Investment must be “should have no place to live”.
In recent months, the investment circle is undergoing drastic changes. What are these changes and what inspiration will they bring to entrepreneurs? Today we will talk about this topic.
Recently, Pencil Avenue interviewed Dong Zhanbin, the founding partner of Qingsong Fund. He has 20 years of investment experience and has been rated as “Top 10 Angel Investors in China” by third-party organizations many times.
The following is the essence of the interview
1. How does VC exit now?
Consider 4 elements: time node, business itself, capital market, founder.
2. What is the current performance status of VC?
An average annualized return of 20% is not bad.
3. The overall performance status of VC in the past few years?
A small number of grains have not been collected, and most have not recovered their principal. The head fund makes money.
4. What is VC’s current investment track focus?
to B Daiyu to C
5. What is the ratio of investment funds to B and to C?
6. What is the trend of involution?
To C has serious internal rollover, and to B investment is still in its early stages, but the competition is already fierce.
7. Internal volume performance?
Raise the valuation, the last round of delivery was not completed, the next round of agreement is completed, the money is invested and the customer is introduced to help find someone…
8. Share one of the biggest entrepreneurial variables this year?
Seizing this year’s financing opportunities will make it more difficult to compete later.
Read on, as long as you are a member of the venture capital circle, you will gain something after reading.
Four principles of withdrawal
Pencil Road: What kind of work have you focused on in the past six months? How many projects did you vote for?
Dong Zhanbin: In the past six months, we have invested in 12 projects. At the beginning of this year, we completed the fourth phase of fundraising of RMB 1 billion. According to the investment cycle plan, the investment will be completed in about 3 years. On average, 20 to 30 projects may be invested a year.
It turned out that our style of play was a typical early fund style, with relatively scattered investments. For example, our third phase fund invested in 77 projects, with an average of more than 10 million in a single transaction. Now some adjustments will be made, such as reducing the number of investment projects, and then investing more in some promising projects.
Pencil: Many funds hold strategic review meetings every year. In the latest internal review meeting of Qingsong Fund, what do you think about the changes in the external environment and the positioning of Qingsong?
Dong Zhanbin: We just finished the mid-year investment review meeting. For example, whether the people and events of the project investment in the past six months are in line with expectations, and then begin to adjust their own strategies. Maybe some projects should be added, and some projects should be withdrawn. The adjustments on a larger level basically set the tone at the time of the establishment of each fund. Like our fourth fund, we are more inclined to the Industrial Internet of Things. For projects with To B attributes, the proportion of consumer projects will be relatively reduced.
Dong Zhanbin, the founding partner of Qingsong Fund, revealed that the focus of investment has shifted from toC to toB.
In addition, Qingsong has invested in about 200 projects now. Looking back, we also hope to produce some principled things, such as a negative list of investments, such as a relatively systematic exit principle.
Pencil Road: What are the specific aspects of the exit principle you summarized?
Dong Zhanbin: The first is the time of withdrawal. We believe that we should still choose to exit during the upward cycle of enterprises or industries. Because the liquidity of the primary market is much worse than that of the secondary market, compared with the secondary market, after a cycle of the primary market, it is actually difficult to withdraw when others see that the data is going down. At this time, it is not only a question of price, but also a very difficult operation.
It is difficult to say that withdrawal has become a very scientific thing. Our principle is not to withdraw during the cycle of project decline. We prefer to withdraw halfway through the mountain. Although it has not reached the top of the mountain, it must be in the ascending cycle and does not expect to be at the highest point. quit.
The same goes for the industry cycle. For example, in the mobile Internet, the entire industry is already going down. The market value of some companies is far from its peak. The consumer industry also clearly feels this trend.
The second point is the business itself. Although some projects are still in the upward cycle, their growth rate has slowed down. For example, the annualized growth of project revenue has fallen below 50%, and the company has become relatively mature.
The third point is to pay attention to the capital market. In fact, the secondary market and the primary market are very closely linked, and we will be more vigilant in the event of overheating.
Branded consumer products are more obvious in this regard. After an industry and a company have stabilized, under normal circumstances it will have a P/E ratio of 20 to 30 times in the capital market. But last year, some consumer product brands had a price-earnings ratio of sixty to seventy times. The life cycle of branded consumer goods is more typical, and new problems may be encountered in three to four years. When the secondary market is overheating, I think it is a good time to exit.
The fourth point is about the founder. Found some problems with the founder, such as weakened fighting spirit and passion. Some people may start a business two or three years later, the market competition is fierce, the policy is also changing rapidly, the founder is exhausted physically and mentally, and the idea of selling the company is moved. At this time, we can’t actually have much hope.
Pencil Road: When the investment project reaches a certain point in time, the institution will naturally begin to withdraw. How about Qingsong’s liquidity in the first half of this year? What is the choice of exit methods in the market?
