Author | Wang
Feiyan reports | PEdaily in the investment community
“Now VC / PE institutions really lack money.”
Under the epidemic, the fundraising environment this year is not optimistic. Somewhere angel investment fund partner government guidance revealed to the investment community, private LP now very difficult, “after the return to work, we have some emergency funds were being set up Paimo, found that individual private LP there has been a big change, has The subscribed amount cannot be reinvested because of tight cash flow. ”
This is a cruel scene in the current primary market.
At the same time that market-based funds were cut off, the 10 trillion government guidance fund also ushered in “the strictest in history.” “The size of the government-guided fund is shrinking, and the central enterprises can provide up to 100 million yuan, and now it is possible that only 500 million yuan can be used for insurance funds.” A Suzhou state-funded parent fund partner sighed.
The most worrying thing happened: the
temporary withdrawal of private LPs, and “invest in you after the ” The
epidemic. epidemic disrupted the rhythm of the entire primary market. During the time of online offices, everyone became 007, and fundraising was 24 hours. Not closing.
“I’ve been preparing various materials for LP all the time, and I’ve been busy all day,” sighed at IR, a Shenzhen agency.
The institution is raising a RMB 300 million yuan fund, which has already received 50% of the government’s guidance fund, which is still a cornerstone investor, which needs to contribute about 30%.
Compared with the new fundraising, the closing of the fund is more urgent. “We have a PE fund with a target size of 1.5 billion, and currently have raised 1.1 billion. We have already started investing in projects.” Said a Shanghai-based medium-dollar fund partner.
What is even more worrying is that LP’s willingness to contribute funds seems to change at any time. During the outbreak, the LP funding and payment progress will be affected. For example, under the compulsory quarantine policy in some regions, the U Shield funding operation, the custodian bank lending process, and industrial and commercial change procedures were affected, resulting in delays in LP funding. Due to the suspension of production and production, the cash flow of some private LPs is tight, and the willingness to invest has been shaken.
“Investment has slowed recently, and I will invest in you after the epidemic.” It may not only be what investment institutions say to entrepreneurs, but also what LPs say to GPs.
“After the resumption of work, we conducted a reorganization of some funds that were being formed. We have already passed the meeting last year and are in the process of forming one after another. However, we have found that there have been relatively large changes in individual private LPs, which have been subscribed due to tight cash flows. It is possible that it will no longer contribute. “An angel investment guidance fund partner told the investment community. The Angel Investment Guidance Fund has cooperated with more than 70 foreign funds and is currently conducting online fundraising and matching activities.
Last year’s fund needs to close quickly, and this year’s fund needs to speed up preparations in advance. In the past two years, the RMB fundraising cycle has been generally lengthened, and many institutions have already started the new fundraising of 2020.
A RMB fund raised in 2019 by a PE fund focused on investment in the medical field in Shanghai has been registered and will be closed for the second time. A lot of work has been done in the middle. A new RMB fund is currently being raised with a target size of 500 million.
Due to the complexity of the fund registration approval process and the uncertainty of the investor’s payment cycle, the fundraising needs to allow sufficient time for preparation. Now affected by the epidemic, communication with new LPs can only be limited to online, which also makes it more difficult for these institutions preparing to raise new funds.
Government guidance funds tighten?
The average size of participating sub-funds has been reduced by 30%
, and the cold winter of primary market fundraising, which has lasted for two years, still seems to show no signs of recovery.
According to data from the Private Equity Link under Zero2IPO Research Center, as of the first half of 2019, a total of 1,686 government-guided funds have been established in China, with a total target size of 10.12 trillion yuan and a fund size of 4.13 trillion yuan in place. In 2020, for most RMB funds, 10 trillion government-guided funds are the greatest hope.
A few days ago, the Ministry of Finance issued the “Notice on Strengthening the Management of Government Investment Funds and Improving the Benefits of Financial Contributions” (hereinafter referred to as the “Notices”), which clearly stated that the budget constraints on the establishment of funds or capital injections should be strengthened to improve the efficiency of financial contributions. As soon as the “Notice” came out, it immediately aroused heated discussion in the venture capital circle. In the eyes of many investors, it may be more difficult for GPs to take the money of the government guidance fund in the future.
However, the investment community communicated with some government-led funds in Beijing, Shanghai, and Suzhou, and learned that there are no specific rules in the current Notice, and it will not lead to the immediate reduction of their funding. “From a policy perspective, the impact will be Large, but has not yet seen the specific implementation arrangements, so it has not yet begun to implement. ”
A founding partner of an unnamed PE agency admitted his understanding: In fact, many LPs of government-guided funds are state-owned enterprises, not the Ministry of Finance, so the “Notice” does not apply.
