The seven-year change of the Arctic light

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Seven years, for a start-up enterprise, can do some summary of the time; for a VC as well. Good at the clear zero of the returnee entrepreneurs Deng led the Northern Lights venture to explore a set of their own investment logic.

Article | Shaolin Pictures Available | Arctic Light Venture

Standing in the center of the 32 floor of the China Trade Centre, the Deng is behind the CBD complex, and a whole Chang ' an street.

This is the new office that the aurora Borealis moved into early last year, with 1200 square meters of space separated into a number of different conference rooms and large single office rooms. There was a Deng in it, and the furnishings were very simple. In addition to the name of the doorway, do not see any level, title.

If he doesn't travel, he spends most of his time here. Sometimes work too late, simply live in the downstairs hotel. Working overtime on weekends, he likes to stay in the next room with stereo and vinyl discs. Another enthusiast, the office layout "Audio United Nations" Zhou 祎 to observe his equipment, bluntly: "Too bad, back to you get a set of cattle." "I don't collect audio, I collect music," he said. ”

This may be understood as, in the Silicon Valley to sell the NetScreen 4.2 billion dollars, experienced the glorious life of him, now in addition to wealth and success, have more spiritual appeal. Water Wood Tsinghua BBS on the spread of his early 2005 when he returned to his alma mater a confess: intend to run a non-profit folk think tank, the Chinese enterprises to the world.

So, the previous six years the office in the adjacent Zhongguancun Tsinghua Science Park seems very reasonable: the most opportunity to go out, it is Deng most familiar with the TMT field.

But in addition to the shift in office space over 7 years, its investment strategy has also quietly changed: clean technology (including: New Energy, energy conservation, materials, advanced manufacturing) investment ratio has accounted for 25%, and further into the health care, but also 10% of new consumption 5%; The proportion of investment in the TMT sector fell to 60%.

This adjustment to a founding seven years, the control of the 1 billion dollar VC, is not an understatement. To this end, our correspondent has visited Deng and Jiang Haotien, Lixin, Yang and Yang Ruilong for several months, and has contacted many entrepreneurs who have accepted their investment, trying to clarify the trajectory of this change and its internal logic.

Portfolio: High and low beta-value dumbbell structures

"Investing in clean technology, health care is an early-established idea, but it takes time to build a team." "Deng denies the reporter's question about the adjustment of the Northern Lights ' investment strategy:" We don't feel good in any one area and how the rhythm depends on the team's DNA. " ”

The Arctic light unveiled the first clean Technology project, a 2007 investment in the bio-fuel company of the life of the game. Thus, at least since then, Deng has had the idea of cutting into the field.

His first consideration was to balance the risks: the beta value of the TMT project (System risk sensitivity) was high, explosive and volatile. This year's 300-500% growth is likely to fall sharply next year. The clean technology, the health Care Project The beta value is relatively low, means is stable. It may only grow by 100% a year, but it can last for 5 or 6 years. In particular, health care, the Northern lights involved in more medical devices, medical services, not only beta low, cyclical also very weak, doubly robust. Together with TMT, it can guarantee the benefits of the fund.

This is not enough to explain the problem. There are a lot of low beta industries, such as energy, chemicals, automobiles, agriculture, why not?

In this respect, Deng has another way of thinking: according to the social development trend selection industry. These trends include: urbanization brought about by changes in consumption patterns and consumption upgrades, processing, low-end manufacturing to the transformation of advanced manufacturing, the Government's environmental protection, Low-carbon economy, the emphasis on quality of life, as well as mobile internet, it revolution brought about by the life, consumption patterns change. In his view, each trend is a huge business opportunity, but for northern Aurora, in the field of traditional consumer goods, modern agriculture seems to have no advantage. As a result, the Aurora Borealis's two new bright spots outside TMT – clean technology, health care – have automatically surfaced. As for advanced manufacturing, Deng is often used to sum up new energy, materials, energy saving and environmental protection, precision manufacturing, and sometimes refer to medical devices. This is because these areas of technology often have to rely on the manufacturing process to achieve the final.