Dong Zhanbin: Most of our projects are exited in the subsequent rounds. This is actually the easiest to grasp. For some projects we invested, if they have relatively excellent performance, the next round may be other people grabbing shares. This Time is the easiest time to withdraw, and good projects may not be discounted.
Like the industrial Internet or Internet of Things projects we invest in, the valuation may double in a few months. Many people can’t invest in it, so they raise the valuation again. It is very easy to sell.
Pencil Road: Think in empathy. If it were me, I might face some temptations. When the project has new financing, the valuation will become higher. I will consider whether to keep it and not sell it. Will you face this double The temptation? One is to withdraw, and the other is to keep the shares first.
Dong Zhanbin: There will definitely be difficulties in making decisions, but for us, after we have formed the principles, we will not be too entangled. The result of a longer time period or even waiting to be listed and then exiting may not be good. For example, I always want to wait for a peak, and the valuation falls and I want to wait for it to go up again. This actually turns the primary market into a secondary market business. . Later, you may find that the valuation of the project has become 1/5 or even 1/10 of the original, and the liquidity is very poor, and it is difficult to withdraw.
Investment must be “should have no place to live”
Pencil: A few years ago, some funds told us that it is better to compete for four guarantees and three guarantees. The average annualized return is 30% as the bottom line. Do you think this standard is outdated today?
Dong Zhanbin: Actually, this growth rate is quite high. I think that the expected value of many investors is that 20% annualization is already a very good result. For example, Buffett’s fund, taking the compound interest of time into account, its annualization for decades is actually about 20%.
Only a base Jindal benefits to several times, or is likely to achieve high-yield, but its every fund can achieve this result at the stage of time, it will certainly have a very strong ability to the job.
Pencil Road: Qingsong Fund has a saying: “It’s duty to make LP easy to make money.” “Is there really such a fund on the market that didn’t get any money after the investment? Was there such a fund in the bubble-prone period in the past few years?
Dong Zhanbin: Most of the funds have not recovered their principal. It is not that they have not recovered at all.
However, the principal is not recovered, and sometimes it is actually very much in the early stage of the fund. For example, the number of people around us who started to make early-stage investments in 2012 has actually become fewer and fewer now. Some have switched to later stages, and some have returned to their original funds.
Pencil said: How long is the cycle of one fund of Qingsong?
Dong Zhanbin: We are 7+2 years. In fact, RMB funds now have this problem: If early investment is a 7+2 cycle, many investors will have to consider it. Because there is a lot of uncertainty about investment, the domestic environment prefers lower returns and shorter cycles.
3+2 can make double, he can accept it. But seven or nine years of earning four or five times, this is not that attractive to him. For many people, liquidity is the first demand.
Pencil Road: From the perspective of the development cycle of the project, the longer the investment cycle of the fund is, the better it is, and it can give enough development cycle for the project to grow. Short-term funds may not be as desired. We have also encountered some 3+2 RMB funds. Because of the high exit pressure, their investment terms are not particularly friendly.
Dong Zhanbin: There may be a certain stage, no matter what early projects, the founders will have to buy back such terms. In fact, under ideal conditions, the 3+2 RMB fund should only invest in late-stage projects.
Pencil Road: Are there any key words you can share about your summary, reflection and thinking about your investment career?
Dong Zhanbin: I feel a bit of “Zen language investment”. I think the spirit of Zen can actually be combined with investment, which can be reflected in fundraising and investment management.
For example, the choice of the track can be combined with a word in the “Diamond Sutra”: There should be no place to live. The term is to make people unattached, and investment cannot be a rigid, fixed model.
For the Qingsong Fund, it is very obvious. Each fund has a theme, from the first phase of entertainment, to the second phase of education, the third phase of consumption, the new technology of the smart fund, and the current phase four of the industry. Internet and Internet of Things. In fact, any industry will go through a process from inception to maturity and then to decline. If we are just holding an industry, holding something we are familiar with, the final profit will definitely get lower and lower. For example, in the first phase of our entertainment, we did a good job, but if we have been investing in entertainment, it may be difficult to raise funds even now.
To have this kind of flexibility, but the challenge to people is very high. Everyone wants to invest in the industry they are familiar with, and feels very safe in the field they are familiar with. Under this principle, you need to change.
How does it change? Basis or to stare at the big industries, such as basic necessities, entertainment and music education education, staring at a few trillion industry on this macro, when there is some changes in this industry factors when it can be found as soon as possible. Any business that looks good and can be invested does not suddenly change for the better. In fact, it has already gone through a long preparation time.
When we invested in entertainment in the first phase, we were actually paying attention to the direction of education, but we didn’t make a single investment in two years. Because at that time, there were no good investment opportunities, and education was still a more traditional model. In 2014, we saw that live broadcast can be used in education. Under the original education model, the project did not receive much money, and the unit price per customer was very low. After the live broadcast, the original model of selling content was turned into selling service. To achieve large-scale fees, the head of education was invested at this time.
