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Text | Wang Lin, Zhai Yuanyuan, Xi Rui
Source: Tech Planet (ID: tech618)
After being unemployed for two months, Zhai Yuan finally decided to become a food delivery rider like 170,000 undergraduates and 60,000 graduate students.
He previously worked for a waist investment institution, mainly watching the Internet track. Two months ago, his group was “annihilated”. The company was kind and gave them “N+1” compensation.
Instead of giving himself a break to catch his breath, he started looking for a job non-stop. “Even big factories have reduced HC (staffing), and investment institutions are definitely not as rich as big factories, and they can’t support idlers,” Zhai Yuan explained that he was so anxious to find a job.
Investors are naturally alert to risks, but Zhai Yuan did not expect it to be so difficult – he has submitted resumes to almost all the investment institutions that are still recruiting, but has not received a reply; he is thinking about going to a big factory to do business analysis Let’s be a teacher, but there is no “pit” in Dachang; he should go back to his hometown to take the civil service exam, but when he thought about the income of civil servants, he still gave up.
“I can’t do anything but invest,” he told Tech Planet in disappointment.
Investors used to be an industry that everyone envied. The post-90s and post-95s who have just entered the industry haven’t taken off the tenderness on their faces, but they are talking about projects of hundreds of millions. In sharp contrast, most of the investors who have just entered the industry are the same as ordinary workers. Passed at any time.
The experience of TikTok CEO Zhou Shouzi is a dream career path for all investment managers. Hit Xiaomi in DST, then went to Xiaomi as CFO, and then jumped to TikTok.
But now, the “low-hanging fruit” of the Internet has almost been plucked, and the consumer industry, which was once a mess, is cooling down, and more and more investors are finding that the myth of wanting to recreate the myth of Zhou Shouzhi is no longer realistic.
There are fewer good projects, the wallet of LPs (limited partner investors) is shrunk, and the era of investing in four or five projects a month is gone. The reality that most investment managers are now facing is that one project cannot be completed in one year.
Investors lost their jobs
The wind of layoffs from Internet companies has swept into the venture capital circle.
A few days ago, Xiang Shan, an investor in the post-1995 consumer sector, resigned from an investment institution. This was an involuntary resignation. The company ordered layoffs from top to bottom. The investment team of more than 30 people needed to be reduced by 7-8 people, and his merger and acquisition team was directly eliminated.
Immediate leaders are also worried that they will lose their jobs, so several people are provided with alternatives, such as going to the company where they invest in mergers and acquisitions to do post-investment work. But the condition is that the salary package is reduced by two-thirds, and it needs to move from Beijing to the second-tier city where the post-investment company is located.
Accepting the harsh conditions of layoffs in disguised form, “stubbornly” or simply resigning, Xiang Shan struggled for nearly half a month. During this period, he called his different friends every day, and the friends persuaded him that the environment was not good, and it was important to keep his job first.
For half a month, Xiang Shan still went to work in the company every day, still in the same office with his former colleagues, but he no longer had the right to discuss the project. The frustration and gap were unprecedented, and he finally failed to convince himself to learn to compromise. After struggling for half a month, Xiang Shan finally decided to resign.
People usually cherish their first job very much. Even if they leave, they have imagined countless ceremonial leaving scenes, saying goodbye to each colleague. But the resignation came quickly and violently, and Xiang Shan didn’t have time to say hello to anyone.
Not only Xiangshan. Hong Hao’s team just experienced indiscriminate layoffs last year. “Some of our investment directors and below have all been laid off.” Hong Hao works for a trust fund, and his group mainly focuses on the primary market: the Internet + technology field.
The scale of funds managed by the company is so huge that Hong Hao asked other investment managers to exchange business, and the other party always came to the conclusion that “you must be a local tyrant company”.
Investment managers hardly ever imagined that they would one day be fired. Investment institutions are not like big factories, with 100,000 or more people, they are more like a “high-end” team, and very few people make enough money. Layoffs are rare in the investment industry.
This has made investment managers who are inherently risk-savvy realize that things may not be good. Therefore, after losing their jobs, Xiang Shan and Hong Hao began to deliver resumes and communicate with headhunters non-stop every day, which has formed muscle memory.
In half a month, Xiang Shan talked to about twenty headhunters, and the headhunter gave feedback that there are almost no “pits” in investment positions in the consumer sector. If you change the track, it is extremely difficult for consumer investors to switch to technology, and the latter has a certain technical threshold.
Hong Hao’s situation is not very optimistic. During his years as an investment manager, his grades are not bad, and he guarantees at least one project every year. However, his resume has been submitted to almost all the institutions related to him, but most of them are not recruited.
Hong Hao and Xiang Shan realized that the best time may have really passed.
Hot ten years: see more than a dozen entrepreneurs a week, and invest in three or four projects in January
The past ten years have been a decade of vigorous development of the Internet in China, as well as a booming decade of China’s investment industry.
