cloud network hunting note: following the hunting cloud network reported last time, this time, zhang lei, a recent semi-public appeared in 3 yuet wah hing capital “for” a PI namely together huaxing PI CEO summit. During the meeting, zhang lei and package all around investment, mergers and acquisitions, venture began a conversation, zhang says his own investment philosophy and relevant Suggestions to the entrepreneurs. The following is a dialogue records: (from tencent technology)
package every: zhang lei’s investment industry legend, I know you are one of the most legendary investment jingdong, I want to ask next when you know how liu?
zhang: we are met in a speech on the meeting to listen to. Hillhouse capital is research, we have been studying the electricity, at that time to find some topic in China. In 2008, was to find several large traditional companies want to persuade them to spin off electricity let’s investment, then all of the traditional enterprise said you this help a kid understand what ah, don’t understand at all, all ignore us. Finally found the jingdong, so we met.
package all: do electricity is not only a it, why did you choose the liu?
zhang lei: first of all, we know what you want, in addition, liu is honest, what you see is what you get. When most people make electricity with capital markets could learn a few words, such as asset light model, everyone said he was light assets of a business model. But light assets mode was already on the taobao, ali perfectly, not too much of a chance.
we are looking for heavy assets of enterprises, the people are really doing such a thing, but the one who is embarrassed to say he is doing just that. Only liu seriously tell we want to do it. I feel quite good, hit it off.
package all: when you had to vote for a lot of money, in the environment (tencent technology note: 2010), the tiger funds into the time has come for me, also asked me how much value is. I told him take a head between us $2 – $300 million, then he throw it at this price. Soon after you kill time is $1 billion. Why was so big determination? A $300 million, in those days there was no heard investment industry in China.
zhang lei: 2009, 2010, a project at the early time for $300 million, the situation is really less. To say the truth, old liu also didn’t want to find my investment of $300 million. He financing is a very small number (tencent technology note: liu offered to raise $75 million m). We calculate a bill, feeling at the time, spending money on this business if you don’t look not to come out is ok.
I would talk to him or not, should we vote 300 million dollars. Will have the opportunity to shots, we also insist on very much. Finally the account, after they agreed, the round of a total of $300 million, the main is our cast, have a little bit of someone else.
package every: jingdong is took your $300 million, to some extent, also affect its future way, it’s pace of getting things done in the future?
zhang: I think it’s dare to express myself better. Before a lot of people have a lot of ideas, but were all shy astringent to express themselves, or limited to express themselves. I think as a capitalist, is, in fact, sometimes feel quite ashamed for what we do, in fact, we didn’t do anything else, old said he is to invest, but our appreciation has been very limited.
my definition of value-added mainly has two points:
the first, first don’t less. How to do this?
is mainly how to get rid of the interests of the more risk. How to let these guys do everyone consistent interests, ideas are consistent, don’t have short-term, give yourself a chance, founder of the most real, most pursuit, the side with the most idea how can express. So we spend a lot of energy to do it.
I believe liu themselves with a great idea to do things. We put together jingdong’s shareholders, it is very, very good investors for a long time, whether before or after I with us for shareholders, we all have ideal, give us a better chance to express themselves.
second, I investment companies adhere to the company to do the company’s control, to do the design of control.
I think startup must be to take risks, if he think a risk comes at a price, or the old people on the board looked at him, and he was afraid to take risks.
early in the process of entrepreneurship this timeless game is change itself. Entrepreneurs, then, the biggest risk is the same, he don’t go to a risk is actually a shareholder in the biggest risk. So, everything we do is let him he should take the risk, which is why we let the founder to design for control of the company. We know that no matter what you decide finally, I will support you, this is our philosophy.
package every: sequoia capital chairman Michael? Moritz recently published a comment. He said America’s technology industry has entered the stage of the bubble and bubble may soon be broken, zhang total do you think?
zhang lei: overvalued (overpay) if it is a year or two or three to five years, I think is ok. I feel bad is overvalued foam atmosphere makes people do something more in the short term, or the more fear I overpay 100%, the company to zero, this is the most afraid of overpay a bubble situation.
package that: the most core is not afraid to throw your, the mainest is select the right company, choose the wrong company is nothing, the difference between 0 and 1, I also quite recognized this concept. In recent years the Internet quite active. Last year, I had the opportunity to cooperate with a total contributed to the jingdong and tencent’s strategic cooperation, is a very good win-win deals. Drops, fast merger this year, zhang also drops of shareholders. From an investment perspective, what do you think is the trend of mergers and acquisitions?
zhang: this is the inevitable trend. Mergers and acquisitions or to see if in creating value. You see clearly in the process of burning money is no longer any new value created, that m&a is very good.
so far, the Internet’s largest m&a should be tencent strategic investment of jingdong. When we discuss this topic everyday, discussed a long time, the process of m&a is also very long. Want to carefully, this is a win-win-win mergers and acquisitions.
I remember to Pony (tencent company chairman of the board ma), Martin (tencent company President Mr Lau) said, I am a decade of shareholders of tencent, we don’t sell has bought shares of tencent on in his hand.
