Is venture capital harmful to startups?
Investing in unlisted companies is full of temptations for investors with backgrounds. For example, Facebook privatized its stock for eight years before the media giant completed the warm-up of its initial public offering. Bill Gayle is the general partner of Benchmark Capital.
He believes that early success stories, such as facebook and other high-tech companies, have made it a trend for CEO to refuse to go public. Investors who injected capital in the early days certainly won't complain. In addition, CEOs claim that they can focus on long-term development without the pressure of quarterly results. The question is, can they really achieve a win-win situation?
‖ From the investors' point of view, the fear of missing the good opportunity, coupled with the low interest rate environment, increases the investment risk, which is enough for investors to put their funds into private enterprises, although they know that there is still a long way to go to complete the phased exit. In this way, we entered the unicorn era, and the total value of private companies exceeded one billion dollars.
1986 and 1990, when Microsoft and Cisco went public, the market value was $778 million and $224 million respectively. When Google went public for the first time in 2004, its market value reached $27.2 billion. When Facebook went public in 20 12, its market value was10 billion. 2065438+In February 2005, Fortune magazine confirmed 80 unicorns. As of February 20 16, VentureBeat counted 229 companies. ‖
What's wrong with well-funded private enterprises trying to keep their shares privatized? If it finally meets the expected high valuation, then there is no problem at all. However, this is the crux of the problem.
In the thinker forum of Credit Suisse 20 16, Gurley said that the investment market of private technology companies has become a dangerous bubble. In the environment he described, the valuation of technology companies in each round of financing is much higher than that in the previous round, so that everyone can accept the new valuation without too much review. Of course, the founders want to attract more capital, and venture capitalists also want to see the valuation of the companies they invest in rise in the relatively fair valuation of private companies.
Keeping the company's shares privatized, there are no lawyers, bankers, auditors and regulators in the IPO process, and the unicorn lacks the necessary financial supervision, but this cannot be said to be useless. Unlike ordinary investors, unicorn investors do not think that some information is essential, such as auditing financial reports on time.
However, Gayle believes that the shortcomings of the lack of censorship are increasingly exposed, and the recent collapse of several successful technology companies also confirms his point of view.
Stable capital flows also have a negative impact. First of all, in the investment field of private technology companies, high valuation plays down the problem of high liquidity of investment funds. Insufficient IPO and high valuation reduce the possibility of companies withdrawing from the market through mergers and acquisitions.
Secondly, Gurley believes that for technology companies, a steady stream of funds will inevitably lead to high operating costs. ? These companies have no fixed assets. They don't build shops and factories? Gurley said in the thinker forum that the more money you invest, the more people they will hire, and the faster the company consumes, the farther away from the central industry of the enterprise. ? More funds need to be raised in the future, and so on.
Investment giants, such as Fidelity International, BlackRock Group and T. Rowe Price, have recently reduced their investment in startups. Gayle believes that there will be several similar downgrades in the future. ? I call it a great realization? Gerry said,? This is the first time we have injected so much money into a start-up, but it will also have some consequences. ? Unlike the disastrous outcome of the Internet crisis, Geli is worried that his business model will no longer be effective and the company will continue to expand.
On the other hand, the financing environment began to change. Gurley predicted in his blog that some opportunistic investors will enter the market with a well-structured list of terms, which will set obstacles for the company to raise funds in the future.
For example, after the company goes public, investors guarantee the income, which is what Gerry thinks? Shady? Terms. Any investor who invests capital after the above investors has to think carefully about his commitment. When unicorns raise money in the future, they will find themselves in an awkward position. They either accept the terms, endanger future financing, lower their valuation and shift their strategic focus from development to profit, or go public.
The possibility of lower valuation will obviously bring a problem to investors who have invested in private technology companies. More and more companies plan to go public and enter the profit model. On the other hand, this is a benign transition point for investors and technology companies.
How to choose the exit mode of venture capital
How to reduce the loss of venture capital projects and ensure the smooth recovery of successful investments is very important for venture capitalists. At present, the lack of convenient exit channels is the biggest obstacle to the development of venture capital in China.
Venture capital, also known as venture capital, refers to the behavior of recovering investment by means of equity transfer (transaction) by providing equity capital to small and medium-sized high-tech enterprises that develop or industrialize high-tech. Generally speaking, venture capital does not aim at holding shares and paying dividends, but promotes capital appreciation in the growth of enterprises through capital and management investment, realizes the realization of income when exiting, and then finds new investment targets. Venture capital behavior is a kind of market behavior, and its ultimate goal is profit. In order to achieve this high return, which greatly exceeds the general investment behavior, a reliable investment exit mechanism is needed. On the other hand, venture capital gains investment returns in the form of capital appreciation, and continuous circulation is the vitality of venture capital. Therefore, the exit mechanism is the central link of venture capital industry. Without convenient exit channels, it is impossible to compensate for the high risks undertaken by venture capital. The success rate of venture capital is very low, and its benefits are generally comprehensively investigated through the overall benefits of venture capital portfolio. According to the analysis of American 13 venture capital fund, 50% of the total income of venture capital comes from 6.8% investment, and 75% of the total income comes from 15.7% investment. Less than 1/4 investment projects can really bring benefits to venture capitalists. Therefore, how to reduce the loss of venture capital projects and ensure the smooth recovery of the benefits of successful investment is very important for venture capitalists. At present, the lack of convenient exit channels is the biggest obstacle to the development of venture capital in China.
First, the analysis and comparison of exit methods
Venture capital mainly obtains return on investment through equity transfer or stock listing. There are four main ways to realize income:
1. Public sale of securities
Public offering is the first time to issue the securities of a venture enterprise to the public, usually common stock. IPO is the most ideal exit channel for venture capital, and its investment income is higher than other ways, accounting for about 30% of the exit of venture capital in the United States. Venture capital companies and venture enterprise management all welcome the IPO exit, but the IPO exit cycle is long and the cost is high. At present, there are two ways for China enterprises to go public: direct listing and shell listing.