The project in hand was robbed, and this hard-core VC ushered in the harvest season

“At the most difficult time, we persisted to get the opportunity we have today. It is not easy. When everyone is not optimistic about you, you can persevere. It is also a kind of self-confidence.” Mi Lei, who has always been serious Rarely joked.

In the past October, Zhongke Chuangxing, which he is in charge of, has harvested a hard technology IPO – Zhongke Microzhi successfully landed on the Science and Technology Innovation Board; and Qixin Optoelectronics, a project that Angel Wheel participated in, has been valued all the way up, and now it is worth it. The return is more than 200 times. Behind this, China’s hard technology investment has ushered in a big explosion, and hard technology investors who have been sitting on the bench for many years have ushered in the harvest season.

Such a scene was something Mi Lei, who had just stepped into the VC circle, could not imagine. In 2013, at the Xi’an Institute of Optics and Mechanics of the Chinese Academy of Sciences, he and other partners jointly initiated the establishment of Zhongke Chuangxing, which is the first domestic platform focusing on hard technology venture capital and incubation. At that time, few people were interested in domestic hard technology investment, and mainstream investment institutions were more inclined to projects with innovative models, relying on the Internet to create countless return myths.

Over the years, Mi Lei and Zhongke Chuangxing have experienced the process of China’s hard technology track from being deserted to hot, and at the same time, they have also formed a set of systems for incubating hard technology entrepreneurship and a strict investment methodology. So far, they have invested in more than 340 hard technology companies. , with a valuation of over 110 billion; including more than 150 well-known scientists, creating a secret and huge hard technology map.

The history of a hard-core VC:

For 8 years, he has invested in more than 300 hard technology projects

Mi Lei never thought that hard technology could be as popular as it is now.

Back in 2013, with the support of Xi’an Institute of Optics and Mechanics, Chinese Academy of Sciences, Zhongke Chuangxing was established in Xi’an, the ancient capital of thousands of years. At that time, the original intention of Zhongke Chuangxing was to build a scientific and technological entrepreneurial ecological network system integrating “research institutions + angel investment + entrepreneurial platform + incubation services”, and to provide professional, in-depth and comprehensive entrepreneurial incubation for hard technology entrepreneurs. and financing solutions.

Recalling the difficult situation in the initial stage of Chuangxing, Mi Lei was still very emotional: “Because the investment cycle of hard technology is relatively long, people’s recognition of hard technology was not as high as it is now. Therefore, we still raised funds at the beginning. It’s difficult.” Finally, fortunately, with the support of Xi’an Institute of Optics and Mechanics and other institutions, Zhongke Chuangxing successfully launched the first domestic hard technology angel fund.

Compared with fundraising, what is more difficult is the follow-up financing of the invested projects. Generally speaking, hard technology companies have large initial investment, long cycle and slow results, which makes most investment institutions stay away. At that time, mainstream VC/PE institutions focused on the Internet and were keen on model innovation projects. Even powerful funds did not dare to easily try hard technologies with long return cycles.

At that time, Zhongke Chuangxing held many high-quality hard technology projects with strong growth potential, including the now popular optoelectronic chip company – Qixin Optoelectronics. Founded in 2014, this company is one of the few companies in the industry with full-featured research and development capabilities in materials, chip design, chip preparation, chip packaging and testing, and optical modules.

As early as the beginning of Qixin Optoelectronics’ establishment, Zhongke Chuangxing participated in the angel round of investment and accompanied it all the way. In 2018, the company was affected by the ZTE incident and had some cash flow problems. After learning of this situation, some investors wanted to withdraw their capital, and the negotiated new round of financing could not be carried out normally.

Just when Qixin Optoelectronics was in the most difficult time, Zhongke Chuangxing provided another 10 million yuan in support to solve the problem of the company’s capital chain shortage. Today, Qixin Optoelectronics, which has survived the difficulties, has become a hot star project in the venture capital circle. It is reported that in the new round of financing, many investment institutions have been unable to grab the share of Qixin Optoelectronics.

Uisee Technology has also been neglected. In fact, Mi Lei has been specializing in the field of unmanned driving for a long time before he formally invested in Uisee Technology, “Because my research direction is the field of optics, and LiDAR is a very important part in unmanned driving, so I started in 2012. Just started to pay attention to the trends in this field.”

Later, when he heard that Wu Gansha was going to leave Intel to start a business, he immediately asked for the latter’s contact information through a friend. During the first meeting, Mi Lei learned that Wu Gansha’s team has accumulated a certain amount of technology in unmanned driving, and their technological progress has far exceeded expectations. After the initial conversation, Mi Lei decided to vote without hesitation, and finally voted for 3 consecutive rounds.

