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[Media Focus] Paradise Silicon Valley: 20 years of persistent "long-termism"-"Financing China" propa

Date: 2020-11-12
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Starting from Zhejiang, Paradise Silicon Valley is marching across the country.

This veteran investment institution with a 20-year investment history has accumulated assets under management of nearly 60 billion and invested in more than 170 companies, of which 39 have been listed on the main board and Hong Kong stocks, and nearly 10 have been accepted by IPO or have passed the meeting. The exit rate reached 43.17%, the average IRR reached 31.1%, and the performance was shining.

Why can Paradise Silicon Valley span the 20-year time period? What is her growth gene?

On the one hand, it benefits from the experience accumulated over time, on the other hand, it may depend on the internal open and inclusive system and the mechanism of continuous innovation.

Looking at the upgrade of Paradise Silicon Valley strategy from the outside: from investment in quasi-listed projects to full-stage coverage; from standard decision-making processes to a balance mechanism for risk control and investment decision-making; from round-up projects in the whole sea area to precision salvage in deep-growing industries; From a foothold in Zhejiang to a national layout...

From the inside, look at the persistence of Paradise Silicon Valley culture: the average age of the management partners is nearly 10 years, and one of them has been 19 years, allowing time experience to be preserved and passed on; internal original partners co-created funds to make the team's incentive mechanism more Adequate; the values of advocating collective warfare rather than individual heroism have allowed younger investors to be entrusted with important tasks.

This may be the key factor for the success of Paradise Silicon Valley: Organizationalization replaces one word, independent decision-making replaces strongman management.

In the Chinese equity investment market, institutions with 20 years of investment history are rare, and managers who have undergone iterations are even rarer.

Last year, Zhang Sheng, who had been working in the system for 7 years, was promoted to the post of president. He is familiar with the system and culture of Paradise Silicon Valley. Although young, he has a record of all A's internally. His appointment signifies that this established institution is seeking new changes.

Zhang Sheng stood at the front desk and urged the deepening and upgrading of Paradise Silicon Valley's reforms, and continued to increase in the three directions of incentive system, industry focus, and national development.

Can the paradise Silicon Valley replicate or continue this path of continuous upgrading and innovation? Today, standing at a new starting point for 20 years, there are many more stories to be told in Paradise Silicon Valley.

 

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November 11th is the 20th anniversary of Paradise Silicon Valley.

At that time, in addition to holding the 20th anniversary celebration thank you party, in accordance with past practices, Paradise Silicon Valley will also incorporate the family open day activities to thank the employees' families for their continued support to the company.

Family background and flexibility, this is the growth secret of an organization that has gone through 20 years. Pay attention to the individual, give space for growth, and through the maturity of the individual, bring the organization's continuous forward momentum. This cultural attribute has given Paradise Silicon Valley a bargaining chip to be cautious when the market is singing, and be brave when the market is down. This is closely related to the culture of Paradise Silicon Valley.

In 2010, the tenth anniversary of Paradise Silicon Valley moved its headquarters from a single-family villa under Leifeng Tower to Xixi Wetland a few kilometers away. In the golden autumn of October, the air of Xixi Wetland is filled with sweet osmanthus fragrance. The sky is high and the clouds are light and the autumn colors are pleasant. On both sides of a narrow road, there is a pond at two steps and a lake at three steps. Go straight along the end of the road, and the paradise Silicon Valley is here.

Throughout the market, most of the investment institutions in Shanghai are established in the bustling downtown areas of Jinbi Towers, such as Paradise Silicon Valley, hidden in the forest, and investment institutions hidden in the water are rare. Seems to be dictated by nature, and Paradise Silicon Valley also appears more rational or cautious about the desire to expand.

In fact, Paradise Silicon Valley has no indicator requirements for management scale and investment volume. Internally, a methodology is constantly emphasized and released: 'You must do things within your own abilities, see clearly before moving forward.' Steady is one of the characteristics of this organization.