I said to Pony, Yi Xun you’ve done, you may never have experienced a word, this word is called “stock”.
tencent did more than ten years of the company, selling virtual goods, everything is never sell a thing, will do electricity suddenly, there is more than $one hundred, how also get billions of inventory. Business make, the greater the stock will be more and more.
for liu, I said at the time of one of the main problem is the trend of mobile, PC mobile Internet is go. At that time, baidu also no 91 wireless acquisition, but we have been able to see a big trend from the capital. Obviously, jingdong is without the gene.
with inventory and move the two key words, the two can be persuaded to management, on the surface is not very like the two companies, gene is a retail company, a company is the Internet product gene, we can sit together to discuss, able to sit together to discuss the core issue of inventory and mobile.
so today if who talk and mergers and acquisitions, a situation is to see who can integrate with your industry chain, who can create value together with you, whether can back together with or without swaps, an update.
you can talk about another case of m&a is to reduce the money what you burn, the two companies as drops quickly. Drops quickly after m&a, can reduce the money to burn, return the money to better, can create differentiated products.
I think the two mergers and acquisitions are very classic creation value of mergers and acquisitions, this is a trend. In this level, huaxing capital are promising.
package that: as an investor in mergers and acquisitions that how can play a more active, or a more influential role?
zhang: I think our principles, our principle is friend forever do entrepreneurs, to do their business partners. Like hillhouse capital institutions, every day there are countless, countless ideas, don’t you let me study don’t let me speak how line, we must talk to entrepreneurs say our ideas.
but, have a plenty of we promote mergers and acquisitions, one may be entrepreneurs or not, or it doesn’t interest me, all kinds of situation.
I would like to fight, I will play to the last drop of blood. Regardless of whether that is the end, I think we are doing their best efforts, the view that reach the designated position, no matter what entrepreneurs finally decided to do, we all support.
as capitalists must see your place, we can do is limited, especially at that time, may we research done very well, we got a very important thing, but may have this thing I wrong, or did something to understand. I think is better than the concept for entrepreneurs.
from the entrepreneur’s perspective, I feel especially need to use enough to open eyes to see, in addition with the investor’s point of view, I think to find some more have no conflict of interest of a third party to consider these questions. These two years, I think everyone a little more grateful thoughts, a little more empathy.
package that: with the process of capital can give us two young entrepreneurs do you think is the most important advice?
zhang: is a set of zhu yuanzhang. Wide product grain, dig a wall, king. Doesn’t have to do when A wheel is still in the whole world know how much you cow force, how or what I want to make it.
“dig a wall I was referring to the theory of buffett referred to in the moat. Is constantly to think again, where is your moat, you get up in the morning every day do a day’s work, is to increase your moat, or in your moat, reduce the consumption every day ask myself this question, before you go to work, ask yourself.
looking for investments, more and more investors have their own network, there are a lot of resources, to fully release some financial investment in the process, benefit is the combination of financial investment and strategic investment.
the other is a business to choose direction and entrepreneurial choice direction of early cannot choose too complex, to focus on breakthrough, in the process of key breakthrough to prove their then extended to the complexity of the direction of their choice.
package every: zhang always what do you think of the a-share market, the recent a-share market an obvious sign is that the Internet company, the new economy, in the United States market value could be A shares 1/3, 1/4, 1/5 even. There was a certain theoretical basis for this? A is the a-share market supply and demand decided?
zhang lei: hillhouse capital in the a-share market probably nearly $5 billion of investment, our understanding of the a-share market, I think there are A few points:
first, a-share market has its own logic, I can also see some entrepreneurs to take advantage of the bubble, using the logic of A shares to make money, say congratulations to them.
but the company will eventually return to their fundamentals, you can create the value of what?
don’t ask first capital markets to what you value, you can create more value, and this process of value creation is to build a dynamic changing. I think A shares this kind of atmosphere is some people do well, it is very suitable for him, because he put the capital market into A value of A dynamic interests chain.
but for the majority of entrepreneurs, more is a pastime, constantly to stare at me that how to make money out of the bubble, so I’m sure to ask yourself, is this your own dish.
package every: a-share market recently has an odd theory. Huatai out a report recently, while acknowledging that the listed company under the premise of a bubble, stock market bubble to you, you can take this bubble to buy valuable assets, so you should take this bubble of listed companies in a true asset, what do you think is the matter?
zhang lei: central bank governor, zhou xiaochuan, last time also said that the capital market and promote the real economy. From this perspective, the capital market shares over to it is not possible, by teng cage for A bird is the value, but the question is how much this cost, will in the process of the teng cage for A bird bird fly in the cage. Whether in the atmosphere can make for entrepreneurs, remains to be seen.
I’m on the a-share market is very optimistic. In addition, I think this do overseas investment and the fundamentals for A long time, feel that investors in a-share market is full of compassion, empathy, so big A capital market, make up, put up the atmosphere foil, for national innovation is A good thing.