The investment logic of the industrial Internet
Pencil Road: At this time last year, were some of the tracks that you focused on completely different from this time this year?
Dong Zhanbin: I won’t say that there was a sudden change. This change was basically completed slowly in two to three years.
Last year, there were more consumer projects, and this year, it was more about the industrial Internet. Among them, we like to invest in some IoT projects with hardware attributes and technical thresholds.
Pencil Road: Where is the turning point from consumption to industrial Internet adjustment? Is it the establishment of a new fund or what?
Dong Zhanbin: We first established a future-oriented and feasible direction. After tentatively investing in one or two projects, this concept will gradually become clear. For example, like the Internet of Things, when a project has been invested and it has verified many of our ideas, we will have more confidence in this field and begin to increase investment.
In fact, we started investing in Industrial Internet as early as 2017, and Fatty Bear is the first case. Later, because it developed well, we started to continue to choose in other tracks. From the development trend of these projects and the heat of the capital market, we can know which tracks should be more worthy of effort to bet on.
In fact, since the third phase of the fund, we have invested in some industrial Internet projects. These projects have basically grown into top projects in several sub-tracks of the Industrial Internet, and their valuations are also very impressive. By the end of the third phase, we are actually planning to focus on this direction in the next phase of the fund. For example, when investing in “Little Fat Bear”, it was valued at tens of millions of yuan, but now it is more than one billion dollars.
Pencil Road: You said that the industrial Internet is essentially a connection, so is the underlying logic of these projects not much different, but the industry is different?
Dong Zhanbin: There is a big difference in severity. The least likely to be an Internet project. As long as the connection is made first, then the business can actually be guaranteed. Some of them need to do some infrastructure work and provide contract performance. He may have to get warehousing and logistics by himself. There are also some tasks that involve upstream connections to the industrial Internet, which are difficult in themselves. The factory owners are relatively old and it is difficult to access the system.
For example, Feiliu Technology , the previous connection with the factory side took about three years, reaching thousands of cooperation, but this time may not have started to connect downstream.
Pencil said: In fact, the business of Fatty Bear or Feiliou technology has started to explode in the last two years. Does this also allow you to verify this direction?
Dong Zhanbin: They were in the right direction before, but the early stage is like taxiing on the runway, the early start is very slow. After two or three years of preparation, the upstream and downstream have begun to connect, and now it has begun to increase the volume of business, and we can see a three or four-fold increase every year.
Pencil Road: Frankly speaking, when investing in these projects at the very beginning, did people invest in these projects, or did they depend on the direction + the investment? Is there any kind of blind casting?
Dong Zhanbin: In fact, we look at both people and things, so we emphasize that things are human. We have to judge people with certain things, and then to be able to combine them together , including the track, too, we may direct some of direction give up, because with some basic logic, it can not be established.
Pencil said: Qingsong Foundation will do research first, find out the direction, and then maybe go fishing for the project. When you were fishing for these projects, you felt that these projects were good people and did more reliable things. Based on this logic, you still think that the track will explode in two or three years. This team happens to be one of the best on the track What kind of logic does the team invest in?
Dong Zhanbin: First of all, we have basic judgments on the direction. Compared with general Internet projects, the industrial Internet is fortunately less competitive. In this field, entrepreneurship often requires sufficient industry accumulation. Most of the founders have been in this industry for many years and are naturally familiar with upstream and downstream to establish connections. . Otherwise, even if such a project is launched, it may not be possible to do it in 10 years.
A person we recognize, on a correct track, such a result is a “dimmed right”. In other words, we think it is feasible for this person to do this, but when he will be able to do it, it will eventually be verified.
To B investment is at an early stage, but the competition is already very fierce
Pencil: I met a founding partner of a fund of funds at the beginning of the year. He concluded that the primary market has tens of billions of net profits each year, but this net profit is basically eaten by the top one or two hundred funds. Finished, and the head is very obvious, the funds in the middle waist basically don’t make money, is this the case?
Dong Zhanbin: Everyone said that the 28th effect or the 19th , there is indeed this law, regardless of the GP or the project side, in fact, this is the case.
The top fund made most of the money, and so did the project, attracting most of the funds. Other funds or projects have relatively certain returns, but they are certainly not so “stimulating.” In addition, some funds have a very large amount of funds. A fund is worth tens of billions of dollars. From the perspective of size, it should also have such a profit ratio.
Pencil Road: In the To C industry, there is a popular term called internal scrolling, which means that the competition is too fierce. Do you think that To B track investment is still in a blue ocean stage, or is it also beginning to scroll?