'Zhejiang Pavilion, looking at the tide, the tide will go away and the original is uncertain, but the West Mountain is forever.'

Based in Zhejiang, nearly 50% of Paradise Silicon Valley projects are invested in this area. In recent years, Paradise Silicon Valley has also begun to gradually expand outward. After the ups and downs of the market, Paradise Silicon Valley also needs a stronger security margin. It must be 'eternal,' and it must have new momentum. Standing at a new starting point in 20 years, Paradise Silicon Valley is also looking forward to new changes.

 

20 year-end color and new blood

 

'How can we only do the best in Zhejiang? We have to face the whole country.' Zhang Sheng stood at the end of the conference room near the screen, facing the entire conference room. For a long time, group meetings in Paradise Silicon Valley have been held in this largest internal conference room. As the number of investment teams has grown to more than 100 people, the huge conference rooms have also been crowded.

To the east of the office is a huge floor-to-ceiling window, looking out, there are stone steps in the water, and the center of the square courtyard is a three-legged round tripod, which means to stand for the inscription. Since ancient times, water has always been a source of wealth. 'Ding' can be extended to 'prominent', 'noble' and 'shangda'.

This is the ambition of Paradise Silicon Valley to make money for investors and gain a foothold in the industry.

Unlike most investment institutions, Paradise Silicon Valley is a real professional manager system. There are more than 10,000 institutions in the 10 trillion equity market, with a history of 20 years and management iterations.

This requires not only superior strength, but also a unified culture. Although young, Zhang Sheng has a lot of seniority. He has worked hard in the system for many years, selected and challenged at various levels, and finally won with an extremely excellent record and became the new president.

Colleagues commented on Zhang Sheng, 'A talented scholar who is very easy-going'. By office hours, Zhang Sheng was extremely decisive. After taking office, he accelerated the process of national expansion while urging industry focus. Through younger blood, established institutions are creating more changes.

Changes and innovations are based on iteration, looking back to history, and the background of Paradise Silicon Valley is revealed.

In the late 1990s, there was news that the Growth Enterprise Market was about to be established. This wave of venture capital has been blowing from Shenzhen all the way to the north and has begun to blossom all over the country. At the same time, there were more than 400 professional venture capital institutions and related institutions nationwide, with a total capital of more than 50 billion yuan. Beijing, Shanghai, Shenzhen and other places took the lead in establishing regional venture capital industry organizations.

Zhejiang Province has also begun to make a large-scale layout in the venture capital industry. In 2000, the Zhejiang Provincial Government took the lead in establishing Paradise Silicon Valley Venture Capital Co., Ltd. At that time, Paradise Silicon Valley was jointly established by the Zhejiang Provincial Finance Office and 18 listed companies and branches in the province as a state-owned investment platform under the government. At the same time when Paradise Silicon Valley was established, there were 23 venture capital companies and 8 risk management companies in Zhejiang Province.

According to statistics from that year, by the end of 2001, venture capital in Zhejiang Province had reached 2.2 billion yuan, and venture capital institutions had injected 630 million yuan in venture capital into 146 high-tech enterprises and projects.

During the same period, with the goal of doing well in venture capital and supporting physical enterprises, and with the vision of building Zhejiang's 'Silicon Valley', the paradise Silicon Valley started the process.

The market seems to be prosperous and lively, but in fact, at that time, companies still adopted a quota system for listing, venture capital institutions had no exit channels for investment, and the industry did not have the business form of private equity funds. A few months after its establishment, Paradise Silicon Valley invested in entrepreneurial software (now renamed: Venture Huikang 300451) with its own funds. This enterprise focusing on information services and innovation in the medical and health field has been established for more than 4 years. There is no financing history.

The project did not land on the Shenzhen Stock Exchange until 2015, and 13 years have passed since Paradise Silicon Valley became a shareholder. The long-term accompaniment has allowed Paradise Silicon Valley to reap a high return of nearly 50 times, which has become a very representative case in the history of Paradise Silicon Valley.

