Reshaping Venture Capital Logic for Breakthroughs

Song Chunyu / Camera

Securities Times reporter Zhuo Ying

At the 13th Venture Capital Investment Conference and the National Venture Capital Association Alliance, industry insiders gathered to discuss "Breakthroughs and Reconstruction - The Way Forward for Venture Capital". With the current venture capital market experiencing a downturn in fundraising and an increase in exit channels, Patience Capital is accelerating its entry into the market, with full-chain coordination becoming a key factor for breakthroughs. Guests shared their insights on changes in fundraising environments, exit strategies, and industry development paths, providing multiple perspectives for venture capital to break through.

Fundraising Market Bottoms Out

Patience Capital Becomes a Key Force

From a macro perspective, the industry is experiencing a rebound. Yang Zhoucheng, Vice Secretary-General and General Manager of Guangzhou Production Investment Party Committee, cited data showing that fundraising scale decreased by 20.8% in 2024, while the first quarter of 2025 saw a narrowing decline of 2.9%. "Market confidence is gradually recovering, with 'DeepSeek' moments emerging one after another, giving entrepreneurs more expectations for the future."

Changes in Fundraising Structures

Hu Yan, Vice Director and Partner of Australia Capital, noted that government-led funds have shifted from "attracting investors" to "industrial construction thinking". "In the past, government funds focused on short-term indicators such as registration and tax returns. Now they actively match middle-test scenarios and clinical resources, like in the biopharmaceutical field, even helping to connect backend clinical application channels. This 'capital + ecosystem' support model is crucial for early-stage technology companies."

Patience Capital's Entry Becomes a Trend

Yang Zhoucheng introduced that Guangzhou Production Investment has collaborated with multiple banks to establish 9 financial asset investment companies (AIC) funds, totaling 150 billion yuan. "Long-term capital from insurance and banks is accelerating its layout in the venture capital industry. The Industrial and Commercial Bank of China plans to set up 7 AIC funds in Guangdong Province, totaling 120 billion yuan, which matches the long-term characteristics of hard technology investments."

Flexible Capital Cycle

Zhang Jun, Partner at Mu Fen Capital Management, mentioned that many industry capital also hope to collaborate with venture capital funds to layout upstream and downstream. "For example, the Shanghai-based intelligent fund invested in a humanoid robot track, actively participating in industrial chain investments and forming a symbiotic interaction between capital and industry."

Exit Strategies Diversify

Tan Chen, Director of Fuyou Capital Management, believes that aside from changes in investment structures, another key driver is the shift from pursuing internal returns (IRR) to pursuing capital distribution rates (DPI), giving limited partners (LPs) more confidence and investment power.

Balancing DPI and IRR

Exit Strategies Become a Core Issue for Venture Capital Institutions

Zhang Jun emphasized that "DPI is the first promise to LPs, with at least a rate of 1". According to her introduction, Fuyou Capital's small and medium-sized fund DPI has exceeded 1, and small and medium-sized funds are pushing for exit strategies. Small and medium-sized three funds are accelerating investments.

"Exit-Defined" Strategy Widely Adopted

Hu Yan mentioned that Australia Capital adopts a "composite configuration" strategy, with early-stage funds investing 60% in angel to A+ rounds, 20% in seed rounds, and the remaining 20% in mid-to-late-stage projects. Through partially mature projects' stable cash flow, this strategy balances the overall fund's cash return rhythm.

Exit Channels Diversify

Byron Capital, managed by Mu Fen Capital, has also set up a Shanghai-based national capital mother fund system, which includes S shares (private equity secondary market). Zhang Jun shared his experience with the S fund: "Our S fund has been operating for three years and has achieved good DPI returns. At the same time, we have seen more institutions participating in the market, gradually forming new exit pathways."

Current Hong Kong IPO Market is Hot

However, investment institutions have different opinions on Hong Kong IPO exits. Hu Yan believes that the Hong Kong market is more like an "emergency channel" rather than a "golden channel", "short-term liquidity may improve but does not represent long-term stability. If companies want to go international, they need to have a plan and arrangement in place."

A-share Reform Brings New Opportunities

The landing of the third batch of standards for China's growth enterprises and the fifth batch of standards for sci-tech innovation will bring hope to hard technology companies that have not yet turned a profit. Jia Wei believes that policy signals give investors and entrepreneurs more confidence, with investment rhythms accelerating.

Industry Breakthroughs Require Perseverance

Full-Chain Coordination Becomes a Key Factor for Breakthroughs

Facing the pains of industry transformation, participating investors unanimously believe that persevering with long-termism and value investments is the core. Jia Wei emphasized, "Early-stage investments must pursue explosive growth in a declining market environment, only by pursuing project IRR can support overall fund DPI."

Full-Chain Coordination Becomes a Key Strategy for Many State-Owned Enterprises

By leveraging mother funds to mobilize social capital, focusing on key nodes in the industrial chain, and forming a "capital + industry" symbiotic effect. For example, Guangzhou Production Investment has adopted a "mother fund + direct investment" mode, collaborating with over 50 general partners (GPs) to invest in over 170 projects, totaling over 240 billion yuan."

Guests Offered Multiple Recommendations for Industry Development. Hu Yan suggests that we should "structureally solve problems", seeking balance between capital attributes and investment laws. Zhang Jun emphasizes the importance of embracing change while remaining true to one's nature, leveraging innovative methods such as S funds and M&As to activate dormant assets. Yang Zhoucheng calls for continuous "doing difficult but correct things", deepening hard technology investments.

In his concluding remarks, Tan Chen said, "The spring of venture capital requires rational pessimism, but also optimistic perseverance. With Patience Capital's entry, exit channels expanding, and industry coordination deepening, the industry is poised for a healthier direction, with full-chain coordination becoming a key factor for breakthroughs."