Value and Strategy of Post-investment Management

? Although the concept of "post-investment management" was first put forward as early as 30 years ago, it has been gradually valued by various investment institutions since the end of 20 13. Post-investment management is regarded as the process that VC/PE participates in management to make enterprises realize value-added, so post-investment management will become the core competitiveness of the fund and gradually present a new profit model. So what is the value of post-investment management? This paper expounds it from three aspects.

1. Control risks

? Post-investment departments need to control not only the operating risks of the fund, but also the uncertainties brought by various factors around the invested enterprise under the changing operating environment and market trends. At this time, post-investment management can reduce the trial and error cost of enterprises as much as possible and avoid detours as little as possible, thus shortening the period required to complete the initial goals or urging enterprises to forge ahead towards more suitable goals.

? Before the A round, especially the angel round of the seed round, the financial system, personnel matching and even business model were almost imperfect, so the post-investment management here is not only a doctor who listens to the pulse, but also a housekeeper who serves meticulously. From the subjective and objective aspects, we can reduce the potential risks of enterprises from the dimensions of policy, market, management and capital chain (finance) and realize the preservation and appreciation of investment.

2. Enhance the soft power of enterprises

? Deep cultivation of post-investment management can also be a way to enhance the soft power of investment institutions.

? According to the report of Zero2IPO, by the first quarter of 20 16, the number of LPs in China's equity investment market had increased to 16287, of which the investment amount disclosed by 10348 LPs and the investable capital of China had increased to 6 trillion RMB. With the growth of the capital market, there are only a few high-quality projects. Although good projects rely on support, the pre-investment department should also reduce the incubation cost of enterprises as much as possible. In order to attract enough high-quality projects, it is difficult to retain high-quality enterprises by relying solely on financial support. Hexun.com 2015 data shows that about 66% investors pay more attention to the performance improvement brought by post-investment management, and then realize the preservation and appreciation through the organic growth of enterprises.

3. Pre-investment feedback

A. Test the investment logic

? This carries the value of mutual assistance before and after voting. After the pre-investment department completes the enterprise investment in a short time, the post-investment personnel will test the investment logic of the original investor through a long-term follow-up visit, even after error correction and polishing.

For example, investing in a platform was originally intended to attract upstream enterprises by introducing downstream personnel, and finally open the e-commerce platform. The management also hopes that after a year of polishing, the traffic of the e-commerce platform can reach a certain scale. However, after half a year's development, the enterprise found it difficult to get through the previous business model and turned to become a service provider for downstream industry personnel. Although this road is easy to walk, it is not attractive and the threshold has been lowered a lot. At this point, the post-investment department will light up the red light for the project, help the project side sort out the business model, and give timely feedback to the project leader before the investment. On the one hand, the pre-investment personnel solve the problems existing in the current enterprise, on the other hand, they avoid such risks when investigating similar projects.

B. Adjust the investment layout

? Most investment institutions will set the scope of investment fields and rounds when setting up funds. However, with the outbreak of market dividends, it is easy to cause project clusters in a certain field, such as "internet plus" products such as Internet finance of 20 14 -20 15. Then the post-investment department should strictly control the proportion of each field and the quality of the project at this time. For example, many companies have invested in a certain field at present. At this time, the post-investment department should give timely feedback to the pre-investment personnel, and there should be stricter thresholds or differences when looking at such projects in the later stage. Of course, it is not excluded that some large-scale funds can trade in multiple projects and bet on which team runs faster and better under the same business model. However, regardless of the magnitude of the fund, from the perspective of post-investment management, we should avoid homogenization and diversify products and fields as much as possible to reduce the risk of a basket, improve the coverage and growth space of the fund as a whole, and finally, under the same product in the same field, post-investment personnel can dock more resources and incubate projects faster and better.

Second, what is the current post-investment management status of industry giants?

? According to the statistics of IT Orange website, there were 1388 investment institutions in China in 20 14 years. In China, although the fund industry has developed rapidly in recent years, there is still no systematic post-investment management team. Some enterprises are just a functional department of post-investment management, and their business includes regular and simple enterprise return visits, administrative affairs follow-up, business update reports, etc. This not only greatly underestimates the value of post-investment management, but also wastes post-investment resources. Major institutions are also constantly adjusting their understanding of post-investment management and exploring ways to effectively play the value of post-investment management.

? In China, according to the research of Zero2IPO Research Center, among VC/PE institutions active in China for 20 13 years, 16. 1% set up full-time post-investment management teams, such as Chen Da, Jiuding and CITIC Industrial Fund. Another 54.8% institutions have no full-time post-investment management team, but plan to set up in the future. Full-time post-investment management team is becoming a trend.

