Text | Fuji Research Jiu Bai Yixin
Text | Fuji Research Jiu Bai Yixin
In 2017, at the World Internet Conference, “Investment Godfather” Xiong Xiaoge asked the founder of Inke: “How much profit can you make this year?”
The other party smiled and replied: “About 500 million!”
“Only 500 million?!” Xiong Xiaoge was disappointed. After all, for an industry leader like him who has successfully invested in Tencent, Baidu, and Sohu, 500 million is indeed “little money.”
Today, a cold wave is blowing through the market, and venture capital institutions of all sizes are collectively “exploding.” According to SoftBank’s 2022 annual report, in 2022, Japan’s “investment godfather” Masayoshi Son’s SoftBank Group lost nearly 4 trillion, shocking the financial world.
The world is in the same situation, and life is not easy for China’s “investment godfather”. Xiong Xiaoge, who once “disdained” 500 million, seems to have never imagined that it would be so difficult to make 500 million one day.
Huge bets and mutual money failed, and suffered repeated “Waterloo”
At the end of 2022, a cross-border e-commerce platform called “Sihai Shangzhou” collapsed, along with Xiong Xiaoge’s ambition to compete in e-commerce again.
Among the three Internet giants BAT, Xiong Xiaoge invested in Tencent and Baidu. A reporter from Sina Technology once asked Xiong Xiaoge: “Why did you miss Ali?” He replied: It was too late for me to meet Jack Ma. IDG, which has missed the golden development period of domestic e-commerce, does not want to miss out on cross-border e-commerce. Xiong Xiaoge has invested heavily in merchants all over the world and wants to create another Alibaba overseas.
Zhou Ning, the founder of Sihai Shangzhou, compared him and Xiong Xiaoge to Ma Yu and Masayoshi Son. Ma Yun said, “It took him 15 minutes to defeat Masayoshi Son. Although we were not as short as 15 minutes, it was less than two hours.” .”
In 2022, when Shein and TEMU are sweeping the United States, Sihai Shangzhou has fallen, falling into the best era of cross-border e-commerce.
Source: IDG Capital founder Xiong Xiaoge-Xiong Xiaoge’s official Weibo
Even before the epidemic, IDG’s investment seemed to be in decline. In 2015, with the rise of Internet finance, P2P startups sprung up like mushrooms after a rain.
Xiong Xiaoge, who has been involved in the Chinese venture capital market for more than 20 years, is very optimistic about P2P. In 2015, the New York State Department of Financial Services issued a BitLicense to Circle. Xiong Xiaoge said, “If Internet finance is done well, it must be international. This market , is big enough and the threshold is high enough, it is possible for a company to surpass BAT.”
With the support of Xiong Xiaoge, IDG concentrated its funds and rushed into Internet finance. According to statistics from International Finance News, after 2015, IDG has successively invested in 35 P2P companies including Caishu, Lemon Fortune, Wanglibao, and CreditEase.
However, the brutal growth of Internet finance quickly caused problems. A series of problems such as illegal lending, high interest rates, financial fraud, and high leverage have shrouded P2P companies, and regulatory measures are increasingly tightened. According to data from the Online Loan Tianyan Research Institute, as of April 30, 2019, among the 6,715 P2P online lending platforms, the number of problematic platforms was as high as 5,400.
In 2019, Wanglibao declared insolvency and entered bankruptcy and reorganization procedures. Public opinion quickly pointed the finger at IDG, which was deeply tied to Wanglibao, and some investors even asked IDG to compensate for their losses.
Since then, P2P companies invested by IDG have been hit hard: CreditEase HP was sealed for allegedly illegally conducting financial business; Yao Caishu fell into the overdue crisis and signed a “Voluntary Exit Commitment”; Formax Financial Circle was put on file because it was unable to withdraw cash. reconnaissance. In addition, Lemon Fortune and Haitou Finance invested by IDG have encountered varying degrees of crisis.
Although IDG’s investment losses in Internet finance have not been disclosed, they are obviously not a small amount. The failure of the “big gamble” on the mutual gold track was not only the “Waterloo” of Xiong Xiaoge’s investment career, but also seemed to open the “Pandora’s Box” of IDG’s subsequent losses.
After the epidemic, IDG’s investment encountered a second “Waterloo”, and many of the companies it invested in closed down one after another. According to IT Juzi data, in 2021 alone, 8 of the companies invested by IDG, Qingmang, Kuaisuilian, Yiersan, Aomeng Programming, Douzi Technology, Crazy Fruit Network, Yingle Shang, and Karaku, have been shut down. At least $380 million was lost.
Two consecutive “Waterloos” seem to have limited IDG’s ability to reinvest. According to statistics from IT Juzi and Tianyancha, IDG invested in 116 companies in 2021, but this number has been reduced to 53 in 2022; as of September 8, 2023, the number of IDG invested companies this year is 23.
AI investment dilemma, “network investment science” failed?
In November 2018, in an interview with the CCTV Financial Channel’s “Meet the Big Shots” column, regarding the topic of “how to connect with entrepreneurs or good entrepreneurial projects”, Xiong Xiaoge once said: “You must learn to get involved with entrepreneurs. ‘Together’, in the process of ‘soaking’ with others, observing their daily work and life, communicating with them, playing together, and more importantly, renewing your cognition, so that you can discover opportunities.”
Xiong Xiaoge, who is well versed in the Chinese philosophy of human connections, seems to have turned the business of investing in companies into the business of investing in individuals. This time-tested “network investment science” may have “failed” in the new era.
