Hua: Pour some cold water on the gem

"China does not have Microsoft because of lack of funds to support?" Small and medium-sized enterprises on the gem grow into a big enterprise? It's naïve to think so!　　"Hua not without worry, this witness the Chinese venture capital industry from scratch of the elder personage, in the gem before the market still can't help to say two words" not sound "words.　　In a few suggestions to the China Securities Regulatory Commission last month on the administration of gem listings, Hua, the president of Shanghai Venture-Investment Association, said how to identify the potential for expansion and ensure the success of the listed companies is the most concerned issue in the listing management approach.　　From the point of view of the venture capital organization, he mentioned the most important two points: giving priority to the listing of venture capital with the participation of professional investment institutions and professional investors, and the proposal to withhold a one-year lock-up period for the investment survival period before the enterprise.　　These proposals derive from Huayu's 16-year-mixed venture career. Shanghai Wind Investment Industry Hua 1992 as the director of Shanghai Science and Technology Commission, led the first venture capital in East China Shanghai Scientific and Technological Investment Company (hereinafter referred to as "Shanghai Branch").　　Looking back at the history, he said, from the risk period into the expansion period of about 30% to 40% enterprises, can be strong through expansion of the enterprise less, really big enterprises are few. The 1993 Shanghai municipal Government wanted to find a "person with operational experience," which leads to the Shanghai branch and IDG each 10 million dollar set up a Pacific investment company.　　The "marriage" of the Chinese and foreign capital has so far been talked about, but Hua said, now it seems that the consideration is not comprehensive, this is because the domestic legal environment is far from meeting the requirements of the joint venture. "In the Sino-foreign joint venture, it is difficult to raise funds, more than 20 projects have not been successful, the company lost a good tens of millions of Yuan", which makes Hua very helpless.　　On the other hand, the concept of venture capital is not understood at home, enterprises themselves do not know how to valuation, the conversion of equity is afraid to bear the "sale of state-owned assets" infamy. Until 1999, the Shanghai City issued a "18", a way to let investors and managers separate the idea of "commissioned management" also introduced to China.　　When the Shanghai municipal government spent 600 million yuan to set up Shanghai venture capital company (hereinafter called "Shanghai Ventures"), it was carried out according to the entrusted management: The investor is the government, and the manager is the Shanghai VC. After retiring from the post of Chairman of Shanghai Venture capital company in April 2003, Hua, 64, joined another 4 professionals from Shanghai Venture Investment Co., Ltd. Among them, Shanghai venture capital company accounted for 30% of the shares, 5 partners have an average of another 70% shares.　　Venture Capital Management company under the current management of 4 government-backed funds, only 500 million yuan, a total of more than 50 projects, including Shanghai Biochip Technology Co., Ltd., Shanghai Jie Festival new materials and prediction software companies, including three Swiss materials Erici gene and other projects have been implemented to exit. Recently, Hua personally the main array, from Shanghai venture ManagementThe company and other partners to set up a tracker investment management company, which will be a fully private investment management company, is currently raising funds. According to the introduction, in the future, venture capital management company will also set up more private investment management companies.　　In 16, Hua's biggest wish is to be able to produce more excellent teams for local venture investment industry.　　The opportunity brain drain from biomedicine may be a big "natural enemy" of a good management team, although Hua has such a regret, but he is very frankly admitted that in the late 90, the reason why daxing to foreign-funded enterprises to job-hopping, and incentive mechanism, but by the state-owned capital and capital distinct nature of the decision. Whether it is Shanghai branch or Shanghai venture, in such a pure state-funded background, a strong venture capital concept of young talent can not be reconciled to long-term garrison.　　One reason is that state-owned capital, unlike capital, can develop indefinitely, the government cannot always inject money into it; the second is that the whole idea of running state-owned assets is not for profit, that is, from the angle of preserving and increasing value, the state-owned capital participation in venture capital is only the guiding function, and it is not a profitable investment that really engages in "28 principles" Bio-Pharmaceuticals is one of the highest on the Nasdaq in 2007, and insiders believe the subprime crisis will "force" the American biopharmaceutical industry fund to come to China to find projects.　　But Hua that domestic peer pressure will not increase precipitously, as these foreign funds trying to enter China do not know how to operate in the domestic legal environment, do not know how to transition to renminbi funds, or do not know where to find a partner. Shanghai Venture capital invested 10 projects in the biomedical sector, and now has 7 exits, of which 6 are sold to foreign companies.　　Like the star gene, Rui Guang technology, respectively, into the Japanese and French companies pocket. The purpose of government investment is not to make money in itself, the total capital of Shanghai venture to today has exceeded 6 billion yuan.　　But Hua the most regrettable: the real impact of the local VC platform is very small. Hua said that companies often do not have the ability to independently assume the task of research and development, willing to produce generic drugs, to a large extent, the impact of technological innovation.　　And those who get the government support of pharmaceutical companies, such as Zesheng technology, the company to go abroad to do clinical experiments on the need for billions of dollars, even in the domestic also need a good tens of millions of yuan; it is hard to help the Shanghai venture and other local VC companies to do it.　　Capital helps large, middle-and late-stage companies to be more overvalued, need of input (research and development, marketing, large-scale production) also more, in Hua View, rely on government industrial funds to promote the development of those large-scale projects or feasible way, but the real problem is that the domestic VC generally small, the number of industrial funds is not enough. Only 6 of the National Industrial Fund, 2 High-tech industry funds in Mianyang, Sichuan and Suzhou, Jiangsu Province, located in Shanghai is the Financial industry fund, but Hua that the fund can operate in the form of the establishment of investment companies, that is, the use of delegated management to set upThe investor and the manager are separated. However, investors let management companies entrust management, and fund companies directly operating funds or different.　　Legally, in the event of a dispute, the investor is held accountable.　　The size of venture capital is not good for investment managers, because investment and fund operation also need cost, foreign big fund each partner at least 10 million U.S. dollars, so that 2% can also maintain the day-to-day costs. According to the law of the development of venture capital, venture capital needs to establish the following mechanisms: first, the establishment of risk management institutions to evaluate and recommend projects, and accept investors entrusted to the project management; the second is to implement the fund system, set up venture capital fund, and enact relevant laws and regulations to absorb funds　　　The third is to establish the venture capital system including second market, and improve the mechanism of investment, operation and exit of venture capital. In terms of exit mechanisms, Hua that the domestic exit channel has yet to be improved; but real venture capital through the listing of exit is very few, in the United States, the proportion of less than 20%, one reason is that some of the immature development of SMEs out of the listing requirements are still a short distance, another reason is the United States mergers and acquisitions activity Some large enterprises often buy small businesses with innovative results to maintain their position in the industry.　　But the domestic strength of the large enterprises themselves are not many, the legal environment of various approvals also let mergers and acquisitions can not be carried out smoothly. Hua said that China is still in the first stage, but we can go in parallel, cannot wait until everything has been arranged for action, which will pay higher opportunity costs, the key is to adopt appropriate strategies.