“We are not directly given by the Ministry of Finance, and LP is a state-owned company, so it will not be directly bound.” An investment manager of a government-focused fund focused on the medical field in Hangzhou revealed. However, for new GPs, they generally contribute up to 10% and have a 1: 1 counter-investment requirement. They must invest the same amount in enterprises in Zhejiang Province.
The fundamental purpose of the “Notice” is not to reduce the investment scale of the government guidance fund, but to solve the problems of duplication of policy objectives, idleness and fragmentation of some government guidance fund funds, to strengthen budget constraints on the establishment of funds or capital injection, and to improve fiscal performance. Investment benefits.
In recent years, governments at all levels have led to the gradual development of funds, but their management levels have been uneven. “Many government-guided funds in remote areas are idle, and some regions only invest and do not have a complete performance evaluation system.” In the opinion of the government-guided funds mentioned above, the government needs to entrust funds to professional management agencies for management. More standardized.
Under the epidemic, market-oriented government guidance funds have been operating efficiently. “Most of the sub-funds we invest in are in Beijing and Shanghai, and some Shanghai sub-fund partners can already travel to Suzhou to communicate face-to-face. And recently we have opened investment and decision-making meetings and participated in the first stage of a new fund for an institution in Guangzhou. In addition, we are looking at two new funds in the industrial Internet sector, which are about 1 billion in size. “Said the partners of the Suzhou Government Guidance Fund.
However , it is an indisputable fact that the scale of participation has been reduced. The 16 sub-funds invested by the Suzhou government to guide the fund’s past investment are about 1.5 billion, and this year may be controlled at about 1 billion.
In response to the possible impact of the epidemic on GP fundraising, some government guidance funds have also proposed a series of countermeasures. For example, the Xiamen Industrial Investment Fund first proposed measures such as “increasing the reinvestment quota”, “appropriately relaxing the operating time limit of equity participation funds”, “increasing support for funds and projects in medical and health fields” and other measures.
This year’s fundraising is more important than being bigger.
Not long ago, Yuan Hechenkun conducted a series of surveys on 104 GPs in response to the epidemic. Nearly half of the GPs thought that it would be more difficult to raise funds in 2020.
Among them, more than 50% of GPs hope that the source of funds can introduce some new capital, whether it is state-owned funds, bank funds, insurance funds, or private capital: 33% of GPs hope that relevant regulatory authorities can properly open new rules on asset management to equity The investment market increases the supply of funds.
In 2016, after the release of the 10 Articles of Venture Capital Countries, state-owned assets entered on a large scale. According to statistics from Zero2IPO Research Center, in terms of new funds raised in 2019, of the 2705 funds raised in the new round, the total scale of LP subscriptions with state-owned background has accounted for 70.4% of the total fund subscriptions; among the managers of the above funds The total subscription scale of institutional management funds with a state-owned background accounted for 61.3% of the total fund size.
Under the new asset management regulations, state-owned assets have become the most important source of funds for GP fundraising. “From the perspective of market funding capabilities, only insurance funds that can deliver 500 million yuan now. The size of government guidance funds has also been reduced in the past two years . Under the control of the State-owned Assets Supervision and Administration Commission of the State-owned Assets Supervision and Administration Commission of the State Council last year, they can only contribute up to 100 million yuan. “Said a partner of the above-mentioned Suzhou government guidance fund.
“Now most of the market-based mother funds have no money.” The landlord’s family has no food left. This is an awkward scene of VC / PE in the past two years.
Earlier, Jin Haitao, the chief executive partner of Qianhai Equity Investment Fund (Limited Partnership) and chairman of Qianhai Ark Asset Management Co., Ltd. once said frankly that it is difficult to raise funds, and many places have restricted the funding to the venture capital industry. “In fact, China’s reform and opening up for so many years has accumulated a large amount of social wealth, and these wealth can’t find a way out for investment, so it was deceived by illegal fundraiser. Now it’s more money and no way out, I think the mother fund is a A formal way out. “The
lack of long-term funding sources is a consensus in the primary market. “The lack of long-term funds is the biggest bottleneck in the development of our industry and has caused some problems within the industry. We look forward to the state to strengthen the supply of long-term funds such as national social security, local social security, enterprise annuities, life insurance funds, and state-owned enterprises. “A parent fund partner called.
Of course, the easing of fundraising depends not only on the situation of the supply side of the fund, but the related issues such as the withdrawal of funds and taxation have improved one by one, so that the entire chain can be fully opened up.
When spring has not come, living is more important than anything. The angel investment guidance fund partner suggested that “GP should be more pragmatic, target 500 million, and raise 100 to 200 million first. This year’s fundraising is more important than making it bigger.”