The shareholder lists of the first-generation super Internet companies such as Alibaba, Tencent, and Baidu are mainly overseas institutions, and there are not many local institutions. The shareholder lists of companies such as ByteDance, Kuaishou, Didi, Pinduoduo, and Xiaomi all have at least A local first-tier fund.
After 2014, VC/PE institutions soared.
According to the statistics of CVSource’s investment data terminal, from January to November 2015, a total of 796 funds were disclosed to have started to raise or were established, with a total target raising scale of US$162.606 billion, and the target raising scale reached the peak in recent years; January-November 2015 A total of 1,055 funds were disclosed, and the disclosed amount of funds raised was US$47.295 billion. From January to November 2015, a total of 2,506 cases were disclosed in the domestic venture capital market. In 2013, the number was still 1,335.
The market seems to have an endless supply of hot money. It only takes one and a half months at most for a small and medium-sized institutional investor to raise a fund with a scale of 200 million yuan.
Talent always flows in the direction of money. A rumor circulating in the industry is that in 2017, the number of investors in China’s primary market reached 200,000. An institutional partner described the situation at the time as “crazy sweeping goods”. When exaggerating, he could vote for three or four projects a month.
This fiery continues into 2020. It’s just that from the initial Internet investment boom, it has shifted to the consumer sector.
Song Qing, an investor in an investment institution, told Tech Planet that in 2020, when the project is concentrated, he needs to meet more than a dozen entrepreneurs a week. Every day from morning to night, in addition to chatting with project people, I also need to do internal reports, as well as communicate with peers and FA (financial advisors).
In the eyes of the outside world, investors represent the cognitive ceiling of the industry, and they can predict the development trend in the next 3-5 years or even ten years in advance. Holding a lot of money, he is in charge of the life and death power of each start-up company. Their personal wealth accumulation speed is also very fast. Not only do they receive higher salaries than their peers, but they can also get rich dividends (investment bonus + follow-up bonus) for their investment projects at the end of each year.
More importantly, after the project is withdrawn, the investment institution will give a part of the income to the executive team, that is, Carry.
Investors who hit the dividends of the times are accumulating their personal wealth crazily. With discerning eyes and pearls, you can create hundreds of millions of wealth through one investment target. It is reported that investors who invested in Kuaishou received 100 million in Carry alone. The consensus in the investment circle is that if VCs want to make money, what they earn is Carry.
The accumulation of investors’ personal wealth is strongly tied to the ratio of investment in good cases. Most investment managers generally only need to invest in one project a year. Last year, Song Qing invested in 2 projects. The year-end bonus of his institution is capped at 12 months’ salary, and Song Qing got the year-end bonus for 7-8 months.
Zhai Yuan told Tech Planet that the income of an investment manager consists of the basic salary and the investment bonus. The basic salary can basically meet the daily expenses, and the investment bonus is the big one. If he is the main person in charge of a project, he can get half or even 70% of the bonus, about 100,000 yuan. This means that if four projects are invested in a month, and each bonus is 100,000 yuan, the investment bonus will be 400,000 yuan, and the return can be said to be rich. It’s not even carrying.
For investors’ personal wealth accumulation, Song Qing believes that the time period with the highest financial returns is from 2020 to 2021. At that time, the source of cases and the quality of projects are also the best. For two or three rounds of financing for a project, investors rely on a project have high income.
The investment logic has changed, and I failed to invest in a project in half a year
In the past ten years, China’s local investment market has followed a common logic: as long as it grows wildly and squeezes into the first echelon, there will be a steady stream of financing to continue its life, and expansion is their first consideration, not profit.
But now, the investment logic has changed. In the second half of last year, investors began to mention that “to maintain the company’s self-hematopoietic ability”, that is, to make profits from the invested company. The requirements for the company’s profitability have become higher, and the track is more cautious.
In the past, investors believed that only categories with a market size of more than 10 billion had the opportunity to grow large companies. But now everyone’s thinking is that a large category means that the competition will also be fierce. “There must be strong enough logic to support whether to make a shot.” Of course, the more important requirement here is profit.
As a front-line investment manager, Song Qing clearly felt that his work had become more leisurely. Now he only needs to meet four or five entrepreneurs a week, and the workload is directly halved.
But he dared not let himself slow down. The news that a leading institution, which accounts for half of China’s venture capital industry, has abolished its consumer group and optimized TMT has scared every front-line investment manager.
During the epidemic in Shanghai, Song Qing was forced to work from home, and he was very anxious every day. There is no way to travel, conduct interviews and research, but still need to find new projects to stabilize the boss’s emotions. The general direction of the peers in the venture capital circle turned to Metaverse and Web3. Although their organization declared to the public that they were firmly optimistic about the consumption track, the boss also reassured several investors who were watching the consumption track, saying that they would not lay off staff, would not remove the consumer group, and would unswervingly look at consumption. But everyone’s heart was not unshakable.