At present, Hony Capital has set up a special expert consultant/consulting team to provide "nested value-added service solutions" such as ERP and human resource management system for the invested enterprises. Although it is a fee-based service, it is also a good direction. Innovation works has also adopted embedded post-investment services. In addition, exclusive clubs have been established for various core members, trying to establish an upgraded service community for the invested projects. Similarly, in addition to the establishment of entrepreneurs' clubs, Chen Da Venture Capital has also established strategic cooperation alliances among intermediaries in the investment and financing chain. For example, in 20 13, Chen Da signed strategic cooperation agreements with China Merchants Bank Head Office, noah wealth, CITIC Securities and other institutions 14 at the annual meeting to build a financial ecological platform for SMEs with Chen Da as the core. Letv has also set up a special post-investment department. Judging from the current operation mode, LeTV tries to implement post-investment management from five aspects: financial supervision, internal supervision, collaborative resources, human support and capital docking machine, interspersed in various investment departments.

? In this mode of operation, it is necessary to have an effective communication mechanism between departments before and after investment to avoid internal friction, otherwise the department after investment may eventually become a "handyman" department.

? In foreign countries, excellent VC/PE often has professional operation teams to provide value-added services for enterprises, and some large investment institutions have also set up specialized value-added service subsidiaries. For example, KKR established a subsidiary Capstone, with about 50 employees, to provide value-added services in cash, income, cost, organizational structure and strategy formulation for the invested enterprises. KKR also has an industry analysis team, which, together with the operation consulting team and senior consultants, puts forward plans and suggestions for improving the business income and business of the enterprise. Similarly, TPG has a lot of consistency in integrating M&A investment and its post-investment management.

? For projects with large investment funds, VC/PE institutions may even set up special service teams to strictly control risks, observe the development trends of enterprises in real time, and intensify efforts to provide better value-added services. Of course, different stages of enterprise development, the corresponding post-investment management is also different. From the perspective of financing rounds, this paper expounds the key points of post-investment management in each stage. Considering similar rounds, such as Angel Round and Pre-A Round, there is not much difference between the maturity and development of enterprises, so the rounds discussed below are roughly divided into four parts: before A Round, A+ turns to C Round, D turns to Pre-IPO, IPO and beyond.

1.A round ago.

A. Save the team, build the team and straighten out the equity structure.

? Before Round A, enterprises often had imperfect team configuration and unreasonable ownership structure. At this stage, it is not so much an investment project as an investment founder or core team. For early projects, human factors play a vital role. Projects that the team has been very reasonable and perfect at the seed stage are scarce. For most early projects, the team often has defects or deficiencies, so in order to incubate high-quality projects faster, the employer needs to work hard to help enterprises code the team and put forward suggestions on equity. In the A round, the perfect construction of the core backbone team will also provide the foundation for the explosive growth in the later period. Some investment institutions even set up special personnel recruitment departments to find suitable candidates for invested enterprises for a long time. In incubators, such problems are often encountered, but the advantage of incubators and industrial parks is that resources are more enjoyable.

B. Business model combing

? Business models in different fields are different. For example, TMT, which is in the stage of Angel Round or Pre-A Round, should be able to grasp the core business, iterate quickly, and constantly try and make mistakes in business direction and mode. Once in the A round, the product form and mode need to be basically stable. At this time, we need to pay more attention to the integrity and stability of products, including stability, perfection and safety. At this stage, the management helps enterprises to explore more reasonable and imaginative business models, reduce the trial and error costs of enterprises and avoid paying tuition fees for detours.

C. Financing docking

? For early projects, financing is almost a necessary support to ensure the stability and sustainable development of the enterprise capital chain when the enterprise itself does not have good hematopoietic capacity. It is best if the enterprise has high-quality hematopoietic capacity at an early stage. But on the whole, the prophase project lacks reasonable financial allocation, has no good liquidation channel, and even breaks even. At this stage, the break of the capital chain is very likely to directly destroy a project. For companies that can make blood, capital intervention in the early stage is still beneficial, such as shortening the product cycle, making products mature and facing the market faster.

? Considering that the introduction of the next round of investment institutions will take a period of contact and running-in, in this case, the employer and the project party need to make plans in advance. When the company's book funds can support, for example, four months of operating costs, it is necessary to sort out the financing plan, start the next round of financing, and start docking with various investment institutions. Of course, it is best to make plans at the beginning of enterprise financing, such as starting a certain round of financing when the enterprise's operating conditions reach a certain level, rather than financing because it needs money.

? At this stage, many companies will ask questions such as "how much valuation should I set". In fact, at this stage, financing may be more valuable than financing according to how much valuation. Moreover, the valuation itself is linked to the maturity of enterprise growth and the future development space of business model, not simply because enterprises are willing to release as much equity as they want to raise. Enterprise valuation needs to be reasonable in the market, in order to connect with the right investment institutions better and faster under the condition of homogenization of enterprise products. Then, on the one hand, the post-investment department helps enterprises sort out the financing plan, on the other hand, it helps enterprises determine the post-investment valuation and rhythm.

D. Case studies

? From 2065438 to March 2004, Liu Qing Capital invested 1 100 million yuan in Angel Fund. However, at that time, the team of Aixian Bee was seriously short of personnel, and the product development was limited, so users could not fully experience the product functions. After understanding the situation, Liu Qing's post-investment team helped Aixian Bee Team to introduce talents from various fields, most of whom are core talents in the current team. 20 14, 10 10 On October 23rd, Aixian Bee received another round of financing of USD 20 million led by Sequoia Capital, and another round of financing in early October15, with a valuation of over 300 million yuan. In addition to Liu Qing Capital's "looking for reliable people while looking for reliable projects", Sequoia Capital's post-investment department is even more unique, setting up the function of "internal headhunting" with the intention of recruiting high-level talents.

