Rise of the New Generation Ventures with Start-up Branding and Influence
2010-02-05
Among the first GEM listed companies in 2009, Gifore Agricultural, an agricultural machinery chain from Sichuan, stood out. Also known as “little Suning”, Gifore was the most sought-after offerings after its IPO, with share price soaring from 17.75 yuan to the highest 96.50 yuan, bringing pouring benefits for many of its investors.
The venture institution that reaped the most was Jiuding Capital Co., Ltd. (“Jiuding Capital”) established only two years ago. As one of the new generation ventures, Jiuding Capital came to prominence.
With the head of venture financing, a number of new-generation ventures sprung up, with excellent ones standing out in a short period of development and securing its market in the fierce competition with its flexibility and innovation.
However, this new generation of ventures is still facing the challenges of branding and market influence expansion in a short period of time.
Rise of the New Generation
In May 2009, Jiuding Capital bought 6.24 million stakes of Gifore with 40 million yuan and became of shareholder of Gifore. In half a year, this investment of Jiuding Capital had been added with a huge amount of value. Based on the present share price of 48 yuan of Gifore, the market value of the stakes that Jiuding Capital holds has reached 300 million yuan with a floating profit rate above 600%.
The investment of Gifore endowed Jiuding Capital, a not well-known venture then, with the title of “Golden Eye”and Jiuding Capital shot to fame in no time.
This was the first time that young Jiuding Capital came into our sight. In the end of 2009, Jiuding Capital, for the first time, climbed up to the institutional private equity ranking list released by Zero2IPO and was enlisted to China’s Top 30 PE Firms 2009 (Ranked ninth), exceeding Hony Capital, the established and well-known venture institution.
Jiuding Capital, originally known as Beijing Huida Jodin Investment Management Co., Ltd., was established in 2007. Other than Gifore, it has also invested in Geeya Technology which launched its GEM IPO in October last year and became one of the biggest winner in GEM plate. In only two years，Jiuding Capital has had two projects going public successfully . Company data shows that it has had invested 12 more projects.
It is understood by the reporter that Wiseman，the project the venture invested recently, is expected to submit its IPO materials in the first half this year, and it may have some other projects to be listed within the year.
“They moves really fast and sometimes they can make large concessions in the stake price. ”One who worked with Dinghui Investment commented. The rise of new-generation ventures like Jiuding Capital has a lot to do with the private capital characteristics and flexible operation system which is the main reason for them to secure a market place in the fierce competition.
In 2007, Xiaojie HUANG, President of Jiuding Capital found an investment team in less than a year, raised more than 1 billion yuan and made investment in many quality enterprises, including Goldcup Electric Apparatus Co., Ltd., Henan Billions Chemicals Co., Ltd., and Linoya Electronics Co., Ltd. and put a number of enterprises therein on the expressway of GEM IPO. Their high efficiency is applauding in the industry.
In the middle of last year, with a preference to pharmaceutical industry, Jiuding Capital planned to set up a new investment platform. “Mr. Bo YU, general manager of Searainbow Holdings Corporation has worked with us before, and with the large prospects of pharmaceutical industry lying ahead, it is no surprise that we arrive at the same place.” Zhongyi ZHAO, CEO of Jiuding Capital, said in a previous interview.
Before long, Jiuding Capital and Bo YU’s team came together officially. They launched Jodin Pharmaceutical Industry Fund as the new investment platform and raised 500 million yuan within a short period of time. Flexibility of this kind is rarely seen in the industry.
Northern Light Venture Capital，established in 2005, manages two USD funds and two RMB funds with a total asset value of over 5.2 billion US dollars.
Unlike other ventures that diversify their investment over different fields, Northern Light has a preference for IT industry. This has certain relationship with the experience of Mr. Deng Feng, its founder and management team.
As the founder of Netscreen, a listed company with a market value of 1.5 billion US dollars, Mr. Deng Feng has been recognized in Wall Street since long ago. Its investment team, with most of the members having experience in high-tech industry, is with a strong technical background.
“Many things in high-tech field are connected, and our team, with a technical background, has an competitive edge in the IT field.” Mr. Deng Feng said. He also commented that though many venture capitals may not have a long history, they often have founders who have been been in the field for years and thus are young but prudent and capable.
With the success of Kaixin001.com, Northern Light behind it became famous. The company has invested in more than 30 enterprises including Kaixn001.com, Redbaby, Zhuhai Actions, Baihe.com, Derby Software and withdrawn from three, showing a high-profile development pace.
Fuho Capital is another rising venture capital institution. In 2008, Fuho Capital was established by Mr. Zeng Jun-lian, vice chairman of GST Holdings, together three other entrepreneurs. GST Group was shot to fame as a leading fire alarm system and solution provider successfully listed in Hong Kong Exchange.
In just over a year, Fuho Capital has invested at least six enterprises and Nanjing Huaqi Information Technology, owner of the brand Aigo, is one of them. As is learned, the company has started the preparation for a second fund.
“Unlike the first generation of ventures, founders of the new generation institutions fall into two categories: those evolving from enterpriser with industrial background and those with expertise and resources edge. They entered the field with a clear aim. They are practical and well aware of the ways to invest flexibly and consolidate all kinds of resources.” A portfolio manager with Fortune Capital commented. The gathering effects of talent, capital and resources are now manifested in the venture field.
Challenges
“The fact that we are in the start-up phase also contributes to our performance today. Compared to other established institutions, we are more creative and enterprising.” Commented by a person from the senior management of Jiuding Capital.
Mr. Li Wan-shou, CEO of Shenzhen Capital Group and an experienced figure in the field, expressed his appreciation for the spirits of the new generation of ventures.
He reckoned that the VC field in China is now promoted both by old and new powers. New venture investment institutions are endowed with more opportunities to try new business models. More local talents with working experience in foreign investment banks and elites from various fields are joining in, urging the venture investment to a phase of clear diversification.
Mr. Li Wan-shou commented that if there are a number of VCs specialized in one field, it shall change the status quo of multi-field layout of venture investment institutions now and benefit potential enterprises and new industries.
However, it could not be neglected that the path lying ahead for the new generation ventures is anything but smooth. The biggest challenge is no doubt branding and market influence expansion in a short period of time. Compared to those well-known institutions with over ten years of investment experience in the industry, the new generation needs more time to settle down.
“Many excellent enterprises are hoping to find institutions with great influence in the industry when seeking investors，which shall be a perfect match with each other. This is a big challenge for new generation VCs. Few people know you, let alone believe you.” Said the same portfolio manager from Fortune Capital.
The owner of a bean company in Shandong also shared the same opinion. The company has been looking for investing institutions. More than ten institutions knocked their door yet he knew nothing about them and didn’t know what to do with them. He’d rather talk to one or two more recognized investing institutions.
This seems to imply that the new generation of venture capitals that came on the scene with guts and courage are at the same time confronted with a number of difficulties.