The early investment of Paradise Silicon Valley was mainly in Zhejiang Province, and the companies it invested in were mainly high-tech companies with relatively difficult operations. Judging from the current results, a large number of companies that initially invested have high returns, which also laid the foundation for the value investment of high-tech, long-term investment in Paradise Silicon Valley.

Time came to 2005. With the support of shareholders, the management of Paradise Silicon Valley established Silicon Valley Paradise in Beijing and gradually completed the management's acquisition of the company. Now Paradise Silicon Valley has taken shape. Up to now, Paradise Silicon Valley has 7 shareholders including Silicon Valley Paradise (833044), Qianjiang Water Conservancy (600283), Zhejiang Dongfang (600120), Minfeng Special Paper (600235), and Chint Group.

While the system continues to improve, Paradise Silicon Valley has not slowed down the pace of investment. In recent years, it has maintained the pace of launching more than a dozen projects every year, with an investment amount of 1.2 to 1.3 billion yuan.

Judging from its 20-year history, Paradise Silicon Valley has also undergone significant changes on the investment side. The most obvious thing is that the main investment direction of the early Paradise Silicon Valley was Pre-IPO projects, which had nothing to do with the environment at that time.

At that time, the industry did not have mature rules and play styles, and there were no exit channels. Under the background of this era, most of the investment institutions established in the same period are crossing the river by feeling the stones. There is no subdivision track and no stages at all. Paradise Silicon Valley's main criterion for judging a company is whether the project meets the listing standards of the capital market or whether it can be acquired by a listed company.

Now, through 20 years of accumulated experience, Paradise Silicon Valley has established a sound investment logic. In addition to refining the industry track, the investment direction is aimed at the four directions of information technology, intelligent manufacturing, medical health, and large consumption. Start trying to move forward partially.

The iterative investment logic has created a good return on investment for Paradise Silicon Valley. Counting from the first corporate fund managed by Shanghai Pudong Development Bank in 2006, Paradise Silicon Valley has invested in more than 170 projects, 39 of which were successfully listed, with an exit rate of 43.17% and an overall IRR return rate of 31.1%. The accumulation of 20 years of experience and high-quality transcripts are important labels for Paradise Silicon Valley.

Where does the high-quality record come from?

'From the experience accumulated over 20 years.' Zhang Sheng replied. 'Time accumulation is our biggest advantage.'

In recent years, Paradise Silicon Valley has continued to organize internally. Through the review of past investment cases and performance, it has been found that those cases that have brought super high returns to Paradise Silicon Valley have an investment period of more than 8 years, such as Entrepreneur Huikang (300451), Changchuan Technology (300604), Lianchuang Electronics (002036), etc. The commonality of these cases is the high growth of enterprises brought about by time accumulation. 'Time allows high-quality companies to settle and grow. The more high-quality companies, the more effective time will be for them.'

In addition to the accumulation of time, the team in Paradise Silicon Valley is also extremely stable. The average time for the six managing partners to join the company is about 10 years. The high retention rate and stable team have allowed valuable investment experience to be retained intact and passed on to younger investors based on this standard. The fire of experience has been passed down to this day. This is also the truth conveyed by time and the most precious benefit.

It is not only the revolving cycle of experience, but the power of transmission is constantly improving within the Paradise Silicon Valley. People are the most important thing.

If you don’t understand the history of Paradise Silicon Valley or Zhang Sheng’s experience, you may think that he is the “fresh blood” absorbed from outside, who came to awaken the new vitality of this established institution. In fact, Zhang Sheng has been working hard in the Paradise Silicon Valley system for many years. He used to serve as Deputy General Manager, General Manager, Executive General Manager, and Managing Director of the Risk Management Department of Silicon Valley Paradise Asset Management Group Co., Ltd. Internally, his promotion was described as controlling (risk control) and investing for excellence, and investing for excellence (management). After investing in several high-quality companies, he was promoted to the president of Paradise Silicon Valley through layers of selection and evaluation.