The emergence of ChatGPT shocked the entire investment community. SoftBank, which is deep in losses, seems to have found a life-saving straw. Masayoshi Son claims to be an in-depth user of ChatGPT and chats with the founder of OpenAI every day. He believes that the next revolution in the Internet will occur in the field of AI, and SoftBank is looking for “Alibaba” in the field of AI.
IDG has made frequent moves in the AI field. It has successively invested in Shiyun Technology for AI content generation, Spark Thinking for AI personalized teaching, and Ping An Good Doctor, which specializes in AI treatment. However, the scale of investment seems to be limited.
According to the official information released by IDG Capital and Tianyancha data, IDG invested “millions of dollars” in Shiyun Technology; Spark Thinking raised $150 million, led by KKR, while IDG only participated in the follow-up investment. Another person familiar with the matter revealed to Sina Technology that Huohua Thinking unexpectedly encountered educational rectification during its IPO in 2021 and faced valuation pressure.
According to “Fuji Research”, compared with the investment scale of mainstream venture capital in the AI industry, which can easily reach tens of millions or even hundreds of millions, most of IDG’s investments in the AI industry are more like “a scratch on the surface” and are very likely to end up being “heavy-weighted”. Involved” ending.
In fact, Xiong Xiaoge does not lack vision, but perhaps he lacks money.
According to incomplete statistics from Sina Finance, from the second quarter of 2022 to the second quarter of 2023, IDG has reduced its holdings in at least 7 A-share companies, and plans to reduce its holdings in two more listed companies in the form of block transactions within 3-6 months.
According to “Fuji Research”, the frequent reduction of holdings in A-share companies may confirm IDG’s lack of money from the side. If IDG wants to survive the cold winter, it is also an option to replenish funds by cashing out.
In addition, IDG also faces considerable challenges in raising foreign currency funds. IDG was once a US dollar fund, with foreign investors accounting for a large proportion. This year, foreign investors have become more conservative in their attitudes toward the Chinese market, which is not good news for IDG.
According to data from Zero2IPO Research Center, in the first quarter of this year, the number and amount raised by RMB funds and foreign currency funds all declined compared with the same period last year. Especially for the raising of foreign currency funds, only 8 foreign currency funds were closed in the first quarter, compared with 114 in the same period last year.
It is worth noting that according to statistics from IT Orange, IDG is not among the top 5 in dollar investment event amounts from January to May this year. IDG’s billion-dollar US dollar investments have also shrunk from 39 in 2022 to 13 this year, and the number of investment events is only 1/3 of last year.
Compared with investment institutions such as Sequoia China and Lightspeed Venture Capital, they have switched their focus on fundraising from US dollars to local currencies this year to cope with the dilemma of US dollar fundraising. According to publicly disclosed information from the Asset Management Association of China, the U.S. Securities and Exchange Commission and Tianyancha, as of April 2023, IDG’s current capital scale exceeds 150 billion yuan, and its China Venture Capital Fund VII target size is US$900 million. However, the completion of fundraising has not yet been officially announced.
The “Godfather of Investment” is old, is Ragnarok waiting for dawn?
In the 1990s, Xiong Xiaoge, who was working as a journalist in the United States, was favored by IDG founder McGovern by chance. He changed from a reporter to a venture capitalist and introduced venture capital to China.
At that time, no matter who Shen Nanpeng, Xu Xiaoping or Xu Xin saw Xiong Xiaoge, they all respectfully addressed him as “senior”. Xu Xiaoping said: “When he was playing VC, I was still washing dishes in the United States!” Xiong Xiaoge fully deserves the title of “Godfather of Chinese Investment”.
In 2018, at the “Financial Capital and Internet Technology Innovation” forum of the Fifth World Internet Conference, Xiong Xiaoge delivered a keynote speech titled “Century-old Stores Win the World”.
Jack Ma said, “I want to build Alibaba into a company that can survive for 102 years.” Sun Zhengyi said, “I can’t think that far into a company that can last for 300 years, but a century-old store can still be imagined.” Xiong Xiaoge thought: “IDG has gone through 26 years, so what kind of company will it be if it becomes a century-old store?”
How easy is it to be a century-old investment bank? The only investment banks in the United States that have survived for a century are Goldman Sachs, Morgan, Chase, and Stanley. These investment banks have narrowly escaped death and faced bankruptcy crises several times over the course of a century, and they have managed to achieve their current status in the industry.
If you want to build a century-old store, strength alone is not enough, you also need a little luck. According to “Fuji Research”, if IDG wants to succeed, it still needs to get rid of its dependence on a single trend, not follow the trend, and cultivate more partners in different fields in order to seize more trends. The more opportunities it seizes, the stronger its ability to resist risks, and IDG may become a “century-old store.”
Right now, the world is at the peak of its debt cycle. This is the first real “counter-cyclical” that IDG has encountered after 28 years of business. This is also a time to test the quality of IDG.
Anyone can win the “downwind game”. Under the Twilight of the Gods, can Xiong Xiaoge still lead IDG to win the “headwind game”?
1. “China’s New Economy Venture Investment Analysis Report 2021-2022”, IT Orange
2. “Dawn in the Cold Winter-2022 Domestic Private Equity Institution Investment Report”, Zhongtoubang Venture Capital Academy
3. “IDG Capital leads the investment in Circle, a Chinese consortium bets heavily on blockchain financial companies”, Securities Times.com
4. “Xiong Xiaoge and the Rise of IDG: China’s VC Era Opened by a Silicon Valley Journalist”, Unicorn Workshop
5. “Xiong Xiaoge: It’s a pity that I didn’t meet Jack Ma and missed investing in Alibaba”, 36 Krypton
6. “”Update”·Xiong Xiaoge: Continue to invest in the next great company”, Beijing News
Typography | Cathy
Producer | Yoda