"TMT is something the world can do, and it's not necessarily that China can do it better." But advanced manufacturing is not the same. "He has no reservations about the idea that the labor costs are too high and America's manufacturing is shrinking," he said. Lack of this link, the technology is incomplete, laboratory results can not be engineered and mass production. China's labor costs are relatively low, education is relatively high, coupled with the economy is in a transitional period, the Government strongly support, and has a huge local market support, can be said to be the world's most advanced manufacture of the best place. ”

In terms of investment, he saw the opportunity: a certain technical applications, and even the original technology of the Chinese companies, across trade, agents, directly to the domestic and foreign two of the market's own brands. or from the import substitution start, main domestic market again seek export. #p # subtitle #e#

Three major investment methods: Platform/infrastructure, technology, "go out"

There are different ways to invest in a variety of areas, and new members of the investment team who focus on these areas also bring their own methods. But repeated comb, will find that compared to the difference, the continuation of the common but more. These commonalities are called the Northern Lights investment method.

Method One: Preference platform, infrastructure properties

North Aurora focuses on the mobile Internet field as an example. In its old version of the official network, this once as an independent category exists, it is evident that attention. However, due to the early stage of investment, out of the reluctance to expose competitors to consider the case published only four. In addition to the early years of the exhibition, the recent more representative is the touch-control technology, the Sino-Division Chong da.

Touch Technology and its founder Chenhao Zhi has been widely known in the industry, no longer. But the Northern lights are more prized by its cocoa china--, China's largest iOS developer community, game development engine and game distribution platform, than Superman's "Fishing Man".

The company is a provider of core technology services for the Android operating system. The team's Linux development background makes it a relatively system-optimized snack, the technology is much lower and larger--about 800 technicians and more extensive business--chip-side arm, Qualcomm, Intel, Motorola, Sony, Sharp, NEC, LG, Huawei, ZTE and the major carriers are their customers.

Not the app, nor the fiery entrance, security, storage. The former is the iOS service platform, while the latter is in the infrastructure of Android's vast industrial chain. This partly reflects Deng's understanding of the mobile Internet: apps are less risky, but not too big. The possibility of platform and infrastructure is low, but it can be bigger.

Similar ideas can be found in other areas: Ponnen, set Sheng (SPS) in the field of energy storage in the new source, too time core light, fused photoelectric production of LED epitaxy and chip in photoelectric, Sanofi research and development cost reduction of 90% of the transparent conductive glass in its application area-using the touch screen 3C, It's all about infrastructure. And the East Sharp wind power to provide the safety operation of the fan-dimensional services, dimensional city, home food will be (take-away delivery service), the United States Regiment, many customers (C2B service platform) and other O2O projects, is the platform.

This approach can be traced back to the early Northern Lights in TMT investment preferred data communications equipment, chips, software, these traditional ICT (information Communication Marvell) project under the great TMT concept of natural platform and infrastructure properties. In fact, Deng's own netscreen--web-based security company is a typical infrastructure. Perhaps this boils down to thinking inertia: Because of familiarity, so optimistic.

Method Two: Focus on technology

Deng himself and the team are mostly technical origins, focusing on technology has always been the Northern Lights eye-catching mark.

On the one hand, this can be interpreted as a preference for technology-type projects. Not only technical applications, but also highly sensitive to the world's synchronized original technology that China has started to rise in recent years.

Shenzhen Micro-point is the representative. The company introduced semiconductor microfluidic technology into IVD (in-vitro diagnostics) and subverted the traditionally large and expensive equipment that must be equipped with a central laboratory to simply insert a drop of blood on a plastic card for a few minutes, low cost and equally accurate. Not in the domestic label company, overseas competitors are Roche, Abbott. Silicon Valley, China has a research and development, manufacturing team, the goal is to POCT (bedside real-time inspection) to occupy a global leadership position.

It is a first-round venture to invest in renminbi, and in theory the second round of foreign investment is difficult. But one of the founders, director Lianping, told reporters that it was very trusting of the Northern Lights ' respect for technology. The tiny dots in Silicon Valley's offices in the Deng Park, which was launched by Santa Clara more than 10 years ago, he believes the pioneer has a world-class Chinese business dream, rather than a short-term gem listing.

On the other hand, this is often misread as the emphasis on technology over the market.