Paradise Silicon Valley does not advocate individual heroism, which is why this established institution has kept a low profile for many years. After Zhang Sheng took office, he promoted the nationalization process and industry focus, but he was not the first internal reform initiator or management innovator.

As early as 2006, Paradise Silicon Valley had established the first standardized operation of corporate-based private equity funds in China. It was the first in the country to establish a discretionary fund management model and introduced Shanghai Pudong Development Bank as an external fund supervisor to ensure the safety of investors' funds. In 2011, it not only established an industrial integration M&A fund, but also created a precedent for domestic PE to support the merger and acquisition of listed companies. In 2014, Paradise Silicon Valley became one of the first 50 private equity investment fund managers registered with China Foundation Association.

And Zhang Sheng's appointment, outlines the best side of Paradise Silicon Valley in terms of management, and dares to give young investors a bigger stage and smooth promotion channels. This not only reflects the company's heritage, but also represents the most important aspect of Paradise Silicon Valley culture. From the time point of view, the first-line institutions in the industry have all entered the adult ceremony, but there are very few institutions with generations of leaders. The paradise Silicon Valley's talent inheritance model may be a reform advocate and a tester for the industry to move towards the next 20 years.

 

First principles and activation organization

 

After Zhang Sheng took office, he raised an internal question: 'Who shall we serve first?'

Is it for investors, shareholders, or the fund itself?

Different choices obviously have different answers. If serving the shareholders or the fund itself, continuously expanding the scale, charging more management fees is the path. The first principle of Paradise Silicon Valley is 'investors first.'

Through the past investment performance, Paradise Silicon Valley realized that a temporary strategy may win the success of individual cases, but only with long-term company and time to grow can ultimately win the future.

After all, returning to the essence of investment, ensuring the safety of the investor's principal and bringing sustainable returns is the first thing. Otherwise, it will be abandoned by investors and left behind by the market.

Five years ago, the main force of Chinese LPs was still dominated by high-net-worth individuals. They seized the opportunities given by the times, accumulated a large amount of personal wealth, and began to try to invest funds in the equity investment industry. At this stage, how much money can be made is the only criterion for an individual LP. Since then, with the departure of individual LPs, institutional investors will consider the true quality of investment institutions through more dimensional and professional standards.

In 2018, the launch of the 'New Asset Management Regulations' boots caused a sharp drop in the money in the market. It is hard power to get the funds. Behind the replacement of IRR by DPI as the assessment standard, LP cares not just about 'how much the fund earns' but 'how much can I get'.

The lower the market, the more proof an institution's background. Zhang Sheng revealed that the scale of Paradise Silicon Valley is growing steadily, and there are still plenty of bullets on hand. This ensures that when the market is deserted, Paradise Silicon Valley can have the confidence to invest, and boldly hold high-quality projects when others are cautious.

However, Paradise Silicon Valley does not deliberately pursue scale growth, which is also based on the investment philosophy of 'investor first.'

From the perspective of fundraising, Paradise Silicon Valley has always maintained a stable rhythm and scale. In contrast to the market, first-line institutions are constantly raising the fund-raising ceiling of a single fund to deal with more severe industry challenges.

Zhang Sheng said frankly that in this respect, Paradise Silicon Valley has no KPIs. 'We do not pursue the scale of the fund, nor subjective fundraising pressure, but pursue healthy operation.' The desire to control is a prerequisite for risk control and a necessary condition for the longevity of the fund.

From the structural point of view, Paradise Silicon Valley's LP can be roughly divided into two categories. The first category is private capital, funds of funds, and listed companies; the second category is government guided funds.

Close cooperation with local governments is an advantage of Paradise Silicon Valley in fundraising. As early as September 2009, the Paradise Silicon Valley Hefeng Fund was established, which was funded by the Ministry of Science and Technology and the Hangzhou Municipal Government Guidance Fund. Looking back at this fund now, it is not only the first government industry fund in the history of Paradise Silicon Valley, but also a private equity investment funded by local governments.


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