Since the beginning of this year, the COVID-19 epidemic sweeping the world has severely impacted the world economy and posed severe challenges to us. The world economy is facing unprecedented major changes. How will technology and capital affect the reshaping of the world order? What role will equity investment play in the global innovation value chain? How will big shots of investment in scientific and technological innovation seize the opportunities and jointly meet the challenges in face of such changes?
On September 18, at China Science & Technology Investment Summit, the parallel forum of ZGC Forum, which is guided by the Management Committee of Zhongguancun, and sponsored by Zhongguancun Development Group and Zero2IPO Group, big shots of investment in scientific and technological innovation, targeting the core theme “science and technology innovation and equity investment under the major changes”, gathered together to share ideas and insights with each other and forecast the trends as well as explain the venture capital opportunities and new challenges during post-epidemic period.
Since 2019, a new word called Sci-Tech Innovation Board has emerged in the capital market in our country. Both professional investment institutions and ordinary people are very concerned about the Sci-Tech Innovation Board, which brings us a new investment logic and value assessment system. Pan Xuexian, deputy party secretary and chief supervisor of Shanghai Stock Exchange, gave the attendees a keynote speech themed Science and Technology Innovation Enterprises to Make Profits from the Board, mentioning that the capital market has played a unique and important role in support of science and technology innovation. In particular, the establishment of the science and innovation board and piloting of the registration-based IPO system have further enhanced the ability of capital market to serve the innovation of key core technologies, which will surely provide strong support for innovation-driven development, transformation and upgrading of the Chinese economy.
After the launch of the Sci-Tech Innovation Board in 2019, Shenzhen Stock Exchange ushered in the reform of the registration-based IPO system for the Sci-Tech Innovation Board in 2020, which was also a butterfly effect to have a significant structural impact on the whole capital market. Yang Zhihua, deputy party secretary and chief supervisor of Shenzhen Stock Exchange gave the attendees a keynote speech themed Reforming ChiNext and Piloting the Registration-based IPO System to Facilitate a High-Level Cycle in Science & Technology, Capital and the Real Economy, saying that Shenzhen Stock Exchange has deliberated and approved IPO listing application of 79 enterprises in ChiNext, the registration of 39 enterprises in China Securities Regulatory Commission has taken effect, CSRC registered to take effect, and 30 of them have been officially listed. Generally speaking, the ChiNext stock market has been operating in a smooth way to achieve preliminary results since the beginning of the reform. Among enterprises under deliberation for listing in the ChiNext stock market, there are enterprises in emerging strategic industries and high-tech industry, and industry-leading enterprises undergoing deep integration of the traditional industry with new technologies, new industries and new business forms and new models. The enterprises which have just applied for listing presents good growth with average annual compound growth rate of 24% and 44% respectively in operating income and net profit. The PE ratio of enterprises with completed issuance and pricing is generally reasonable. The proportion of medium and long-term funds such as publicly offered funds and social security funds for subscription and placing, has been significantly increased. The mechanism for market-based inquiry, pricing and placing dominated by institutional investors, has been gradually effective. In general, the reformed ChiNext covers a wider area and is more inclusive with more prominent segment orientation focusing on “Innovation, Creation and Originality” and “New Technology, New Industry and New Business Form and new models”, and with elevation of the ability to serve scientific and technological innovation.
Ni Zhengdong, board chairman of Zero2IPO Group, showed the change of the current investment market through data, and indicated that Chinese VC and PE industry in China has increased by 500 times in the past 20 years, has increased by 15 times in the past ten years, and has been falling in 2018, 2019 and 2020. Therefore, I hope that all parties shall make efforts to form a new turning point, a new wave and peak in the whole equity investment and capital market. We must promote greater changes in the whole capital market and the multi-level capital market.
For the Sci-Tech Innovation Board, Ni Zhengdong put forward three points: first, there are not more but less VC, PE and equity investment in the current market of China. I'm here to call for us to pool more capital, to be more inclusive of our capital, of our venture capital, and of our equity investments. Second, a new wave of business startup should be formed according to the changes in the industry, the situation and the world. This wave of business startup is the one of science and technopreneurship. We need a new entrepreneurial force, and Zhongguancun needs a new entrepreneurial force. Third, the hardest thing for us to do in the capital markets today is to do angel investing and early stage investing. Beijing Zhongguancun should have such angel investment mother funds for us to support early investment and angel investment more and greater strength.
The past decade has been dominated by Internet investment, and the next decade and the next two decades will be dominated by technological innovation and health care. Steve Hoffman, a famous entrepreneur, angel investor, and Chairman and CEO of Founders Space in Silicon Valley, deeply discussed the latest technologies emerging in Silicon Valley and their possible impact on the future, investment and the world. By video connection, he has brought information about many state-of-the-art technologies emerging in Silicon Valley, such as implanting micro human brains into robots, implanting mammoth DNA into elephants to witness the revival of creatures in ancient times, and deploying miniature windmills smaller than coins in numerous devices of Internet of Things.