? The post-investment management of Zhenge Fund is also relatively systematic, covering personnel recruitment, PR brand, capital docking, financial legal adviser and so on. For the projects that have been invested, follow up according to the quarterly cycle, and connect at different levels through horizontal and vertical comparison.

? IDG establishes the core talent pool in the form of internal monthly recommendation. According to the relevant person in charge of IDG, there are now more than 500 high-quality candidates matching in technology, products and UI/UX every month in China. This kind of headhunting work is only a part of IDG post-investment service, and the rest also includes: resource development, public relations activities, entrepreneurial guidance and so on.

2.A+ it's c's turn.

A. Profit model-realization channel

? At this stage, on the one hand, the post-investment departments of enterprises and management help enterprises to improve their business models, but what is more worth exploring is the opening of cash channels, that is, the combing and development of profit models. Even in the angel wheel, the profit model will always be the point of thinking, but it is particularly important in the A+ wheel. When the project develops from A+ to C, a reasonable profit model will bring more flow and cash flow to the enterprise and start hematopoietic function on a large scale. For example, TMT company, which is B's turn, has already had certain advantages in scale, and its focus should be shifted to expansibility, performance and efficiency, as well as details processing and liquidation channels.

B. Strategic financing

? For enterprises at this stage, financing is not only to find funds, but also to find investment institutions that conform to corporate culture and future strategy, which can not only bring financial help, but also bring more resources to supplement and support. At this stage, the post-investment department should have a deeper understanding of the future development strategy and planning of the enterprise, sort out the employers that meet the corporate cultural attributes at present, and then make capital matching, which is actually equivalent to the role of professional FA. In the process of capital docking, we will constantly solve the doubts of employers and sort out the future development direction of enterprises. At this stage, there may even be necessary transformation or cross-disciplinary expansion, but it must be carefully considered.

3. It's time to go public.

A. Strategic layout

? Generally, a large amount of funds will take over the D round or Pre-IPO. At this stage, enterprises often have mature business models and good profit growth points. At this stage, the post-investment department needs to assist the project parties in effective strategic layout, such as business mergers and acquisitions, supplemented by supplements, improving the industrial chain and preparing for listing.

B. strategic financing or mergers and acquisitions

? Absorbing small and medium-sized enterprises through mergers and acquisitions and supplementing the shortcomings of enterprises have become the focus of enterprise development at this stage. Necessary strategic financing and mergers and acquisitions will become the focus of this round of follow-up investment institutions. Judging from the current post-investment management, the post-investment role at this stage has begun to weaken, and more is to follow up regularly and replenish resources. As for the strategic level, such as financing or mergers and acquisitions, the depth of post-investment management needs to be strengthened.

? Of course, being merged is also one of the paths to realize capital withdrawal. General enterprises will roughly finalize the willingness and feasibility of being merged in round B. When the enterprise develops to the D round, if it is to be merged, the post-investment department should assist in docking enterprises that can form strategic supplements in the industry or at this time, and assist in docking.

4.IPO and beyond

? The post-investment management of IPO and beyond is much less than the previous value-added points, but it does not mean that it is not needed. Regular financial return visits and the disclosure and follow-up of necessary events ensure the effective development and growth of enterprises after listing, thus ensuring the interests of investment institutions. At this stage, the post-investment department plays more of a doctor's role, regularly taking the pulse to ensure the healthy development of the enterprise.

A. Case studies

? Most companies can effectively expand their strategic territory after IPO, but some companies buy blindly. The case here gives some negative teaching materials for your reference.

"Ali's acquisition of UC and Gaode maps has gradually declined the leading enterprises in the two industries. Tencent invested tens of billions of M&A companies, many of which disappeared. Baidu's acquisition of 9 1 wireless is unknown now. It can be seen that the huge investment in mergers and acquisitions has not promoted BAT to form business, but has largely consumed corporate capital and created internal management friction. At the industrial level, BAT's imitation and plagiarism skills have frightened many small and medium-sized entrepreneurs. The shortcomings in integrating resources have made mergers and acquisitions stifle many entrepreneurial directions, which has limited promotion to the industry and even become resistance. "

? Whether it is strategic layout or investment and financing mergers and acquisitions, enterprises should not only understand their own industrial structure, but also think about the actions and value-added after mergers and acquisitions. No matter on the business model or on the technical level, enterprises cannot stop innovating at any stage.

? When you enter adolescence, you can take care of yourself by eating and drinking. At this stage, you pay more attention to spiritual edification and cultivation to prevent detours, just like enterprises in Pre-A round. When the child enters the age of 20, his personality and thoughts are relatively stable, so this time is the control of the general direction, and greetings in too many details are easy to backfire, similar to the enterprises around the C round. When you enter middle age, you are mature in all aspects. For companies that are about to IPO or comment on IPO, regular and irregular care and greetings are enough.