Early-stage investing is essentially investing in people. In Mi Lei’s view, Wu Gansha, the founder of Uisee Technology, is a typical “long-distance runner” and is trustworthy; moreover, the path he chose is also acceptable to Chuangxing: do it first and land it scene, and then iterate step by step.

Time proved Mi Lei’s judgment at that time. After experiencing the darkest moment in the unmanned driving industry, UISEE began to enter the harvest season – in 2020, the company began to move towards large-scale commercial use, and its performance increased by 150% year-on-year. At the same time, the financing of Uisee Technology is hot: in 2021 alone, the company has completed 4 rounds of financing, attracting national team investors such as CDB Manufacturing Transformation and Upgrading Fund, CDB Finance, and Keyuan Industrial Fund. industrial investors.

As of October 2021, Zhongke Chuangxing has invested in and incubated more than 341 hard technology companies, including Uisee Technology, Jiutian MSI, Feixin Electronics, Zhongke Weiguang, Zhongke Weijing, Kunyou Optoelectronics, Zhuo Lei Laser, Many hard technology companies such as Qixin Optoelectronics, Bodong Medical, Wushuang Medical, Shenxin Bio, and Chengke Microelectronics have grown rapidly.

Zhongke Chuangxing interprets the connotation of value investment with practical actions: the real value is often reflected in the long run. Looking back on the past 8 years, Mi Lei sighed: “Ten years ago, the entire investment circle’s attention to hard technology was freezing point. Today, investment in hard technology is booming, and this is a transformation process from extreme cold to extreme heat. Fortunately The thing is, at the most difficult time, we persevered to usher in today’s opportunity.”

So far, Zhongke Chuangxing has managed several funds with a total scale of more than 5.3 billion yuan. The LP lineup has become more diversified, and the proportion of securities companies and private enterprises has continued to increase. In addition, Zhongke Chuangxing has begun to enter the harvest season. The invested company Zhongke Micro will be listed on the Science and Technology Innovation Board in October this year, and more than ten companies will prepare to apply for listing in the next 2-3 years. After years of hard work, China’s hard technology investment has finally ushered in an explosion.

Hard technology Jianghu chess player

The methodology behind belief in value investing

Looking around, all major VCs/PEs are crowded in the hot land of hard technology: some people are very explosive, and they are high on a track; Zhongke Chuangxing, on the other hand, is like a chess player, who sees opportunities in chaos, dares to withdraw from popular tracks, and plunges into uncommon areas to explore underwater projects.

“Red Sea’s cake is so big, so many people grab it, you will definitely not be able to grab a big piece. The Blue Ocean’s cake seems small, but no one grabs it from you, as long as you do this thing slowly, then this The cake is yours. When you are the absolute number one, you can slowly make the cake bigger.” Mi Lei explained.

From artificial intelligence, intelligent manufacturing, commercial aerospace, new energy to biotechnology, information technology, new materials, and optoelectronic chips, Zhongke Chuangxing is roaming in the vast ocean of hard technology, and has been unremittingly searching for the next blue ocean. In Mi Lei’s words, the next-generation technology. For example, Zhongke Chuangxing has invested in more than 20 companies in commercial aerospace, and is one of the VCs with the largest number of investments. “Now commercial aerospace has been recognized by mainstream VCs, and it is another track that we have brought fire.”

Right now, when peers in the investment circle gather in the fields of GPU and AI chips, Zhongke Chuangxing has turned around and rushed into optoelectronic chips and quantum chips. Mi Lei shared the team’s prediction: “Human information communication is in the process of ‘from electricity to light’, and the era of artificial intelligence will definitely bring about a revolution in integrating optical circuits and optical chips, and optoelectronic chips will be a hot spot for future investment. .” Since 2015, Zhongke Chuangxing has invested more than 150 projects in the fields of optical communication, optical sensing, optical Display, photonic manufacturing, biophotonics and other fields.

The forward-looking layout in different fields is only an appearance. The core value of Zhongke Chuangxing is that it can discover hard technologies with commercial value in scientific research, and then invest and help the other party realize commercial and industrial value. In other words, any technology goes through at least two processes: first, whether the technology can create value, such as improving efficiency, reducing costs, and solving problems in the industry; second, whether the technology can achieve large-scale at a lower cost mass production. After seeing the ups and downs of hundreds of projects, Mi Lei concluded a rule: If a technology can’t do the above two points, it can only be a castle in the air.

When investors really go to the front line of investment, they will be clear: long-termism is not an empty slogan, but a capability that needs to be learned.

