"These 130 unfamiliar faces look exactly like the masters of the future."

By Muxin Xu, Qian Ren, and Lili Yu

Edited by Zhiyan Chen and Jing Liu

It's Time to Meet Them

The entrance to the Conrad Shenzhen Qianhai is deliberately concealed: after stepping out of their cars, guests must pass through a courtyard embedded with Taihu stones, a sculpture called "Tree of Life," push open a four-meter copper gate, then take an elevator to the conference hall on the third floor.

Along this few-hundred-meter path, Chen Lu was stopped by at least two groups of people. They came with questions they'd prepared for ages, rapid-firing them at this young investor. But the most crucial thing, of course, was: add her on WeChat first.

Wait — who is Chen Lu?

In 2018, this Peking University graduate, already five years into the agriculture industry, joined Wenrun Investment. Five years later, she leaped from senior VP to managing partner, becoming the firm's youngest and only female managing partner.

And what exactly is Wenrun Investment?

It's the CVC (corporate venture capital) arm of Wens Group. Founded in the 1980s as a livestock and food company, Baidu defines it as "a company operating chicken farming, pig farming, and cattle farming" — and many people would struggle to imagine what this has to do with investment. Yet more than a decade ago, Wens began using its own capital to invest up and down its industrial chain, gradually expanding into other sectors. In 2019, Wens Investment launched marketized fund operations, establishing Wenrun Investment as its management platform. No longer confined to agriculture, it has since invested in projects like Dobot, Lansen New Materials, and GoldRiver.

Some twenty minutes later, Chen Lu finally made it into the VIP room. At the "Waves · 2023 Industrial Future Conference" held in September 2023, we invited over 130 guests from industry and investment circles. Chen Lu was among those most aggressively surrounded.

Receiving similar "treatment" were: Liu Cheng, general manager of Inovance Industry Investment; Zhang Peng, general manager of CRRC Gotion; Yang Bo, partner of Weihao Chuangxin; and others. Their common traits are hard to miss: they hail from typical CVCs; they're in the prime of their careers; and their institutions are market focal points.

Over the years, we've hosted many investor events, but rarely — increasingly rarely — has the scene looked like this: the end of every session felt like a bugle call, with people springing up from every corner of the venue, phones raised, surging toward whoever had just stepped off the stage.

Yet perhaps as when we first mentioned these "ordinary names" like Chen Lu, Liu Cheng, and Yang Bo, this too reflects the current state of industrial investors: they occupy hidden positions, their faces blurred. Apart from exceptional cases like Hubble Investment, born in crisis, most participants remain unknown. Even though "the era of industrial investment has arrived" has long been consensus, those immersed in the venture capital circle can hardly rattle off a long list of important industrial investors the way they once catalogued dollar VC heavyweights.

Even the most nimble financial advisors struggle to locate them. One FA complained to Waves at the conference: industrial circles are scattered beyond imagination. Once, seeking an industrial LP, she went through a portfolio founder, who introduced a new round investor, who introduced an earlier investor — four degrees of separation before finally finding the person. At the Waves conference, two FAs from Shanghai listened through two days of agenda, and in the cycle of "gather-disperse-wait," successfully added every single guest on WeChat — yes, all of them.

The industrial investors themselves also lack connections. For instance, several guests on one panel, despite investment overlaps, had never met and never communicated — online strangers. One rarely active investor flew specially from Shanghai to Shenzhen, drawn solely by the industrial heavyweights in the promotional materials.

A Waves author was surprised when inviting guests: Haier Strategic Investment, Haier Capital, and Haier Venture Capital actually have no business overlap or coordination; strategic investors said they didn't even know anyone at the other two.

Thus, connection and exchange carry even greater value. After all, to borrow a popular phrase from the primary market — when "the pendulum of the era has finally swung this way," industrial investment and the formidable force it represents are striding toward center stage.

One media outlet counted 74 new "unicorns" in China in 2022. More notable was this: over the past year, 17 startups incubated by industry became unicorns, accounting for nearly a quarter of annual unicorn growth — roughly triple the same period in 2021.

Among many financial fund investors we've encountered, industrial investment institutions are jokingly called "industry daddies" for their substantial capital and deep industrial understanding. But more profoundly, these industrial players scattered across various fields have already grown rapidly through investment practice, forming a force that cannot be ignored.

This was also the genesis of Waves hosting this conference: to unveil a world long existent yet still novel to many. Yes, this group has reached the point where they must be known.

Grassroots, Long-Term, and Concrete

Over the past 20 years of internet waves, the movers and shakers at the forefront of the primary market were mostly dollar fund operators with overseas backgrounds and finance pedigrees. In an era when "everyone could understand a little," "understanding finance" was often more important than "understanding industry." Now, what was once somewhat mockingly called "rustic," "grassroots," and "down-to-earth" has become the "standard equipment" for mainstream investors of this era.

After recounting his experience on stage, the rarely public-facing Yang Bo was also heavily surrounded by audience members. Before becoming a partner at Weihao Chuangxin, this electronic information engineering major had worked in the integrated circuit industry for nearly 20 years, including nearly a decade as China chief representative at Skyworks. In his own words, he was an "outsider" to the investment circle.