In fact, we think that the market is really, really is the most important. Deng, who has always been concise, talks about two "real" and one "most" to emphasize and clarify: "A large number of cases are more important than technology in the Chinese market." People are wrong can also change, the direction of the wrong you are not a little way. I am also reversing the lessons of the past in giving priority to technology. ”

The market is a very big word, but it is not general. If it were to be dismantled in size, growth, enter the opportunity, marketing capacity of four levels, the Northern Lights weighing technology, market relations can be described as follows: first of all determine the scope of the project is large enough, the growth rate is not fast enough; On this basis, it is required to have entry barriers for a period of time, preference for technical barriers , in the previous two conditions, there is a certain degree of tolerance to enter the time, even if you want to be in the dark for a long time, if the founding team's marketing capacity is slightly weaker, to be complementary or outsourced.

Project verification: The new energy fields of the year--crystalline silicon PV modules, fan manufacturing, lithium batteries, led sapphire substrate, the market is large enough, growing fast enough, but the Northern Lights are not cast, because the technical barriers are inadequate.

Method Three: Watch the Chinese company go to sea

While the "go out" market space may not be as consumer-to-consumer as it is, the stakes are somewhat higher, but it does not prevent the Northern lights partners from often talking about their eyes shining as they make their business world-wide. The eye-catching position of the Northern Lights official website, impressively: to support world-class Chinese entrepreneurs, nurturing world-class Chinese companies-since the world-class goal, of course, can not only hit a Chinese market. The pursuit of clean technology, health care, TMT is no exception.

"There are so few Chinese companies that can have a certain influence overseas. There are few opportunities to invest in such a company, but it seems to us to have a special meaning. With literary and artistic remarks, we are the ideal VC. "Jiang Haotien, who joined the Arctic Light in 2006 and invested with Deng's TMT, confirmed to reporters that this is one of the investment themes of the Northern Lights. In the TMT field, he has found three operable directions: the use of China's manufacturing advantages of electric dealers, such as cross-border business of the Big Dragon Network, can play the Chinese engineers hard-working spirit of high efficiency, low-cost distribution platform, such as touch technology; cloud-based services, such as connecting the world's top seven hotel chains with most of the largest travel agencies, Provide background booking for Derby software. #p # subtitle #e#

Team: The cornerstone of success

Compared with these external concerns of investment methods or skills, in Deng view, to shape a VC more urgent work is actually in the internal: and LP communication, strengthen team building.

The Arctic light is not the first to raise renminbi funds of the dollar VC, before it, has Sequoia Capital, IDG Capital, Sai-Fu Asia joined the Chinese gem Capital Feast. This "slow-beat" is Deng intentionally, because he hopes to spend more time communicating with the US dollar LP, and can use previous cases to reduce the amount of persuasion. Speaking of the different ways of communicating with the dollar and the renminbi LP, he once again referred to team management: The dollar LP mainly looks at the team composition and the past resume, hardly asks about the investment project and the field proportion, but the renminbi LP is just the opposite.

From the point of view of time, after the life of the Ponnen, although the Northern Lights in the 2008 and 2009, even though the clean technology project, but the large area spread out from 2010 onwards, especially in the energy storage Project, set Sheng (SPS), sewage, Sludge treatment project East Shuo Environmental protection, green for the demarcation. The reason behind this is that the renminbi fund, which is more focused on the low beta project, is one of them, but the decisive one has joined the new partners Lixin, Yang and Yang Ruilong to inject new resources and horizons into the northern Lights.

Lixin and Deng are students of different grades in Tsinghua Electronics department, and stay in the domestic development after graduation, with many years of management background of listed companies and the relative lack of native experience of the early northern Auroral group. 2008, at the invitation of Deng, Lee Northern Lights as a consultant, a year later officially joined. In this process more involved in the collection of RMB funds, and assume a considerable part of the work of communication with LP. His investment area is mainly in the clean technology, the storage energy is his handwriting. This is a traditional power generation, transmission, power transformation, distribution of the four major power supply beyond the trillions of large market, but also to open up new energy in various segments of the joint and the entire industry bottlenecks. His investment in Ponnen, set Sheng (SPS) in the vanadium batteries, supercapacitors two direction of the revolutionary technology breakthrough, and has become a leader. The layout will add points for future investments in other new energy projects.

