There is a historical mission for a new generation of investors in the industry.

Editor’s note: This article comes from the WeChat public account “42 Chapter Jing” (ID : myfortytwo) .

Author: Zhou Xiao, former senior investment manager of Matrix Partners China

 

I often face this question: “What will change in the next ten years?”. And what I want to say is: “What will remain unchanged in the next ten years?” Is the most important question, because you must formulate the company’s long-term strategy on the same basis.
 

—— Jeff Bezos

In the past ten years, venture capital has usually been associated with tuyere, but from the perspective of time, the long-term nature of venture capital is completely incompatible with the unpredictable characteristics of tuyere.

If the underlying logic of all outlets in the past decade is the opportunity of mobile Internet brought by smartphones, then we stand today in 2020, and the internal and external conditions of this country are very different time nodes, to look at the future ten The underlying logic of annual venture capital is a very meaningful thinking.

For venture capital institutions, this determines who will grow with entrepreneurs in the next decade and share their benefits.

In the past ten years, “Internet” has been equal to innovation, because the connection between people is enough to produce very powerful leverage and huge innovation.

But in the next ten years, especially in the industry, the “Internet” may only be part or part of innovation. Because the leverage factors of different industries, in addition to technology, there will also be asymmetric information, capital, or the adjustment of supply and demand. This is the core logic of our focus on industrial Internet, that is, industrial innovation.

ROE is a standard we often use to assess the state of business operations.

So, if we think of China as a company, what changes are taking place in our business environment today, and what kind of adjustment is his ROE going through?

If GDP per capita is used as the benchmark, and the ratio of the secondary industry to the tertiary industry is used as the main indicator, China ’s 2010 is probably close to Japan ’s 1968, South Korea ’s 1991, and Taiwan ’s 1987.

China and East Asian countries ’actual GDP growth rate during the benchmarking year

We regard the benchmark year as 0 years.

From the perspective of GDP, the decline cycle of economic growth we have experienced in recent years is in the context of East Asia and is in line with the normal development trend. Even without the impact of the new crown epidemic, our economic slowdown will be a mid- to long-term trend in the future. Moreover, before falling to an average of 4.8%, we may experience a period of slowdown.

So, the problem we face for a long time is likely to be “guarantee four fights for five”.

This means that the opportunity to enlarge the economic aggregate will become smaller and smaller, and our leverage ratio will hardly have room for improvement. The equity multiple of this company in China will touch the ceiling, and there will be no more and The same room for growth as before.

investment rate (%) between China, Japan and South Korea

It is also worth noting that compared to Japan and South Korea, their investment rates have started to decline after the benchmark year, and our investment rate has always been significantly higher than that of other economies, and the decline is still very large. slow.

This is very much related to our frequent use of infrastructure and real estate to stimulate the economy, and these two industries are precisely industries with very low asset turnover. The price is a large amount of debts of state-owned enterprises and the government. The leverage ratio of residents has risen significantly. A large amount of money has entered the real estate and infrastructure and cannot generate a cycle. It has lost the opportunity to recreate value. So from the perspective of asset turnover, China is also facing great challenges today.