8 Ask VC: How should Venture companies "alongside the wealthy"?

What do the two sides call it? China-Europe Business Review (hereinafter referred to as CBR): What do you know about big business acquisitions/stakes in startups? Yang Xi: The big Enterprise has the industrial platform, the fund platform, the market channel and the manufacture platform and so on, has the scale effect. The core technology owned by small enterprises and the platform integration of large enterprises often have greater synergy effect. Mergers and acquisitions or shares often occur in small enterprises in the subdivision of the field gradually mature and show rapid growth, the pursuit of integration of both sides will be particularly strong. Small enterprises want to seize market opportunities to expand rapidly, but limited by funds, channels or production capacity constraints, and large enterprises are highly complementary, it is easier to facilitate the strategic level of cooperation. For example, Tencent based on its strong micro-credit and traffic base, and constantly through the acquisition and expansion of new product lines. This can fully enlarge the platform value, through the initiative to buy shares or mergers of other small enterprises, the platform value will continue to expand. What is the trait of CBR: What are some of the traits or metrics that you will pay special attention to when several big companies want to buy the companies you invest in? Yang Xi: The first thing we need to do is to see how the deal is positioned. We sell companies to big companies for two reasons. The first is the withdrawal, at this time the focus of attention is the price and terms; the other is the integration of common development, together bigger, at this time we consider the factors will be more, to industrial enterprise integration, for example, our invested enterprises have a strong technical basis of subdivision areas, and the integration of the party has a strong capital channels and production platform, the purpose of mergers and acquisitions to expand, in the industry to seize more market opportunities, we will consider the risk of integration, the acquisition of the target on the overall platform performance flexibility. Three questions how to prove their value of CBR: In the process of looking for a backer, "alongside the rich", how to prove their value to large enterprises? Yang Xi: The timing of mergers and acquisitions is best when the value of the enterprise has been reflected in the time, the risk to the buyer, the smaller the uncertainty, the better the price of selling. Has the niche market for small businesses been started? Has the position in this industry been established? Have successful cases supported validation of technology or schema? Subsequent orders or potential customers? If the market trend is still uncertain, technical feeling good but not verified, may not be good mergers and acquisitions opportunity, do things well first. Iv. what are the failure factors for CBR: Partnering with big companies may seem like a lot of benefits, but are there any less successful examples of cases you've contacted? For what reason? Yang Xi: The probability of a merger failure is high. Entrepreneurial team filled with blood to join a larger platform, in the running-in process, especially during the honeymoon period, if and before the expected difference, the team is easy to lose, High-tech industry mergers and acquisitions, people are the most valuable factor, but team integration is the greatest risk. A relatively low-risk approach to acquisitions is to maintain the relative independence of small businesses. A classic example is Nestlé 's acquisition of Hsu Fu Kee, which still retains the independence of the brand and the independence of the team management, while Nestlé exports its management, resourcesand new product lines. The two are tied very close, but at a certain distance, the probability of success is higher. Five questions what is unrealistic fantasy CBR: big companies can help small companies what? What is the illusion that a small company shouldn't have? Yang Xi: Whether it is a large platform acquisition or a stake in the start-up enterprise, the start-up enterprises must realize that the end of the transaction is only the beginning of business integration, to pry the resources of large platforms also involves the coordination between the various departments of large enterprises. For example, in the case of large enterprises, the investment sector of the upstream suppliers, for large enterprises, investment in a start-up enterprise, does not mean that the procurement Department of large enterprises simply because the investment department of a project to switch existing mature suppliers, this is unrealistic. The most is to open a door for you, in the business, the decision to purchase is still quality, cost, delivery and service orientation. Six questions sell or operate independently cbr: What kind of enterprise should choose to sell directly? Yang Xi: Selling directly is the first type of unconformity that has been talked about, and the companies that have met the ceiling due to their own resource constraints in the subdivision area choose such outlets. In particular, the recent active a-share listed companies to buy game company examples, the performance of the game company is very poor, the success of a product does not mean that the inscribed products are equally successful, in the most popular product benefits when Exit is a good choice. Seven questions how to maximize the benefits of CBR: How to ensure that a start-up enterprise to maximize their interests, after being a shareholder, how to be in a more favorable position? Yang Xi: First, the equity structure is the foundation of everything, if it is a total loss of control of the acquisition, for the interests of the start-up enterprises mainly rely on the key provisions of mergers and acquisitions; If the merger is a relatively balanced, multilateral equity structure, the composition of the board becomes very important, as well as the rules of Procedure for some key issues, such as IPO, executive appointment and dismissal. Next is the enterprise management right, after the merger Enterprise's operation Management by WHO to decide, carries out and is responsible. Eight questions how to improve the success rate CBR: How to ensure the success of the waterfront? Yang Xi: When the two sides do not really start substantive cooperation, each other is based on the expectations of judgment. A relatively inclusive and more resilient corporate culture contributes to the success of integration after mergers and acquisitions. But China's private enterprises are often the founder of a strong personality of the powerful culture. It is better for both parties to have sufficient time to communicate, or to start with business cooperation, rather than two completely unfamiliar teams to come together. Small companies should have a clear understanding of who the future is to work with, to understand the intent of the merger, is purely for the performance figures or concepts and mergers, or really optimistic about the business, willing to have more input here.