Hard technology investment managers must not only understand the technical principles, but also predict in advance that various problems will arise in the process of technology implementation, such as how to solve the engineering and process, and how to industrialize the technology. Mi Lei said frankly: “We need investors who have both scientific research experience and experience working in the industry. Only in this way can they better understand the needs of both sides. In the past, hard technology investors rarely possessed such qualities, and they could not be recruited. Come, other investment institutions rarely have such talents, and we basically cultivate them by ourselves.”

It is understood that most of the investment managers of Zhongke Chuangxing have a background in science and engineering, and they also need to have worked in the industry for more than 5 to 10 years before they can invest in projects. In order to make investors grow faster, Zhongke Chuangxing asks investors to do research, and actively promotes investors to run customers, and let them go to the industry for interviews. Mi Lei’s experience is that investors often communicate with people in the industry so that they can get more first-hand information and the industry knowledge system will be more complete.

Today, the labs of many hard technology startup teams can always see the Chuangxing investment team, and Mi Lei also keeps in touch with industrial capital and scientific research institutions at any time. Continue to invest in good companies.”

Give money, give equipment, give service

Let scientists start businesses with peace of mind

When most VCs realized that they wanted to make friends with scientists, Zhongke Chuangxing had already become one of the investor teams most familiar to well-known professors and scientists in China.

Here is a set of data: Zhongke Chuangxing has invested in 341 hard technology companies so far, of which 150 are well-known scientist teams. After contacting batches of scientist teams, the most real feeling of the Zhongke Chuangxing team is that there are only a few scientists who really dare to come out and start a business. Because scientists successfully transform into entrepreneurs, they will encounter many challenges.

Many scientists have a technical complex, hoping to really make a product to serve the public. This is also a common problem for scientists to start a business: they are often strong in technology, but weak in many aspects such as marketing, management, and operations.

“Zhongke Chuangxing has always insisted on the industrialization of scientific and technological achievements, and has accumulated rich experience in this field. We will know what pits a scientist will go through when he starts a business from a laboratory, and how to jump over these pits. Especially when the market cannot provide solutions. When we come up with solutions, we must build our own solutions—provide equipment and technical support while investing, and provide them with the best service.” Mi Lei added.

This is not an exaggeration. Zhongke Chuangxing is one of the few investment institutions in China that dares to purchase semiconductor production lines. Previously, when Chuangxing was incubating chip companies, it found that startups had a high demand for semiconductor equipment, but they did not have much capital to purchase equipment. As a result, Zhongke Chuangxing, together with the Shaanxi Provincial Department of Science and Technology and government departments at all levels, established the Shaanxi Provincial Optoelectronic Pilot Technology Research Institute, and purchased various equipment required by chip companies. It is understood that the total construction area of ​​this research institute is 47,000 square meters (5,000 square meters of clean workshop, 100-level, 1,000-level, 10,000-level, etc.), and there are more than 2,800 instruments/sets.

Planting a plane tree will attract a phoenix. After Zhongke Chuangxing solved the production problem for the chip company, a group of start-up companies were attracted to Xi’an, and the semiconductor material company Saflex was one of them. In 2016, Severus planned to build a medium-volume production line in the United States, but the cost was too high. At this moment, the investment manager of Zhongke Chuangxing found Chen Chen, the co-founder and CEO of Severus and told him that Zhongke Chuangxing had a ready-made production line that could be used directly.

Chen Chen’s first reaction was: “This investor either has feelings, or he lied to me.” One MOCVD equipment is tens of millions, and these 19 pieces of equipment are worth hundreds of millions. Investors spend more than one billion to buy equipment assets. It’s unimaginable.” Until later, Chen Chen personally went to Xi’an and was surprised to see these devices, and finally decided to make Zhongke Chuangxing the A-round investor of Safelux, and settled the company in Xi’an.

Afterwards, Chen Chen once sighed: “Many investors in our industry rarely have the strategic vision and strategic patience of Zhongke Chuangxing. Semiconductor or hard technology investment really takes time and resources to build barriers. to do it.”

In addition to hardware equipment, Zhongke Chuangxing has also worked hard on software services. In Mi Lei’s view, the biggest difference between scientists and entrepreneurs is the way of thinking – scientists’ thinking is not compromising on things and people. They strive to pursue the highest scientific goals, and the most important thing is to achieve the ultimate from a single point; while entrepreneurs It is necessary to have the engineer’s thinking of compromising things and the entrepreneurial thinking of compromising people, so as to achieve the comprehensive leadership of customer product value under the condition of limited resources. To this end, Zhongke Chuangxing has held 7 hard technology champion enterprise entrepreneurial camps since 2015, aiming to exercise the business thinking and industrial thinking of scientists and founders.

