Lei CAI of Jiuding Capital: There Is No “Prince Charming” in Investment

2010-01-24

In the 2010 China Small and Medium Enterprise Investment and Financing Summit Forum held yesterday, Lei CAI, managing director of Jiuding Capital Co., Ltd. (“Jiuding Capital”) shared her thoughts on how small and medium enterprise obtains investment. 

Lei CAI emphasized that when selecting projects, there aren’t dramas of “Prince Charming” or “Cinderella”. Investment is a rational and reasonable work. For those who want to obtain investment, the most important thing to do is to enhance their quality, becoming the leading enterprise in the field and then grooming their business model with the help of financial advisor.

Lei CAI summarized four essential factors for an enterprise to go public: 

First, the temperament of the enterprise should be in accordance with the requirements for IPO.

Second, the core management team of the enterprise should be determined in spite of the uncertainties in the course of IPO due to the special circumstances in China. It might take a long time and a lot of regulation costs, especially for small and medium sized enterprises, which calls for the steadfast determination of listing. 

Thirdly, enterprises should summon an experienced mediation service team, including law firm, accounting firm, sponsor and broker. 

Fourthly, find one to two professional PE firms that are dominant and able to provide good value-added service to cooperate before the IPO to raise the success rate. 24 of the first 28 enterprise listed on GEM plate have the support of VC/PE. 

Lei CAI reckoned that there are currently four trends supporting mid and long term investment, namely industrialization, urbanization, industry centralization and capitalization of high quality enterprise. With the backdrop of these trends, there are many fields with the opportunities of mid and long term investment. Among the first 28 enterprises listed on the GEM, Jiuding Capital invested Gifore Agriculture and Geeya Technology, which according to Lei CAI, meet the development trends. 

As for whether the participation of VC/PC would bring clashes with the enterprise management, Lei CAI reckoned that the involvement of VC/PE with the management’s decision-make differs in their investment models. Jiuding Capital, as a PE firm, will not involve the daily operations. However, Lei CAI suggested that if there were conflicts among VC/PE and the management, the most important thing is to enhance communication. This is a secret trick for VE/PE and the enterprise to get along with each other.