Wang Jun Reopens VC Two Market First Order: Asset Package Should Consider Buyer'S Preference, GP Must Continue To Create Value.

In February 17th, two investment institutions in China venture capital market disclosed the assets invested in the project.

Jun Lian capital disclosed a $200 million renewal fund transaction, which is the 12 item of the LC Fund IV fund. The buyer is a consortium consisting of Hamilton Lane and several international agencies.

The capital disclosed is a transaction that transfers renminbi fund assets into US dollar fund assets, and the buyer is a consortium led by TR Capital. The entire asset portfolio includes 7 projects involving an amount of about $100 million.

TR Capital is an investment agency specializing in PE two level market trading in the Asia Pacific region. It invested 70% in the capital assets transaction. At the same time, there are also Hollyport Capital Partner headquartered in London and AB Value Capital Partners in Taiwan.

For potential buyers of China's private equity portfolios, they still look at the dynamism of emerging markets. According to Coller Capital's survey of 113 private equity investors around the world, 2/3 or more limited partners believe that in the next three years, private equity markets such as Southeast Asia, Greater China and India will provide attractive investment opportunities for general partners.

The motive force of sellers is the liquidity demand of fund LP. According to the report of the Research Institute, the buyers in PE two level market are increasing gradually, the funds set up before 2011 have already been withdrawn from the nodes, and more stringent IPO censorship has been conducted. The three main factors have stimulated the development of China's PE two level market.

In February 19th, twenty-first Century economic report reporter interviewed Wang Jun, founder and managing partner of capital.

Wang Jun. Data map

On fund reorganization: there is no barrier in law, and the complexity of operation is high.

Twenty-first Century: how does this transaction flow?

Wang Jun: in principle, this transaction has no legal barriers, and the difficulty lies in the technical complexity of the actual operation. If the enterprise is already VIE structure is relatively better.

Last summer we launched the project, and the LPAC of the fund soon agreed with our idea.

In order to ensure the fairness and impartiality of pricing, we have communicated with almost all intermediary organizations that can do such projects in China. Finally, we have chosen Lazard.

After the plan is formulated, we will first hand it to our internal LPAC, which will be priced according to the market value in 2019. After the completion of the process, LPAC jointly chose the combination of TR Capital.

Twenty-first Century: Why did you finally choose TR Capital?

Wang Jun: their main founders were entrepreneurs before they worked as a fund. They spent more than ten years in Asia, and now they are the fourth funds. Many times have been seen in Beijing and Hongkong. They are very professional and do very serious work. They visit every project carefully. We are grateful for their trust and support.

Twenty-first Century: how is pricing done? The valuation of Abiee and film is not low.

Wang Jun: as a matter of fact, we talk about it as a whole. The buyers of US dollar Secondary market and Venture fund investors have different risk preferences. We cannot put early projects in their assets.

The price of this asset package is not absolute, the higher the better. After we turn the project over, we still have to be responsible for the performance of the new fund. This is also the reason why the pricing mechanism is done by professional institutions with a complete market mechanism.

Twenty-first Century: what are the asset preferences of the buyers you come into contact with?

Wang Jun: the four institutions we talked about last time are very experienced PE two market buyers. As we all know, the capital market environment was not good last year. These institutions are very professional and can see through the ups and downs of short-term capital markets.

Their common preference is the pursuit of high returns and the best way to achieve exit. The projects in this asset pack are basically projects with technology attributes. The main reason for potential buyers is to see the GP team and the project team and business model.

The founders of these projects are relatively sunny, and can communicate smoothly with foreign investors. This has certain advantages. In addition, in the due diligence of the project, the US dollar LP has mainland talents who are very talented. They can communicate in Chinese and have no communication barriers.

On PE Secondary: the four major criteria for selecting service providers

"Twenty-first Century": last year, the PE two tier market transactions became more and more. What are the driving forces?

Wang Jun: after the introduction of the new regulation in 2018, the growth and late stage projects are relatively slow, especially in the growth period of RMB funds. A large number of our fund investment projects have entered the growth period and have been converted into US dollars.

When we started talking about projects last year, we said that the valuation would be doubled, and the book IRR would be a good thing, but it would be two different things to get cash returns. From the point of view of withdrawal, the pressure is generally larger. RMB institutional investors clearly expressed the desire to see DPI's appeal, which is also the driving force to promote domestic PE two level market transactions.

A lot of good growth companies want to switch to VIE, and RMB LP hopes to see DPI. At the same time, the US dollar LP also wants to see higher certainty.

Twenty-first Century: what is the development level of the PE two tier market in China? What is the intermediary of PE two level trading?

Wang Jun: the choice of intermediaries is critical, because they need to be able to make the whole process open and fair and avoid conflicts of interest in managing transactions. Logically speaking, we need a brand and professional organization to promote the whole process.

Twenty-first Century: will more funds be pulled out of the PE through the two tier market transactions in the future?

Wang Jun: my personal view is that there are bound to be more institutional choices. The PE two tier market of RMB is developing, and the PE market of the US dollar always exists. Although this is RMB to us dollar, we must continue to create value as GP.

I believe that the S fund will have greater development as an asset class in the future. Whether the RMB S fund can be done and how big it is depends on the market. Because the market needs long-term funds. And the RMB S fund, where the talent comes from, where the money is earned, or is gradually exploring.