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"there is a strong, mutually reinforcing positive correlation between entrepreneurship, venture capital and new consumption. this fascinating wave-like chain seems to have broken."

text/ wu xiaobo

it was 2:30 in the morning, and my phone suddenly rang, and i received a message. the message was divided into two parts:

“the teacher always touches my heart.”

"one of our investors sued all the invested companies, including me, in order to exit. i have been very anxious recently. i can't understand why they killed the chickens when they couldn't get the eggs. later i heard that it was the lp who forced procedural justice. i can only face fate. after watching your video,i am going to sleep, good night teacher, good night chinese entrepreneurs. "

tan daxia is an entrepreneur in online games and animation. a few years ago, i visited his company when i was doing research in a cultural park. it was a candidate for a "unicorn". i still remember that he gave me a plush cartoon and we happily posed for photos.

above the message was a short video i posted: "if i keep talking, i hope you'll always be there."

that is the story of another entrepreneur. his name is harry ganggang, and he has been a long-time listener of "hearing wu xiaobo every day". this year, his company's business is facing a shutdown, and he finally has no money to renew his subscription. he left me a message:“perhaps it is the fate of entrepreneurs to hold on until the last drop of blood.”

a sleepless night.

cao guoxiong is the friend who understands entrepreneurs the most among my friends. he has been in venture capital for 20 years. puhua capital, which he manages, has been ranked among the top 20 venture capital institutions in china for many years. in 2016, he and i launched a cultural and consumer investment fund, which has invested in hundreds of startups so far.

i am often surprised by lao cao's passion and diligence in investment. in the past many years, he has reviewed thousands of projects and contacted hundreds of entrepreneurs every year.whenever he rubbed his hands and told me about a good project he had just discovered, the light in his eyes could light up the whole room.

today, as the expiration date of some funds is approaching, he has to start the exit procedure, which is an extremely difficult and painful process.

one night, he suddenly received a message from an entrepreneur. it contained an incoherent farewell, a photo, a messy bedside, a medicine bottle, and a few sleeping pills scattered around.

lao cao hurriedly enlarged the photo and found a note from a hotel chain on the bedside. he immediately searched for several hotels in hangzhou and which one was closest to the high-speed rail station, and then called the police station. the police broke into the room and avoided a tragedy.

every time we talked about this, we were speechless, silent as stone.

all entrepreneurs who received venture capital, those lucky ones back then, are now facing a painful game with "angels".

the current situation of these entrepreneurs can be divided into two categories.

one type is when the entrepreneurial project gets into trouble and is unable to continue. when investors initiate redemption, they will be forced to use their personal savings or even sell their houses. once they enter the legal proceedings, they may become "deadbeats". a report on "analysis of the group of dishonest executors" shows thatby early september, there were 8.413 million "deadbeats" in the country, 90% of whom were private business owners and about one-third were business failures.

another category is that the business is in good condition and even profitable, but the venture capital invested in them expires and the investors have to activate the priority exit clause. when the working capital of the enterprise is withdrawn, it is likely to affect the company's daily operations.

in this embarrassing situation, in addition to entrepreneurs and venture capital managers (gps), there are also investors (lps) involved in private equity funds, including about one million individual investors and a large amount of state-owned capital.

there is only one fundamental reason for this embarrassing situation: the extreme shrinkage of exit channels.

there are four management procedures for venture capital: fundraising, investment, management, and exit. fund raising, investment projects, post-investment management, and capital exit. the so-called "exit" is the ultimate goal of equity investment. the most efficient and most anticipated way is to achieve investment returns through public offerings in the capital market.

today, china's a-share market has basically closed the approval process for consumer and cultural projects. except for a very small number of companies that have the opportunity to be listed on the hong kong and us stock markets, the vast majority of entrepreneurs who have received venture capital are trapped in the dilemma of being unable to fulfill their exit promises.

this entrepreneur’s predicament is causing another chain reaction.

although those high-quality consumer and cultural companies, which number in the tens of thousands, are not "bottleneck" projects and cannot be identified as specialized and innovative enterprises, they are the largest carriers and promoters of employment and consumption.

economic principles tell us that consumers’ “yearning for a better life” requires commodity suppliers to constantly create demand desires and consumption scenarios. over the past many years, it is the enthusiastic investment of countless cultural and consumer product startups, as well as the promotion of venture capital, that has brought prosperity and excitement to the market.

therefore, there is a strong, mutually reinforcing positive correlation between entrepreneurship, venture capital and new consumption.

but today, this fascinating wavy chain seems to have broken.

over the past three years, the number of investments in china's venture capital market has dropped 38% from 11,000 in 2020 to 7,100 last year, and the amount of venture capital has dropped 68% from 1.5 trillion yuan to 480 billion yuan.

china'szhang yinga former colleague of cao guoxiong, he recently gave some advice to entrepreneurs:

"under the current capital market environment, the most important change is to change the employee incentive model that has been tied to valuations and stock prices, short-term expectations of getting rich quickly, and excessive, radical, and virtual, to one that is linked to the company's operating performance. on the basis of steadily growing profits each year, a portion of the profits should be taken out and distributed directly to core employees and those who truly have achieved results, so that employees can fully and timely share the fruits of development."

an investor left a message on this wechat moments post: "dividends are still reliable."

i asked lao cao what he thought of his former colleague's advice. he thought for a moment, bit his lip and said:

"i will do well today and look forward to tomorrow."

this may be a realistic choice for all entrepreneurs on the road:do your best to run your company, keep yourself alive, maintain cash flow, and make up your mind to live every day well. wait for the opportunity and look forward to the recovery of the new cycle. finally, bear all possible outcomes.

good night, chinese entrepreneurs.

author of this article | wu xiaobo | responsibilityeditor | he mengfei

editor-in-chief | he mengfei | image source | VCG