Source: Times Weekly Author: Huang Jiaxiang

it is difficult to raise funds, investment is cold, and it is less cautious to sell. this is the intuitive feeling of yang lei, founding partner of huashan capital.

"at present, we still have 'bullets' in our hands, but the trend of difficulty in raising funds is under great pressure. We will be more careful and choose the best when choosing investment projects." Recently, Yang Lei said in an interview with the times weekly that this is also a good time for equity investment. The market is in a relatively calm state, the valuation is low, and investment institutions are easy to invest in.

Founded in 2010, Huashan Capital is a global growth stage venture capital fund that focuses on investing in technology growth stage startups and currently manages billions of dollars in funds. Hard science and technology investment cycle is long, Yang Lei has lamented, Huashan Capital over the years in the "lonely forward". It was not until recent years that Huashan Capital ushered in the harvest period. It has invested Unicorns such as Unity and Twitch in Silicon Valley and hard technology listed companies such as Zhaoyi Innovation (603986.SH), Company 9 (689009.SH), Xinyuan Micro (688037.SH) and Anji Technology (688019.SH) in China, with a total investment income of nearly 10 times.

Yang Lei is also known as the "sniper" of hard technology. Huashan Capital looks at more than 1,000 projects every year, with an investment ratio of only nearly 5‰. It does not sell much, but it pays more attention to the accuracy of investment. He told the Times Weekly reporter that Huashan Capital's investment logic is "two single-minded and one black, taking care of the head and the tail", professionally focusing on the dark horse, while focusing on exit.

Yang Lei, founding partner of Huashan Capital; Interviewees for Figure

Huashan Capital has been focusing on high-tech/hard technology, focusing on the core bottom of technology and technological development, investing in the core components of semiconductors, new energy vehicles, and artificial intelligence big data. Yang Lei will not invest in companies that are too dazzling at this stage, but will focus on digging out potential underwater dark horse projects, such as some projects that look like "four dissimilar" projects, which others cannot understand, cannot see, and dare not invest in, but Huashan feels It is very powerful and has excellent cost performance. "The leakage is left to those who understand, which tests the true skills of investors".

Zhaoyi Innovation is a typical investment case of Huashan Capital. In 2011, after three rounds of financing, Zhaoyi Innovation encountered a new round of financing problems. This was because the company began to enter the memory chip market segment at that time, but it was not favored by everyone and considered it difficult to compete with international giants. Huashan Capital saw the opportunity inside and entered decisively and got a considerable share of the investment. In 2016, Zhaoyi innovated in the-share listing, since then the market value once reached 140 billion, Huashan Capital chose a relatively high point when the exit.

Yang Lei said that Huashan Capital has developed a methodology to dig out the dark horse, paying more attention to the quality of the entrepreneurial team, the matching degree of the entrepreneurial background with the industry. Tsinghua Department supports half of China's semiconductor industry. Huashan Capital is keen to select projects with Tsinghua alumni background. Huashan Capital team also often takes part in venture capital competitions to learn more about entrepreneurs and projects. At the same time, Huashan Capital pays attention to the ecological circle of an industry and invests in the upstream and downstream, and excavates the dark horse projects in the upstream and downstream among the technology companies previously invested.

In June this year, Huashan Capital invested in Zhaoguan Electronics, an artificial intelligence visual chip design company. Yang Lei said that the reason why Huashan Capital invested in Zhaoguan Electronics is related to Movidius, a European company that previously invested and successfully acquired by Intel. Movidius is a well-known artificial intelligence visual network acceleration chip company, and Zhaoguan Electronics is considered by the industry to be a more technologically advanced Chinese version of the Movidius. Huashan Capital will look for similar investment opportunities in the industry and make a series of layouts. This "style of play" is very unique, and dark horses are generally invested in this way.

Yang Lei said frankly that artificial intelligence is very hot now, but Huashan Capital does not like to chase this hot tuyere. At present, AI big model competition upgrade, set off a "hundred model war", is expected to win the final company is not many. During this period, there will be a market bubble, and then slowly cool down, and some companies will slowly develop in oblivion. This is often an opportunity, Huashan Capital will generally look for opportunities in the dynamic development process; at the same time, it will also look for opportunities in some subdivisions.

"Head and tail" is Huashan Capital's consistent investment style. "The longer you invest, the more you realize that it is not enough to invest in a good project. You can't withdraw anything. You have to invest well and retire well." Yang said the establishment of the board and the North Stock Exchange, as well as the implementation of the registration system, smooth the primary market exit channels. At present, IPO is still the main exit channel for domestic VC/PE, and the M & A market has not really developed. It is expected that in another 2-3 years, there will be more opportunities for market integration and more diversified exit channels.

At present, China's equity investment market is still in a downward trend. According to the "Overview of China's Equity Investment Market Development in the First Half of 2023" released by Qingke Research Center, the number and total size of newly raised funds reached 3289 and 734.145 billion yuan respectively in the first half of 2023, down 0.3 and 23.5 respectively from the same period of last year. Among them, foreign currency funds continued to decline, with the number and scale of new offerings falling by 54.9 and 35.4 respectively. In the first half of the year, the number and amount of investment cases reached 3638 and 292.965 billion yuan respectively, 37.5 per cent and 42 per cent year-on-year.

In Yang Lei's view, the current equity investment market is at the bottom of the cycle. Some people are watching and some are conservative. I believe that with the recovery and growth of the economy, the equity investment market will slowly recover and come out of the bottom. In this process, the industry will also undergo a reshuffle. Non-professional GP (general partner, generally referring to equity investment institutions) may slowly withdraw. Recently, investors have already left the industry. Some funds that specialize in chasing hot spots and joining in the fun will also gradually withdraw from the market.