In addition, Zhongke Chuangxing has also established a relatively complete post-investment team, forming four post-investment empowerment sectors: training team, industry and policy consultation, publicity team and financing team. Among them, the training team is mainly for the CEOs of hard technology companies, providing them with corresponding training services; the industry service section is committed to the connection of industry leading customer resources to help companies get orders; the brand promotion section has accumulated brands suitable for technology companies. Build the methodology and publicity resources; the financing team runs through the entire growth process of Angel+, VC, PE, Pre-IPO and other companies.

Mi Lei said that if hard technology entrepreneurship wants to become easier, investors must gather various innovative elements on a platform to provide them with a tropical rainforest-like ecosystem. “If money is compared to rainwater, then the post-investment service of Zhongke Chuangxing is sunshine, the leading platform is soil, and the upstream and downstream enterprises in the industrial chain are other species in the ecology, which together support the free growth of entrepreneurs.”

“The busier the outside, the more calm we have to be”

Hard tech requires true long-termism

After 8 years, Zhongke Chuangxing has experienced the whole process of China’s hard technology track from unpopular to popular.

At present, hard technology has become the most popular outlet in the investment world. Based on policy support and changes in the international environment, technological innovation has become a social consensus. More importantly, the exit channel for hard technology investors is becoming more and more smooth. The Science and Technology Innovation Board introduces a new exit channel for VC/PE, promotes the influx of capital into the field of hard technology, and promotes a virtuous circle between science and technology companies and the capital market.

The emergence of the Beijing Stock Exchange has opened the door for hard technology investment. “Many hard technology sub-tracks are not so large in market capacity, and the company may not be able to enter the Sci-tech Innovation Board. Now the Beijing Stock Exchange has given ‘specialized, special and new’ companies a new way out, allowing more hard technology companies to Accelerate to enter the capital market. In this way, the exit channel of hard technology investment is completely smooth.” Mi Lei said enthusiastically.

Under such a historical background, VC/PE actively participated in the field of hard technology. But the problem has come again. As the popularity rises, the scene of soaring valuations of hard technology start-up projects has been staged again. Mi Lei saw this scene, and he often warned the internal team: The more lively the external environment is, the more calm he must be. The mentality still needs to be calmer, do your own business well first, and don’t be disrupted by short-term market fluctuations.

“It’s time to live, but now it’s just a little hotter, we still need to find a good project in a down-to-earth way. We can’t eat and drink hard just because the weather is hot, and invest hard no matter how high the project’s valuation is. Now, let’s start Be prepared for winter to come at any time, and you will definitely avoid some projects that are overvalued and irrational.” Mi Lei made an image metaphor.

He also frankly admitted his concerns, “The valuation of start-up companies is very high, which is not necessarily a good thing.” Because most people tend to overestimate the short-term technical capabilities of technology and underestimate the development space in the next ten years. If investors haven’t seen something come out in 3-4 years, they may withdraw, and in the end they don’t know which startups will survive.

Although batches of technology companies have sprung up, technology itself does not “explode” in an instant. Generally speaking, in the development curve of hard technology companies, in the first 5-10 years of development, investment and return are inversely proportional, and even suffer losses. In the research and development and growth period of technology, the return of hard technology companies is lower than linear growth, which can be described as “a lot of hard work and a reward”. Once the inflection point is passed, it will be rewarded with hard work. This is also the essence of hard technology, and it is true long-termism and value investment.

And long-termism is not to hold a company long enough to make a lot of profits, but to take the long-term well-being and economic sustainable development of the country and society as the ultimate goal of investment, and make efforts to realize the upper system maximization of value. This is the long-termism in Mi Lei’s mind: the real value of hard technology investment is to create not only knowledge value, but also economic value and social value, achieving economic progress, healthy social development, and improvement of human living standards.

In Mi Lei’s words, as an investor, especially an investor in hard technology, you must have a certain sense of mission and responsibility. “In fact, our investors are the allocators of social resources and a role in promoting social progress. If you allocate the wrong resources, not only will individuals be eliminated by the times and society, but also social resources may be wasted and social progress may be delayed.”

This is also the mission and pursuit of Zhongke Chuangxing – in the critical period of China’s transformation, there must be someone willing to bury their heads in being the supporter and guardian of hard technological innovation. Mi Lei, who has a background in scientific research, is more aware that hard technology is a long-term thing that needs to be adhered to. This is a long and lonely road.

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