VC embarrassment: 70% this year did not cast 1 cases Electric Corps buy VC average loss of 50%

The failure history of 17 start-ups has been forwarded over 60,000 times on Weibo, causing great concern. Many readers will not understand the question: the large number of investment elite of the major venture capital, why the wrong enterprise. While failure has brought about the growth of entrepreneurs themselves, the huge sums of money invested in similar electric or group purchases have also contributed to a huge waste of resources and contributed to the bubble of the national economy. Is there a more scientific and risk-averse mechanism that will allow investors or entrepreneurs to have a higher success rate and win altogether?

This is a thoughtful question; the internet industry in China over the past 2012 years has been as aihongbianye as the overall environment. 70% of VC has not voted a case in the year, which is the first two years of the electricity dealers and group buying spree. It is said that the two-year investment fund and group buying venture capital funds average book losses in more than 50%. From the stock market, the real profits of pots and pans are 360 navigation as the representative of the navigation station and the media.

If VC's failure rate is so high, it is conceivable that most of the start-up enterprises are naturally and dismally. How did it all happen?

To answer this question, we must first understand the venture capital industry. Venture capital should never have a halo that doesn't match. In the United States, VC is only a branch of many financial investment institutions. Venture capital, like many equity management funds, is nothing more than a wealth management tool. Fund managers let investors (including university funds, pensions, corporate funds, and wealthy individuals) believe they can help them better manage their wealth and gain high returns from investing in High-tech Industries, a fund that can be raised. VC funds and we can buy in the two level of the various types of funds are the nature of the same, are helping organizations and the rich financial management. In terms of the size of the fund, VC than PE (private equity funds), not less than the two-tier market. In terms of resource possession, because of investment in scientific and technological innovation, VC funds can not enjoy real estate, ports, minerals such as the monopoly of resources to obtain excess profits. In other words, VC is a general industry, just because the information revolution in the numerous High-tech companies listed, only to let VC leap into a halo industry.

From the data of the past years in the United States, the VC industry's overall return is almost always negative every year. That is to say, most investors don't make money by investing in High-tech companies, or 20% of investment firms earn 80% of the industry's money. What does that mean? First, he is in line with the famous 28 law, and secondly, it means that the whole industry of VC is actually going downhill.

It sounds very paradoxical, why mobile internet innovation is still in the leap, but VC is not the sun? In the United States, the rise of Super angels and numerous incubators such as y-combinator, robbed the industry a large number of excellent projects, and can be quickly fatten, directly docking listing; Often VC in the middle of this ring is squeezed at both ends. To bear the high risk, but also under the technology bubble to take a high price. At both ends, Super angels and investment banks actually earn real money.

in China, VC faces more complex challenges than their American peers. It is because many of the Fund's decision-making committees are overseas, and neither the members of the Investment Commission nor the two-tier market in the United States are aware of China. This creates a Chinese-style but money-making model that may not be able to pass through the board, and the investment managers will naturally be willing to push the American-style start-up projects. For example, China's Groupon (American group), China's Facebook (everyone), China's Google (Baidu), China's YouTube (Youku) and so on. The great differences between China and the United States make it impossible to do things in exactly the American mode. However, investors, and even selected gold entrepreneurs (such as Harvard's 24 coupons Du Yinan) are many of China's national conditions are not very familiar with the returnees. When burning money, whether VC or entrepreneur, anyway burning is not their own money, nature in order to spell speed, nothing regardless. Sometimes the boss of a start-up company will be blamed by the VC fund partner if he is slow to burn money: "We invest your money to enlarge the market, not to interest the bank." "Don't be afraid to burn money, no money we can continue to melt B-round, C-round", such remarks in the market madness is the standard golden rule.

When markets make money, each company is three years on Nasdaq's crazy age; Every fund is afraid of falling behind, because once it does, it means everyone is making a big pot. But if they fail, fund managers will not be penalized enough. For example, investment managers, directors, and even some of the partners, are originally to work for the founding partner; Investment success failure is all experience, jump slot is doubled wages, who has the mind to do the basic industry research? Second, the overall liquidation of a VC fund for 10 years or even 12 years. In impetuous China, no one can wait that long, in 10, there may be three waves of money to make a chance. The biggest penalty for fund managers in this industry is that if you lose money in the management of your fund, it means that no one will continue to give you money and you'll disappear from the industry. This is in the United States professional and honest environment let everyone have a fear of the heart, after all, you have to be responsible for your reputation and occupation. The most typical is the 2000-year first wave of internet bubbles before the bursting of the internet revolution, the queen of the Internet, Merrill Lynch analyst Mary Meeker, because of the bursting of the bubble let investors lose money, Mary Meeker sadly resigned, from the industry disappeared for seven or eight years. But in China, where information is opaque, media hype and celebrity are more likely to determine whether fund managers are able to raise funds rather than actual performance. On the other hand, even if no one asked you, China can make money opportunities so much, ye may not be willing to continue to do the venture.

The meaning of this does not mean that the VC are not working. In fact, most of the VC peers I know are both smart and diligent. Many of the fund's partners travel more than 180 days a year and return mail to 3, 4 a day. Thousands of projects a year. Even so, often they pay me back with their sorry. And why?

This involves the risk control of entrepreneurship in China. China is different from the United States. The United States is a mature market. As long as the business model is right, the founder fades out, change a professional manager to be CEO also does not matter. The United States pay attention to honesty, most VC investment projects are indeed innovative, and have the potential to change the world and possible. In China, China is a developing relational society. Most of the resources are concentrated in the hands of governments and large enterprises. What China needs is not innovation, but more development. Technology doesn't need to be created, just buy it and use it. China's professional managers are also extremely immature; they are barely able to shoulder the responsibilities of start-up leadership. (Xiao can be prime minister, but can do Liu Bang?)

Most of China's start-up technology internet companies were created by young technicians. They have technical skills and enthusiasm, but often lack market and management skills. A former young genius created video company, after four rounds of financing, then each management sent a VP. Each VP is not from a traditional media, or from a company like Huawei; Everyone is a 40-year-old master. The company opens a strategy meeting, can quarrel for 3 consecutive days, each VP can shoot the table to the CEO, each person's idea is different, and only the 25-year-old genius is unable to manage these experienced but completely has no Internet experience predecessors.

Start-up companies have a lot of risks, such as government regulation that I mentioned in the history of 17 start-up failures, mismanagement, founder money laundering, market positioning errors, and so on. VC will even quarrel in the end is to cast a bluff-type entrepreneur or cast honest entrepreneurs. In China, honesty is reassuring, but not in Chinese society, and the type of entrepreneur is mixed up, but they can also play the management at any time. In China, the lack of values of the society, VC can not unify the standard principles of investment. This has caused most of the investment to become speculative.

When the capital market is good, speculation pays off. And once the recession is over, everyone is in shape. The so-called tide faded, just know who is in the nude swimming. At the start of the new decade's cycle, more discussion and reflection on failure can help entrepreneurs and investors to think about deeper issues. Only by humble reflection can we reconstruct the new order of the Chinese technology start-up market, and let the truly good and reliable entrepreneurs stand out and the real long-term investors benefit.