Dong Zhanbin: The investment in the To B industry is still in its early stage, but the competition is already very fierce. Because many funds are actually transforming in this direction, some newly-raised US dollar funds may have higher valuations and a larger single investment amount. I think SaaS projects are now the most valued category, and institutions can even give them a valuation of 20 to 30 times their annual income.
Pencil Road: What do you think is the investment ratio of To B and To C projects on the market?
Dong Zhanbin: 3 to 2, 3 is To B. At the stage of realization of To C, everyone is investing in top projects. Investment is very cautious, because it is difficult for consumer product brands to grow bigger without barriers . China’s supply chain is very developed, and a new product can be imitated exactly the second week after it appears, and the price is sold at a lower price to occupy the market share of the old brand.
Pencil: You just said that although To B investment is in its early stage, the competition is quite fierce. What is the most fierce competition among them?
Dong Zhanbin: For example, like “Flying Technology”, the right person has done the right thing. The founder has a deep understanding of the needs of the industry, and the degree of matching is very high. He has been groping for several years before, and now the project is in a stage of taking off.
At this point in time, the valuation is definitely still relatively low, and for USD funds, they are all randomly invested. Now the old shareholders of this project are unable to invest, everyone has robbed their shares, and the settlement of the investment in the previous period has not been completed, and the agreement for the next period has been completed, and the valuation has doubled.
In fact, not many people paid attention to this project in the first year or two. An iconic thing is the byte beating also see good investment , the project will become more abundant in resources downstream end of the connection, so optimistic about it after the fund has become more original, like Hillhouse, GGV, Softbank China and other , The investor lineup is getting bigger and bigger.
Pencil Road: In To B industry investment, are all good projects like Feiliu Technology in such a competitive state?
Dong Zhanbin: To B’s project is not the same as the original early investment. To B’s project did not have such a high degree of attention in the very early stage, so it was not intense in the early stage. Because there are few people who can understand, the data of the project may not be verified, the business may not run through, and the prototype has not formed.
Whether the To B project can finally achieve results requires time and resources. It is difficult to say its certainty, but when the foundation is laid and the inflection point is reached, the competition is the fiercest. Investors have already seen and seen clearly, and the valuation at this time is actually relatively low.
In addition, in the later stages of development, such as when the C round project has undoubtedly become the head of the track, investment competition is also fierce. Become a recognized star project, everyone can feel free to add to it.
There is an IoT project this year. We have actually completed the due diligence agreement and the investment is about to be completed, but another big fund suddenly entered. We originally thought that this kind of project should not enter the field of vision of this kind of fund. In the end, this project became their leading, and we followed suit.
Another problem is that when everyone sees the value of the project, it becomes difficult for early investment institutions to raise a stake, even if the old shareholders have anti-dilution clauses.
Pencil Road: What are the competitive strategies of investors at this time?
Dong Zhanbin: Investing is only one aspect, and then everyone has to show resources. Before even investing in, first connect with a few large customers.
However, for some projects, it is useless to introduce customers at the same price, because introducing customer resources is no longer a significant advantage of the organization. The threshold for organizations to provide value-added services has also become higher. In addition to introducing businesses, they must also introduce talents. The organization really has the high-end talents that the project needs, and there will also be a great help to the project party.
Pencil Road: What do you think of this competitive situation? How to deal with it?
Dong Zhanbin: Each stage of investment has its own characteristics. Like our early words, more of it is to fight for cognition.
For industrial Internet or Internet of Things investment, I think the most important thing in the early stage is the understanding of the category. The industry is actually very subdivided and very large. From a national or global perspective, its volume is large enough. Because various factors are involved, some connected entrepreneurship is meaningless, and entrepreneurship itself has costs. If the efficiency of the final connection cannot make up for the cost, it will definitely not work.
Pencil Road: As the education policy guides, are there any general and objective changes in the second half of this year that will really affect the fate of startups?
Dong Zhanbin: There have been too many cases in the past. Once an industry has overheated, relevant departments will come forward to regulate and strengthen supervision. I didn’t pay much attention to it before, but later I found that exit is highly correlated, including some companies before it, and it may be difficult to go public at a later date.
On the other hand, the introduction of some policies shows that the country is paying more attention to it, which will make early industries more dynamic, such as the industrial Internet.
Following the country’s major policies and investing in a major industry cycle, this is definitely the most profitable.
Pencil: What do you think are the variables that industrial Internet entrepreneurs must pay attention to this year? This variable will have a great impact on entrepreneurs.
Dong Zhanbin: I think the secondary market and the primary market are still at a good time this year.
The project’s valuation is also at a relatively high point, so this year’s financing opportunities must be seized. Good companies may be able to complete several rounds of financing this year, but if they fail to capture one round, it may become difficult to compete later. Because although it is in a hot stage now, the focus of investment institutions is getting more and more detailed, and it may turn cold later.
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