market completed a total of 108.177 billion fundraising in the first 11 months of 2019. Compared with the same period in 2018, the total fundraising has decreased by 10%, but the overall decline has slowed compared to 2018.
The introduction of new asset management regulations in 2018 has had a greater impact on the financing of the primary market, which in turn has affected the financing of new economy enterprises. In 2019, the state opened up the gap in the new regulations on asset management. In late October, the six ministries and commissions jointly issued the “Notice on Further Clarifying and Regulating the Matters Concerning Asset Management Products for Investment in Financial Institutions, Venture Capital Funds and Investment Funds for the Government Assets Industry.” Article 6 mentions that venture capital funds and government industry funds are exempt from multiple levels of nesting restrictions, and venture capital funds are officially loosened.
The fundraising market in 2019 shows a significant “Matthew effect”-angels, VCs, and PEs at the head of the market have successively announced oversized new fundraising funds in 2019. Young institutions struggled with fundraising.
It is worth noting that the action of the national team’s background in 2019 cannot be ignored-whether it is invested as an LP or a direct investment by the GP.
According to the statistics of Zero2IPO, from the approximately 3,800 funds newly filed from January to November 2019, 22% of the fund LPs have a state-owned background, and their total subscriptions have accounted for 75.2% of the total subscriptions of the funds; In the same period, among the newly registered fund products, the number of state-owned fund managers accounted for 29.3%, and the total subscription size of its management funds has accounted for 72.4% of the total fund size.The management scale of state-owned fund managers continued to expand.
State-owned capital has also gradually become the main fund-raising “live water” in China’s new economy venture capital.
Since 2014, the State-owned Assets Supervision and Administration Commission of the State Council has selected 21 state-owned enterprises and 122 local state-owned enterprises to conduct pilot projects of state-owned capital investment and operating companies. The 2019 government report mentioned again that it will further strengthen and improve the supervision of state-owned assets, advance state-owned capital reform, and promote the preservation and appreciation of state-owned assets.
In addition, in terms of government guidance funds, the recently released “2019 China Mother Fund Development White Paper” mentioned that as of 2019, 121 new government guidance funds have been added, and a total of 2,057 have been established, with a total size of more than 11.57 trillion. Although the growth rate has slowed down, the government guidance fund has gradually subsided to the prefecture-level, district-county level, and the latter has seen a large increase in 2019.
Because of the in-depth involvement of state-owned capital and the opening of the science and technology board in 2019, it will provide a new way for the RMB to withdraw from the hard-tech industry in the primary market. Total investment decreased by 51.5% compared with the previous year.
Although the size of China’s capital market is second in the world as a whole, the proportion of foreign capital is still low, and the country has also issued a series of policies in 2019 to promote the domestic investment of overseas capital.
During the two sessions in March 2019, the “Foreign Investment Law of the People’s Republic of China” was formally implemented. This law promotes foreign investment in terms of improving policy transparency, ensuring equal participation of foreign-invested enterprises in market competition, and establishing and supporting services systems. Protection of property rights, strengthening of restrictions on administrative organs through the establishment of a complaint mechanism, protection of foreign investment, etc .; and management of foreign investment in principle in accordance with the principle of consistent domestic and foreign investment.
In the “Opinions on Further Improving the Utilization of Foreign Capital” issued in November, the negative list of foreign investment access in the national and free trade pilot zones continued to be decompressed, and foreign banks, securities companies, and fund management companies in China were completely cancelled. Restrictions on the business scope of other financial institutions.
These series of policies on foreign capital will further encourage foreign capital to enter the Chinese market, and provide an effective source of funds for China’s primary market fundraising. At the same time, foreign capital as a mature long-term capital will benefit China’s high-tech investment and development.
In 2019, which institutions get the most money?
In 2019, eight of the top ten new RMB funds raised had a state-owned capital background, and more than 90% of the RMB 5 billion RMB funds in the private equity investment market were supported by state-owned capital.
Of the trillions of funds raised in the market in 2019, the total amount of funds raised in the TOP20 fundraising event has reached more than half, and the size of funds managed by head institutions has been steadily increasing, and small and medium institutions that have not proven their investment capabilities in the past are now In an embarrassing situation in fundraising. Since projects invested in the past cannot be withdrawn, some institutions that are not self-viable are self-cleaned under the choice of the market.
Data source: Zero2IPO, Investment, Internet public information
In April 2019, Guoxinjianxin Equity Fund was established with a total size of 30 billion yuan. It was established by CCB Investment, China Guoxin, Sichuan Development, Chengdu Jiaozi Financial Group, Chengdu Industry Guidance Fund and Chengdu Tiantou Group. And other units jointly initiated the establishment. The fund manager is CCB Investment’s wholly-owned subsidiary, CCB Golden Investment Fund Management (Tianjin) Co., Ltd.
In the same month, DCP Capital’s first US dollar fund, “Dehong Capital Phase I,” focused on raising funds in Greater China was completed, raising more than US $ 2 billion to achieve the financing target ceiling. Investors include the world’s leading sovereign funds, pension funds, endowment funds, parent funds and family funds. In addition to the RMB funds raised during the same period, Dehong Capital raised a total of 2.5 billion US dollars in capital.
In June 2019, Huaping Investment completed the financing of Huaping China No. 2 Fund with a total amount of US $ 4.5 billion. China No. 2 Fund will jointly invest with China and Southeast Asia in a 50:50 ratio with the Huaping Global Fund, adding a total of 9 billion US dollars of funds, mainly to China, which is currently the largest private equity investment fund focused on China and Southeast Asia One of the pool.
In July 2019, the fundraising of the National Integrated Circuit Industry Investment Fund (Phase 2) has been completed, and the scale of fundraising has reached 200 billion yuan. The fund takes the form of a corporate system and operates in the form of venture capital. The sponsors include CDB, China Tobacco, Yizhuang SDIC, China Mobile, Shanghai Guosheng, China Electronics, Ziguang Communications, and Huaxin Investment.
20In August 19, the private equity investment arm of CITIC Capital Holdings Limited announced that it had completed the raising of a fourth Chinese M & A fund with a total size of US $ 2.8 billion and reached its target limit. This is the largest fund raised by CITIC Capital’s private equity investment department to date. After the completion of the fundraising, the total assets under management of CITIC Capital exceed 26 billion U.S. dollars. CCCP IV is a US dollar fund that will continue to focus on consumer, medical, business services, consumer services, information technology, and industry.
In October 2019, Hong Kong-Permira, a global private equity firm, announced that it has completed the latest M & A fund Permira VII (“P7 / 璞 米 七 基金”), raising a total of 11 billion in target funds. Euro (approximately $ 12 billion). The fund will continue to focus on allocating funds to invest in five major areas: technology, consumer, financial services, medical and industrial technology and services.
This article is an excerpt from “Analysis of Venture Capital Investment in China’s New Economy 2019-2020”