The once-popular Internet and consumer tracks are now facing the reality that no case can be pushed, and no good case can be found.
It has been more than half of this year, and Song Qing has not shot any projects so far. Now he has no expectations for the year-end bonus, and feels that it is good that the entire organization can vote for 1-2 projects. An investor who focuses on autonomous driving told Tech Planet that now he basically lives on his monthly basic salary.
The market has cooled down. The Shanghai Venture Capital Guiding Fund released a set of data at the end of May. Among the GPs it invests in, 47% of the institutions’ fund-raising progress met expectations, and 53% of the institutions were affected by the epidemic to varying degrees, or more. Or at least lower the target fundraising amount.
Fundraising has become extremely difficult. An institutional partner told Tech Planet that VCs communicated with LPs very early, and many of them signed the agreement but did not pay. At this time, it is easy to have a fork, and the whole market will fail. Many LPs tore up the agreement and no longer pay.
An investor said that many US dollar investment institutions were withdrawn by LPs, which was equivalent to no bullets, and the situation was very tragic. LPs are willing to abide by the agreement to make money, and there are almost no projects on the institution’s side.
A partner of a second-tier institution said that the institutional investment projects are not as loose as last year, and the projects that can be invested or not invested in last year will still be looked at, and this year they will not be looked at at all. The organization is rational, and the project is rational.
There are fewer projects, fewer bonuses, and investment managers have begun to downgrade their consumption. Zhai Yuan told Tech Planet that he used to go to Starbucks to order large cups, then Nestle’s canned coffee, and then instant coffee. I used to buy socks from Adi and Nike. Now Pinduoduo 9.9 free shipping. I used to buy CK shorts. Now I don’t pursue the brand.
All of this sends a signal: there are not so many projects, not so much money, and investment institutions no longer need so many investors.
A partner of a second-tier institution told Tech Planet that we did not recruit this year, and other companies may be like this. Because the impact of the epidemic is really too great, it is very difficult to raise funds now, so there is almost no money. How to recruit?
Where is the way out for VC investors: transfer to FA and start a business on their own?
Many investors and investment institutions began to look for a way out.
Some investors have become knowledge bloggers on video accounts. They mainly provide business management consulting and coaching for entrepreneurs, with fees ranging from 20,000 to 100,000 per year.
Liu Min used to be a partner of a small investment institution, but now her position is more precisely a partner of a cross-border e-commerce company, and she is optimistic about the Southeast Asian market. The reason is that since you can’t invest in a good project, it is better to start your own business when you see a suitable one.
Liu Min occasionally watches some projects, and she does FA. “In addition to the money from the top big funds, it is difficult for us to raise money. It is better to be stable and live first.”
But FA is not an easy job.
According to CVSource’s investment data, in the first quarter of 2022, the average value of investment transactions in China’s VC/PE market fell sharply to only US$27.3173 million, down 25% month-on-month and 22% year-on-year. In May 2022, the number of investment cases was 393, with an investment scale of US$6.303 billion. Under the repeated influence of the domestic epidemic after the year, the investment market continued to sink. In this period, the investment scale dropped to a freezing point, only less than 10 billion US dollars.
If VC does not invest, FA will naturally not get a share.
A former FA in the consumer industry has been reducing his work in the FA direction since last year. He spends most of his time participating in an entrepreneurial project that has nothing to do with consumption, and focuses on corporate services.
The transformation of consumer investors is relatively difficult, and Xiang Shan is worried that it will not be possible. In terms of skills, he feels that investor interviews and research are relatively imaginary abilities, and there is no one skill. “The end of the universe is the examination of civil servants” has become an industry consensus, he is wondering whether to take the examination of civil servants, “after all, civil servants will not be unemployed.”
When he resigned, Xiang Shan set himself half a month to look for a job, but now, he felt that he was too optimistic before, and decided to extend the time for himself to look for a job.
Investing is inherently a risky game, and they are the best catchers. This year, most investors began to change careers, from consumption, Internet to technology, Metaverse, and Web3.
An investor said that the investment is really bad now, only to see the expansion of Web3. In the new cycle of controlling inflation, it’s best not to mess around. There are thresholds in any field, but investing is to learn, but the biggest threshold for the investment industry is fundraising, and it is really difficult to raise funds now.
But technology, the metaverse, and Web3 are not as glamorous as imagined. An FA told Tech Planet that he recommended the Metaverse project to a well-known institutional partner last year, but the other party’s answer was, “There are too many projects and it’s too messy, and we won’t do it for the time being.”
No action means no mistakes, and it also means that the daily expenses of investment institutions can be minimized, because investment managers do not have to “fly” every day to conduct interviews and due diligence.
“Lie down if you can.” This is the truest voice of most investors today.
(Note: Zhai Yuan, Xiang Shan, Song Qing, and Hong Hao are all pseudonyms in the text.)
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