Since the outbreak of COVID-19, the healthcare industry has attracted much attention. What changes have been made in the field of healthcare under the dual influence of technology empowerment and deployment of epidemic prevention? Now, how to deploy the medical industry? Xu Xiaolin, the founder of HUAGAI Capital, gave a keynote speech on this topic at the summit, and analyzed four reasons for the hot investment and financing in the medical field. First, the COVID-19 has made people realize that medical health is rigid demand. Second, IPO from Hong Kong Stock Exchange and science and technology innovation enterprises brought wealth effect. Third, the dividends from consumption of Internet has gradually decreased, and funds have shifted to the medical sector with larger market. Four, pharmaceutical research and development and high-end equipment have attracted much attention for multiple superimposed effects of international environmental impact, domestic independent innovation and economic double cycle. In the opinion of Xu Xiaolin, the accumulation of underlying technologies is the most critical point for the next step to truly form industry advantages for the companies in Zhongguancun and even China.
Investment and loan linkage alleviates the financing difficulties
New financing channels shall be provided to alleviate financing difficulties. Investment and loan linkage will help the growth of science and technology innovation enterprises and effectively support the real economy to improve quality and efficiency. At China Science & Technology Investment Summit, Bank of Beijing actively explored the way of cooperation with investment organizations, gave full play to their professional advantages and resource advantages in their business areas in the process of business cooperation, and jointly built a systematic platform for investment and loan linkage. Actively promote the implementation of investment and loan linkage business, and jointly support the growth of science and technology innovation enterprises. At this Summit, a signing ceremony between the Bank of Beijing and the investment organizations was held for investment and loan linkage, in which the Bank of Beijing signed contracts with Zhongguancun Capital, Zero2IPO Group, HUAGAI Capital, and THG Ventures, so as to jointly promote the innovation of the investment and loan linkage business in science and technology enterprises.
Capital empowerment shapes a new ecology
In the conversation on global change and the science and technology investment summit, Liu Kefeng, the Chairman of Beijing Technology Innovation Investment Management Co., Ltd., Wang Yeqiang, the Chief Investment Officer of CCB Trust Co., Ltd., Xu Xiaolin, the Founder and Chairman of HUAGAI Capital, and Wei Bo., the Chief Representative of the state of Baden-Wuerttemberg in China, jointly discussed the opportunities and challenges.
The presenter asked,“how to become an excellent sub-fund to get more support from the mother funds of Beijing Science and Technology Innovation?” Liu Kefeng, the Chairman of Beijing Technology Innovation Investment Management Co., Ltd., answered this customized question. Regarding our selection of GPs over the past few years, we, as a science and technology innovation company, attach importance to common GPs, but paid more attention to their investment understanding on key & core technologies and their abilities to serve key & core technologies from the perspective of their performance, team management and industry focus.
During the transformation of creditors to equity investment organizations, what is the most difficult is change of thinking mode. So what CCB Trust Co., Ltd. have done to change the thinking mode and DNA for equity investment? A deep-seated question was raised. Wang Yeqiang, the Chief Investment Officer of CCB Trust Co., Ltd., responded as follows: First, in fact, the China Construction Bank, as a banking group, have constantly made efforts in this aspect from the medical fund of CCB International. I believe this is important. Therefore, we have been accumulating experience from generation to generation in the service for invested enterprises in view of our talent team, customer reserves and LP reserves. In addition to our CCB Trust, CCB has also set up a science and technology innovation fund with the Development and Reform Commission, established CCB Equity, and also founded a subsidiary in this aspect. Therefore, we are in the Mesozoic link. In fact, we have a system to complete this task, including CCB International, CCB Trust, CCB Equity. This is a process of historical accumulation. Second, in this process, CCB Trust is still striving to achieve marketization and professionalization. From the perspective of marketization, the employment mechanism, the equity investment team, including all links of fundraising, investment, management and withdrawal, and post-investment management, must be followed up. Moreover, our follow-up investment mechanism has been in the process of implementation.
In the second summit conversation, Wang Yan, the partner of CAS Investment Management Co., Ltd., Mi Lei, the founding partner of CASSTAR, Wang Guangxi, the Managing Director of LCIG, Cai Tiezheng, General Manager of Guangfa Qianhe Investment Co., Ltd., and other representatives in the field of venture capital investment, freely discussed the technological innovation, value investment and capital markets. The words from Mi Lei, the founding partner of CASSTAR, made people resonated. He said, “career in key & core technologies is just like a moon where the temperature is too low or high. It is bleak at the beginning but hot now.” In his opinion, Chinese people particularly have "sense of hunger" in many fields. However, the enterprises will blindly follow the trend after this “sense of hunger”transferred to investment. Following the trend will easily cause adverse effect to an enterprise under the background of hot issue. Independent thinking and judgment are extremely important for value investing.
In 2020 when events constantly change, it is hoped that the uncertainty will not stop the pace of technological innovation and equity investment. Two-way empowerment in scientific and technological innovation + capital shapes is a good ecology to explore new paths for economic development. At the summit, Zhai Lixin, the Director of the Zhongguancun Science and Technology Park Management Committee, shared the current scientific and technological investment layout and exploration practices of Zhongguancun. In his opinion, innovation comes from technology, develops with capital and succeeds in the market. Zhongguancun is the most active area for angel investment and venture capital throughout China, and capital has become a key element in the high-quality innovation ecology of Zhongguancun. According to Zhai Lixin, in the future, Zhongguancun, as a demonstration area, will continue to play its role of test field to take the lead to try and practice, so that it will become an area with the best venture capital policies, the most concentrated and promising venture capital institutions, and the highest return, so as to build Zhongguancun into an important venture capital center with global influence.