Venture Capital, A lofty career---On the occasion of the 4th
Anniversary for the establishement of BVCC
By Wang
Xiaolong
On
October 28, 2002, Beijing Venture Captial Company Limited (BVCC)
celebrated the 4th anniversary for the establishment of the
company. During the four years, we have experienced ups and downs of
the global economy and gone through the network storm. With the
support and the trust from all shareholders, the management team has
united as one and gone all out for work, meanwhile, all the staff have
worked laboriously and contributed to the company. As a result, we’ve
successfully gotten through the trial and made achievements by phases.
1.
Exploring the future and making sustainable innovation
Having
run business for four years, the company has successively invested a
batch of projects which tend to have increasing stablilization of
management and good profits. The company has created a return on
investment of 200 millions yuan for the shareholders and the average
net asset yield of the first three years exceeds 12%. Its market
performance has caught eyes of people of same profession domestically
and internationally and has been identified and appreciated by the
shareholders as well as the society. The company has been well known
in the VC industry of China, which is reflected on the following
aspects:
Invested Projects
There
are 46 invested projects with the total amount of 400 millions yuan
and 5 projects are on the way until October 28 of 2002. Through
unceasing investment practice and exploration, the company has set up
the distinctive field investment in biological medicine and modern
agriculture, new material and IT fields, which has formed the
investment ideas: choice investment, scale investment and prudent
investment.
Withdrawal of Projects
So far,
the company has succeeded in entire or partial withdrawal of eight
projects through transfer of share option, management buyout and share
exchange successively. The better capital income has been gained and
the company has also increased in value to a great extent.
System
Construction
Through
4-year practical activities and sustainable innovation, a series of
effective regulations have come into being, which involve project
investment, management, withdrawal and financial tools, risk
controlling, incentive and restriction, and business culture and they
cover all the different fields in the company’s business operation.
Team
Building
The
core competitiveness of modern enterprises is human resource. Relying
on the formation of the incentive and restriction system, the company
has attracted the participation of excellent persons and cultivated
them. An echelon of talent group with reasonable knowledge structure,
rich experience on investment and capital operation and analytical
ability has taken shape, which has laid a solid foundation for the
company to participate the international competition.
Theoretical Research
In
virtue of unceasing sum-up of experiences and theoretical research in
order that the game rules of VC can fit to the domestic environment,
the company has offered instruction for development of the investment
business as well as timely adjustment of the strategies. Successively,
the company has published some works with higher academic values, such
as “Practice on Venture Capital”, “Venture Capital and New Economy”,
“Venture Capital and OTC Market”. The books have given special topics
and research on the basic operational rules and international practice
for VC, the developing history of VC in new economy and establishment
of the OTC capital market in China. The research achievements have
gained favorable comments from people of same profession.
2.
Considering the situation and accepting the challenge
With
China’s entry into the WTO as well as the successful bidding for
Olympic games of Beijing, we will face the larger challenges and
opportunities in the future. With the background that the global
economy is being regulated and the macro-economy of China is
favourable, the new round of venture capital of China is a two-edged
sword. Confirming our own corresponding strategy on the basis of
rational and objective analysis for the situation is the constant
working style and thinking method of the company. Facing the
competition from domestic and international venture capital
institutions, the company has kept cool-headed and got a specific
grasp and unique views on its own orientation and market targets all
the time. The reason why the domestic VC organizations are able to
develop is because they are supported by a batch of projects and
resources with their own strong points. Besides, the other aggregated
and mature factors including the correct grasp of the Chinese special
situation and the initial possession of human resources of China
embody the localizable characteristic of VC. In the competition with
foreign organizations of same profession, such advantages as long-term
accumulated project resources have brought huge business opportunities
to the domestic organizations of same profession, which possess the
unique advantages. For example, merging and purchase can be made at
lower prices; there is less blind spots for business negotiation; the
opportunity cost is low; the further financing and strategic partners
can be introduced for invested projects;channels to converting to cash
can be sought for invested projects. Again, when the global economy is
continuously slowing down, especially after the American 911 terrorism
attack, the economy is suffering the heavy losses, China,however,a new
member of the WTO, is out of the ordinary and catching eyes of
international venture capital institutions. Undoubtedly, that means an
important opportunity for those domestic VC companies, which are going
to upgrade their own management and core competitiveness by the means
of sino-foreign joint venture and cooperation. In terms of the current
economic development situation of the world as well as the speedy
development of China’s economy, China is expected to make use of its
entry into the WTO and become a favourable place for international
capitals including venture capital. What’s more, the issuance of the
relevant measures and policies on managing sino-foreign joint venture
VC companies has created a good condition for the domestic VC industry
to introduce international capitals and managerial experiences by the
means of joint venture and cooperation.
Certainly, the company has to keep cool-headed and exactly understand
the intense competition that the accession to WTO has brought to the
domestic VC industry. Localization won’t be an outstanding advantage
if they demand not only currency capital, but also more value-added
services. Particularly, when competing on excellent talents, we are
unable to attract large quantities of excellent talents because of our
current framework and incentive system. This is also the weakest link
for Chinese VC industry. The huge impact arising from the entry into
WTO is the impact to the system. Contrasting with the sound investment
system under the complete market economy of developed countries, the
market system framework of China in the transition times has a huge
drop in level in the fields of capital size, operational system,
talents pooling, resource allocation,etc. Therefore, the domestic VC
organizations will at no time rest easy and must have the sense of
pressure and crisis all the time.
