how shenzhen capital group builds patient capital
2024-08-29
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china economic weekly reporter sun tingyang | beijing report
since the beginning of this year, the development of long-term capital and the expansion of patient capital have frequently appeared in important decision-making documents of the central government, especially the "decision of the central committee of the communist party of china on further comprehensively deepening reforms and promoting chinese-style modernization" reviewed and approved at the third plenary session of the 20th central committee of the party, which further pointed out the development direction for venture capital and emphasized the important role that state-owned assets should play.
as a pioneer of state-owned venture capital, shenzhen capital group (hereinafter referred to as "shenzhen capital"), which was established in 1999 with the investment of shenzhen municipal government and guidance of social capital, has always been regarded as a "model student". at present, shenzhen capital manages 186 private equity funds, 16 mother funds, and 22 real estate funds, with a total scale of about 481.1 billion yuan.
"the proportion of patient capital will increase." a relevant person in charge of shenzhen capital group made such a prediction when he was interviewed by a reporter from china economic weekly.
shenzhen capital group believes that as the country gradually guides long-term funds such as insurance funds and social security funds to increase their allocation to the venture capital industry, the proportion of patient capital will increase, and the overall term of funds managed by venture capital institutions will also be extended accordingly.
"invest early, invest in small companies, invest for the long term, and invest in hard technology" will become the main theme
li chunlin, deputy director of the national development and reform commission, introduced at the state council's regular policy briefing on june 26 that venture capital has the typical characteristics of "investing early, investing in small companies, and investing in hard technology", and is more suitable for the financing needs of technology companies in the seed, start-up and growth stages. without the support of venture capital, the effect of technological innovation will be greatly reduced, and many innovative companies such as "little giants" and "unicorns" will find it difficult to develop and grow as fast as they do today.
"in the future, 'invest early, invest in small companies, invest for the long term, and invest in hard technology' will become the main theme of the venture capital industry." a relevant person in charge of shenzhen capital group predicted that as patient capital increases, venture capital will further return to value investment and long-term investment, and the investment stage will be moved further forward.
the person in charge introduced that in the era of hard technology investment, investment is more based on technical barriers, team characteristics, and industry trends. venture capital institutions need to strengthen the depth of research and investment integration and sort out investment opportunities "from top to bottom."
"we have accumulated considerable experience in hard technology investment and early, small and long-term investment." the relevant person in charge of shenzhen capital group talked about the hard-won accumulation. shenzhen capital group requires the investment team to strengthen the depth of research, familiarize themselves with the industry map, and conduct a large number of field visits to the front line of the industry, discover the value of the project earlier than their peers, and dare to continue to invest firmly.
"due to our in-depth research on projects and industry-based investments, we can adhere to value investing and long-term investment when the capital market fluctuates and cross industry cycles. moreover, when investing in hard technology companies, investment is just the beginning, and more is post-investment empowerment." a relevant person in charge of shenzhen capital group introduced the experience of "accompanying" the growth of invested companies after the investment.
huada jiutian (301269.sz) was established in 2009. its business scope includes the development and sales of electronic design automation (eda) tool software for integrated circuit design, manufacturing and packaging. according to the company's 2023 annual report, huada jiutian is currently the only local company in my country that can provide a full-process eda tool system for analog circuit design. the company was listed on the shenzhen chinext in july 2022.
eda tools are essential tools for integrated circuit design, manufacturing, packaging, testing, etc. they run through the entire integrated circuit industry chain and are known as the "mother of chips". as the scale, complexity, and process advancement of the integrated circuit industry continue to increase, the role of eda tools has become more prominent, becoming a key factor in improving design efficiency and accelerating industrial technological progress and innovation.
"in 2017, 2018 and 2020, shenzhen capital group invested in huada jiutian three times, which is just the beginning of professional and sustainable empowerment." the above-mentioned person in charge introduced that shenzhen capital group's investment in the semiconductor field covers various links such as design, manufacturing, packaging and testing, materials, equipment and components, eda/ip, etc., and can empower huada jiutian from the perspective of the entire industry chain. shenzhen capital group's post-investment services include expanding customer resources for huada jiutian and building an ecological network. the management team of huada jiutian often communicates with the investment team of shenzhen capital group on the company's business issues.
bgi is growing rapidly, with operating revenue and net profit of 1.01 billion yuan and 201 million yuan in 2023, respectively, up 5.68 times and 3.1 times from 2018.
kangfang biopharma (9926.hk) was founded in 2012 by a team of immunologists who returned from overseas. it is committed to the research, development, production and commercialization of innovative antibody drugs that are affordable to patients around the world. the company was listed on the hong kong stock exchange in april 2020 and is the 162nd investment company that shenzhen capital group has helped to list since its establishment.
kangfang biopharma completed six rounds of financing in the eight years from its establishment to its listing. shenzhen capital group participated in four rounds of financing since july 2015.
it is reported that shenzhen capital group has initiated the empowerment process since its investment in kangfang biopharma, assisting kangfang biopharma in setting up a 90-acre production plant in guangzhou; and providing a large number of value-added services for kangfang biopharma's operations, resource integration, listing location selection, overseas restructuring, etc.
broaden exit channels and improve capital liquidity
"opening up exit channels for patient capital can improve the liquidity of risky funds," suggested a relevant person in charge of shenzhen capital group.
shenzhen capital group is not the only one holding this view.
"relevant departments need to further increase support for the 'exit' channel and expand more forms. in this way, investment institutions can continue to make the next round of investment after recovering their investment, so that capital can flow and they can be more patient." in an interview with a reporter from china economic weekly, ge peijian, president of gemdale weixin industry research institute, said so. ge peijian was formerly the chairman of pudong construction (600284.sh) and the general manager of zhangjiang hi-tech (600895.sh), and has long been concerned about the innovation and development of capital markets and financial products.
according to the reporter's statistics, as of august 15 this year, there were 53 companies listed on the a-share market for the first time, raising 40 billion yuan. the data for the first eight months of last year were 243 companies and 305.5 billion yuan. the data for the same period of the previous year was 254 companies and 423 billion yuan. the pace of new stock issuance this year has slowed down significantly.
shenzhen capital group believes that, with the current slowdown in the pace of new share issuance, the exit channels have further narrowed, increasing the uncertainty of exit. it is hoped that the pace of new share issuance will be appropriately increased to maintain a variety of exit channel options. in addition, affected by the current reduction policy, the exit cycle of original shareholders generally takes more than 3 years, and there is a limit on the reduction quota within 3 months. therefore, it is recommended to appropriately relax the reduction restrictions on venture capital institutions.
in addition, relevant persons in charge of shenzhen capital group also suggested studying the establishment of a private equity fund share transfer market covering the whole country, so as to improve the efficiency of share transfer through a unified transfer business process and pricing mechanism.
ge peijian cited the example of shanghai's pilot private equity share transfer, saying that shanghai will start piloting private equity and venture capital share transfers in 2022, support government investment funds to achieve orderly exits through share transfer platforms, and guide the simultaneous transfer of equity in companies invested by funds. on december 29, 2023, zhangjiang hi-tech successfully transferred its shares in shanghai financial development investment fund (limited partnership) through its wholly-owned subsidiary.
"exiting as soon as possible after capital investment can improve capital liquidity and lay the foundation for further investment in hard technology companies," said a relevant person in charge of shenzhen capital group.
(this article was published in china economic weekly, issue 16, 2024)