Yang, who served in another international venture capital of VC, has served McKinsey for seven years. Career change after long-term focus on cleaning technology, which led to the Northern Lights deep linked industrial chain Foundation. In fact, the Northern lights in each of the subdivision areas of the layout of a considerable proportion of the recent 2.5 in his hand intensively completed. Among them, Dong Shuo environmental protection, in the green because of the use of renminbi funds, opened the Northern Lights investment "small and beautiful" model of the precedent, and presented a localized thinking: the Ministry of Environmental Protection "Eleven-Five" during the introduction of policies to strengthen urban sewage control, since then China's new sewage treatment stations more than the last 40 years combined. In the process of sewage treatment will produce a large number of sludge, sludge treatment and sewage treatment together are very likely in the "Twelve-Five" to usher in an explosion of growth. China's sewage, sludge components and foreign differences, coupled with the undertaking of this business must be frequent with state-owned enterprises, government departments, will have more technical advantages of foreign companies in the door. If the domestic competitor wants to occupy the leadership position, needs not only the technology, more is takes the project, the technology conformity, with the Government communication ability and the past experience balanced balance. With such a standard to take in the petrochemical, steel wastewater reuse field occupy the leading position of the East Shuo environmental protection, and then found in green, in a sense to the renminbi VC camp announced the arrival of the Northern Lights.

Yang Ruilong's style of medical investment is diametrically opposed. He has served in the former Moftec (now merged into the Ministry of Commerce) and worked as Vice consul of economic commerce at the Chinese Consulate General in Houston, before joining the Northern Lights in 2010 as investment director of the San Francisco venture capital Asia. He is very cautious, although the new drug research and development, reagents, equipment, medical services companies, has been cast only Shenzhen micro-point, such as one or two companies.

The addition of new partners led to the whole team screenwriters. By looking at the biographical data of 20 members of the investment team, it is clear that 1/3 have energy, new materials or life science backgrounds. Most of them have just joined in the last two or three years, in tune with the "Cross-border" moves of the Northern Lights in the last two or three years.

It should be stated that the renminbi and the dollar are invested by the team, and everyone has the right to decide whether to use the renminbi or the dollar according to specific projects and the wishes of the founders. Is the dual-currency fund in the direction of investment is consistent, but the renminbi project can be "small and beautiful" point, the stage on the latter point.

Common values

Several partners spoke of a common reason for joining the Northern Lights-values. Specifically: look long, responsible, do not make quick money.

Their background is corroborated by the fact that they are all biased, not financially. This allows them to look at the project in addition to research earnings, business negotiations, usually with entrepreneurs talk about a round of values to help judge: whether not to do evil, whether there is beyond the financial return of the ideal, strong sense of responsibility, a broad mind. This approach can help to shield some entrepreneurs with higher moral hazard and reduce the risk of moisture in their earnings.

Conversely, the Northern Lights impress entrepreneurs not money, but industry resources, help not to mess with the mentality and to the operational challenges. Entrepreneurs encounter problems, do not need to sit down to open the board, at any time to call mobile phone can communicate. Because of this, there are a lot of options in the A round, and in the short time after contacting the Aurora Borealis, it decided to accept his vote.

In the first year after the investment, the Northern Lights in the company's board of Representatives is Deng himself. In the face of all the initial start-up team, he has been using the way of questioning to communicate with it: constantly launch the topic, promote thinking, both sides discussed. Shangqiang, the president who answered the question, was under pressure at first because a lot of the questions were not thought clearly. Then enjoy the fun of this kind of thinking collision, and feel the future gradually clear.

"He has experienced the whole entrepreneurial process, the next step to how to go in the heart is very clear, but always said that they are only based on experience to make recommendations, not necessarily, the decision is always the entrepreneur himself." "Geng enhanced the reporter depicts a formal interview in the situation is not easy to see, in his eyes as a big brother-like kind of Deng:" I have contacted the successful people are mostly highly confident, inadvertently may assert something, if the other side of the opinion will feel the invisible pressure. But Deng did not once, I think he deliberately evaded this point. ”