2012.03.07 CoStone Capital Views:
CoStone Capital recently made a donation to the China Europe International Business School (CBIES) Endowment Fund, and announced that it would strengthen in-depth cooperation with the CBIES so as to explore the cooperation model between venture capital companies and research institutions. In an interview, Zhang Wei said that facing the rapid development of the venture capital industry in China, venture capital companies need all-round innovation in terms of project discovery and project exit.
CoStone Capital Zhang Wei advocates innovating the Chinese VC business model
CoStone Capital recently made a donation to the China Europe International Business School (CBIES) Endowment Fund, and announced that it would strengthen in-depth cooperation with the CBIES so as to explore the cooperation model between venture capital companies and research institutions. In an interview, Zhang Wei said that facing the rapid development of the venture capital industry in China, venture capital companies need all-round innovation in terms of project discovery and project exit.
Zhang Wei believes that based on the current market environment, venture capital companies should make corresponding adjustments in project discovery and project exit. “For example, 70% of current venture capital project exits are IPO exits, 10% are backdoor listings, and 20% are major shareholders’ repurchases or mergers and reorganizations. However, in the future, the proportion of major shareholders’ repurchases or mergers and reorganizations will see a significant increase.”
At present, most domestic market-oriented consumer goods and service companies, except for home appliances, beer, and dairy, are still in the process of shifting from decentralization to concentration and large scale, which will lead to frequent M&A opportunities. Meanwhile, the fact that private enterprises have entered a period of generational succession and corporate equity are dispersed also results in mergers and acquisitions. In the US, while the number of IPO exits venture capital industry accounts for only about 10% of all exits, the number of mergers and reorganizations accounts for nearly half. Zhang Wei believes that China’s venture capital industry is also embarking on this path.
In terms of discovering investment targets, CoStone Capital has also pulled out of the traditional model of venture capital to open up a new battlefield. The cooperation with CBIES and China Europe Development Fund is exactly a brand-new attempt. Zhang Wei pointed out that “CBIES is not only a school, but also a good platform for entrepreneurs and financiers to exchange innovative ideas.” He argues that SMEs are the investment targets of venture capital as well as the research targets of business schools, who hopes that the (CBIES) Endowment Fund can provide more opportunities for SMEs.
Rewritten by: Yang Yang, Edited by: Du Zhixin, Wei Yiyi
The year 2019 marks the fortieth anniversary of China’s Reform &Opening-Up, once again, we meet at the turning point of history. What’s the next step for the game, is there any clear guidance? The answer is affirmative.
Our country is enjoying a good momentum of development, which does not come from the Washington Consensus nor the Beijing Consensus. China’s experience has proved that both the visible hand and the invisible hand are crucial: the visible hand, stands for the government-led reform, and would yield benefits for reform and opening up; the invisible hand, stands for the Marginal Power represented by the private sector, and would improve economic efficiency and tax collection, create jobs and employment opportunities.
Provided that we want to protect and expand the benefits form reform, three simple but mandatory agreements are to be made and followed: No.1 Private ownership must be recognized, protected and treated equally with public ownership constitutionally, both ownerships are scared and inviolable;No.2 Make further clarification of the principal position of market economy, “deepen economic system reform by centering on the decisive role of the market in allocating resources”, as President Xi addressed in the third Plenary Session of the 18th CPC Central Committee;No.3 Implement the guiding principles of “comprehensively promoting law-based governance” of the fourth plenum. The rule of law is essential for economic growth, irreplaceable to protect private ownership, and necessary to encourage innovation and entrepreneurship.
Above are three rules for us to avoid falling into the Middle-income Trap. Assuming that we are breaking systematic barriers to private enterprises’ participation in market economy, and boosting innovation and entrepreneurship of our society, then we are heading towards a promoting direction. We are marching in the path of light, regardless of the ups and downs of Sino-US relationship, the drop in GDP growth rate, or the monetary policy.
These principals also apply on knowing how better to run a business: don’t be hedged by rules and regulations at the beginning, pay more attention to your survival, and you’ll learn more when you start your second business.
For many years, Huawei has been the only Chinese company on the list of the Top 50 R&D Spenders. Regardless of the economy and its income, what Huawei has been doing is investing in its future, dedicated to R&D, continuously and resolutely. This provisional work underscores Huawei’s accomplishments, making Huawei anindustry leader.
So, there are standard answers on how to run a company,which could be summarized as concentration and professional dedication, continuous investment on innovation and trying harder in R&D. Entrepreneurship is also important, every single company needs entrepreneurs to push aside all obstacles and difficulties, to implement strategies and ideas. We, as investors, are destined to look for such outstanding entrepreneurs and their companies, invest in them and partner with them.
At this key point of history, a country, a company, or asingle individual, will all need to find the right path. Four decades after the Reform and Opening-up, it’s time to learn from our experience and stop “wadding across