Comparing with most of the domestic VC companies, the foreign
companies have got innate advantages on operational system, capital
size and managerial experience. At present, because of the stable
political environment in China, the China’s economy has increased by
more than 7% for several sequent years There are many business
opportunities with low costs and high effeciency and the growth space
of market is huge. After the entry into the WTO, international venture
capital will pour into China by large scale. Experiencing the first
2-year impetuosity, most of international VC companies have been more
and more rational. They will evalue the Chinese market more prudently
and rationally and tend to be cautious and calm strategically after
their profound introspection. Currently, it’s not because of the
short-term high return on investment through “game”, but because of
the long-term strategical consideration, the international VC
organizations settle on China.
However, the disadvantage for the foreign VC institutions is obvious
enough: Contrasting with most domestic VC companies, foreign companies
have got many innate advantages, however, there is very few foreign VC
companies which have entered the Chinese market and made great
achievements. They take fancy to China, but the fact is they promise
verbally more than what they’ve done. That means more companies have
entered the market, but less companies have made investment.
That is
caused by some deep reasons. Currently, the number of local VC
projects is almost same with that of foreign VC projects and there is
not big difference on amount of capital and single cost. However, the
key problem is a problem of good and bad on investment quality and
income. So far, there are not so many good projects in China and less
among those good projects can be taken to cooperate with foreign VC
companies.From the entire technological system, VC is characterised by
special investing methods deriving from the financial industry and it
mainly serves strong enterprises with technology-added value or
capital-added value. However, the technological chain of China is
still at the stage of introduction and imitation and technological
innovation is seriously lagging behind. It’s difficult for foreign
companies to find out those projects who are in line with
international investment standard totally, while, returns on general
scientific and technological projects are far from high capital income
that the foreign VC companies require. In addition, in the process of
practice, localization of VC is another big problem that the foreign
companies have to deal with. On the special situation of China, due to
insufficiency of communication with technological holders or
enterprises resulting in information dissymmetry, blind spots of
investment emerge even though there is any good project worthy of
investment. On account of the above reasons, the foreign VC companies
haven’t gained evident advantages when comparing its success with
Chinese companies’ success.
3.
“Dancing with wolf”: Our Choice
The
accession to the WTO has brought an unprecedented challege to the
company. The so-called “Wolf is coming”generats the two results: we
either are killed by “wolf”, or dance with wolf. We have chosen to
dance with wolf. That is, with the precondition of maintaining and
consolidating local specific advantages, we should localize VC
business properly and create a business environment, which is close to
the business idea and business culture of our cooperators.Therefore,
we can not only absorb the game rules of international VC, but also
remain the feature of localization. For any side, actually, inheriting
elite and discarding dregs should be a principle that one must
persevere with. The key is to keep balance between variety and
invariability. The inner soul is never changed and the external format
is changed. By this way, the feature of localization can be perfomed
well in the arena of venture capital.
One of
the central development strategies in the future is to follow the game
rule of international VC, to build a new administrative structure of
the company at the core of fund management model and move along the
path of internationalization. Currently, the company is undertaking
extensive cooperation with large-sized foreign VC companies or VC
foundation and seek to set up a broader platform. Through the
platform, on one hand, we have to take advantage of localization,
integrate existing invested projects and future invested projects,
withdraw via investment channels and realize capital income. On the
other hand, we shall make use of various market resources and advanced
managerial experience to enhance our competitive strength. Earlier
than others, the company aimed at the foreign market in 2001. So far,
the company has kept in touch with Silicon Village of US, Canada,
England,and Amsterdam and mastered the market information at any
moment.The company will be concerned about both domestic and
international markets and form a larger platform through the different
market falls.
According to the distribution of the inner investment fields, the
company prepares and plans to set up investment fund for IT,
biological medicine and new material. In terms of IT industry, we
should strengthen the cooperation with some mature foreign VC
companies and learn from their advanced managerial model and take the
lead in establishing a fund management institution in the IT field.
We’ve launched a large-scale professional biological medicine
incubator in the biological
medicine
industry. The incubator is mainly used for investing original
enterprises and the formation of a complete industrial chain including
technological R&B,trial, clinic experiment,examination and approval,
production and sales in the biological medicine industry. According to
characteristics of the new material industry, we should enhance the
capital operation and strategical integration for invested projects
and projects which are expected to be invested in the new material
field. The core businesses of the three fields are composed of the
three important directions for the future development of the company,
by which the company can integrate resources, pool talents, grasp
opportunities and “dance with wolf”.
In the
future, the company will stand on a higher platform and ponder and
explore a path for the growth and the development of Chinese VC
industry. We shall manage not only an enterprise, but also a kind of
business culture. As a fresh pattern of capital operation, which is
formed by the combination of technological innovation and financial
innovation, venture capital must take place with a concomitant of a
new business culture consciousness and pattern. In the exploration of
venture capital,the innovative system, we’ve built a kind of new
methodology and business idea and put them into business practice.
We’re
confident that what we’re engaged in is a lofty career.
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