Venture capital is an "imperfect friend."

It can open up a broader social resource network for you and bring you to a higher-dimensional competitive landscape.

At the same time, it will also bring you many restrictions and even obstacles.

Of course, you can choose not to cooperate with venture capital, but for a start-up, the support and help of venture capital can give you a greater chance of survival.

Therefore, once you decide to cooperate with venture capital, it means that you will enter a complex and subtle dynamic game.

Why do you say that?

Because enterprises are at different stages of development, your life and death line will continue to change, venture capital will have more and more involvement and influence on you, and the related parties involved will become more and more diversified.

You need to always know where you are and where the VC is; when do you need to attack, defend, be tough, or compromise?

You must constantly adjust your relationship with venture capital, adjust your matching model and cooperation model, so that you can play the role of venture capital and avoid pitfalls.

This not only determines whether the value of the enterprise can be maximized, but it is also related to your life and death.

In dynamic games, the first thing you have to do is to know yourself and your enemy and choose the right player.

The logic of cooperation with venture capital is the same.

The types of venture capital are completely different, and whether you find the right one directly determines your chances of winning in this game.

When it comes to finding venture capital, the first hurdle you have to pass is whether to find local venture capital or overseas venture capital.

You know, there's a big difference between them.

There is a very interesting story in the domestic venture capital circle: a foreign venture capitalist, also known as the general partner (GP), summoned some of our domestic limited partners, also known as the limited partners (LP), to hold a meeting to raise funds from them.

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Foreign GPs said that if I set up a fund, you LPs cannot interfere with my daily management or ask about my investment projects; I will only release one report to you every year to let you understand my current operations.

After hearing these words, the Chinese LP sitting at the bottom walked halfway.

Then the foreign GP went on to say, if you invest in my fund, the lock-in period is 10 years, which means that after 10 years, you can get the return.

After hearing this, the remaining half of the Chinese LP also ran away.

Why are all these Chinese LPs running away?

Because the rules of the game proposed by foreign venture capitalists are basically unacceptable in our domestic environment.

This story reveals a truth.

There are huge differences between our local venture capital and overseas venture capital in all aspects.

The first difference is that domestic investors have relatively short investment time and are unwilling to invest in projects that they cannot be deeply involved in.

They like to make quick money and are not willing to wait longer to receive returns.

According to international practice, for example, in the United States, the period from establishment to liquidation of a venture capital fund is generally "10^2", which means that it has 10 years to invest. If necessary, it can be extended to up to 12 years.

In China, the duration of a venture capital fund is basically "5 2", that is to say, it has an investment time of 5 years and can be extended to a maximum of 7 years.

By comparison, you can see that the duration of our domestic VC is much shorter than that of international VC.

Moreover, the duration of domestic VCs also changes with changes in secondary market valuations.

In 2015, the secondary market was very hot and everyone was very optimistic. I saw that the duration of many domestic venture capital investments may be shortened to only "1+2".

What does "1 2" stand for?

It has just been a year since I invested on behalf of a VC, and I am about to start thinking about exiting.

So the question is, why is there such a big difference in VC duration between China and the United States?

The reason behind this is that the composition of limited partners, or LPs, is different between China and the United States.

The LPs of American funds mainly come from insurance funds and retirement funds.

An important feature of insurance and pension funds is the very long investment time horizon.

Their logic is to survive by alternating generations, that is, our generation will keep the previous generation, and the next generation will keep our generation, so they can provide this so-called "long-term money" to VCs.

Another major category of LPs in the United States is university endowments.

You know, the best universities in the United States are all private universities, and the most important financial revenue of private universities, besides tuition fees, is donations.

Some universities invest nearly a quarter of their donations into funds for VC allocation.

For example, the Yale University Foundation started doing venture capital in 1985.

Over the past 30 years, its average annual return on investment has exceeded 14%, which is better than Buffett's. The investment period is very long, generally more than 10 years.

Therefore, only 10% of LPs in the United States are individual investors, and 90% are long-term institutional investors.

In contrast, our situation is very different.

More than 50% of limited partners in China are individual investors.

Imagine that you ask an individual investor to invest 30 million or 50 million in a fund, and then lock it in for 10 or even 12 years at a time.

This is difficult, which leads to the relatively short duration of domestic VC.