Yan Chichen, co-president of Baobi New Energy, represents a counterintuitive choice. Born in 1990, with a finance background, he didn't enter the then-recognized "best options" of dollar funds or internet companies after graduation. Instead, he turned into the real estate system — joining Country Garden Venture Capital for investment work, then moving to Baobi New Energy. The latter is a new energy startup jointly incubated by Poly Capital and Country Garden Venture Capital, which completed two funding rounds this year to much fanfare.

Lan Youjin, founding partner of SincereVC, jokingly calls himself a "local turtle." Despite over 20 years in tech investment, he's not a typical "regular army" either. Having studied history, finance, and mathematics, he worked at a listed state-owned enterprise after graduation, thus connecting with industry and investment. Over 20 years ago, VC peers were basically all sea turtles; "I seemed to be one of the very few local turtles."

In Lan's view, China's investment circle has always had two schools: one is the "classical school" of foreign dollar funds believing in growth at any cost, represented by internet and mobile internet; the other is the "local school" following the principle of technology strengthening the nation and practical work enriching the country, firmly believing in the development of domestic industry. "After China joined the WTO, watching local tech manufacturing grow and gradually move toward high-quality development — though bumpy, this is our faith."

Unlike veteran investors who imported Western venture capital concepts, industrial investors mostly grew up within domestic industry before entering investment. This long-term binding with industry through exploration and deep cultivation gives them more profound and hardcore understanding of industrial principles and rules.

Yang Bo was called to our event by Zhang Peng, general manager of CRRC Gotion. Having been in the semiconductor circle for years, "our batch basically all started from semiconductor design, packaging, and manufacturing, then transitioned to investment," Yang Bo said.

Before joining JD Investment as managing director in 2017, Xing Xiaohui had worked at CNNC and other large enterprises on investment — another experienced industrial investor. Currently, Yuan Feng is founder of CVC Xinlian Capital and silicon carbide subsidiary Xinlian Dynamics under SMEC, having previously worked at GAC Group for 16 years and served four years as CEO of GAC Capital, where he led investments in Horizon Robotics and CALB. This establishment of Xinlian Dynamics brings together industry leaders including SMEC, Bosch, CATL, Luxshare, SAIC, XPeng, and Sungrow.

For the primary market, they are an emerging force that nearly everyone hopes to know, and they themselves are bringing a completely new investor profile to the market.

For instance, relatively more pragmatic. Yang Bo, Xing Xiaohui, Yu Ning, Yan Chichen, and multiple other investor guests arrived without any entourage — they came alone. This "light travel" characterized many investors at the conference. Unlike past investor conferences filled with secretaries, assistants, and PR personnel, industrial investors seem more accustomed to coming alone, more caring about exchange and expression itself.

Also, many among them are young enough. "People in manufacturing work very hard, not as glamorous as financial institutions," one CVC head told us. "C-end consumers are already post-90s, even post-00s. Whether doing production or investment, you have to consider consumer preferences 5-10 years out."

Returns Aren't Everything, But They Matter Greatly

"Anyway, industry has arrived," sighed Liu Xiaosong, founding partner of Green Pine Capital Partners. It was 9 a.m. on September 21, and this tone would underlie the two days of clashing viewpoints that followed. Traditional financial fund investors said this with half resignation and anxiety; industrial investors said it with something of a "the oppressed have become masters" flavor.

Traditional PE like JD Investment is also turning toward "industrial investment." In Xing Xiaohui's view, an industrial investor's path can be roughly defined as: deep cultivation in a specific field, long-term research and visits, accumulation of rich industry and project resources, and higher insight into industry history, present status, and future trends.

For "natives" already in industry for years, industry has other facets too.

Industrial investment has always existed, and at much greater scale than venture capital — it just never became a focus like the latter. Why industrial capital has felt more active in market perception in recent years, Chen Lu offers her explanation: "Industrial investment was constrained by ways of thinking and decision-making processes. Industrial capital prefers selective projects, rather than casting nets because a sector is rising. The selection process takes time, so deployment speed isn't as swift as financial investment institutions."

The barriers between different industries are the main cause of this "slowness" — investors rooted in each industry have their own investment methodology.

The eternal topic in manufacturing investment is cost reduction and efficiency improvement. In efficiency, traditional manufacturing seeks transformation, while new technologies attempt substitution and disruption — the latter undoubtedly being sexier investment targets. In the military industry, weight reduction is a critical link, so in seeking weight-reduction technology, Hua Capital CEO Hua Hua invested in a carbon fiber braking system company, and weight-reduction technology can spill over to other fields like high-speed rail.

In Fengyuan Capital CEO Zhang Haoyu's view, semiconductor investment is especially unique — no field has such a complex investment chain. Fengyuan has internally segmented the semiconductor industry into 200 tracks. Thus no institution can independently complete in-depth analysis and coverage of all tracks; it must leverage industrial resources and industry expert networks.

This is especially evident in early-stage investment. Liu Bo, managing partner and general manager of TusStar Venture Capital, believes an important source of early semiconductor investment opportunities is upstream cutting-edge R&D at research institutes and universities. This aligns with Yang Bo's view: in his opinion, semiconductor industrial investment sourcing basically divides into three points: first, incubation cooperating with universities; second, incubation cooperating with industrial investment institutions — these two can be summarized as "incubation support + order provision" model. Third is layout across the entire semiconductor industry chain. For instance, he invested in a chiplet company called "Polar Bear Chip," then traced upstream through the fully domestic supply chain, discovering major opportunities in domestic substitution for substrates, ceramic materials, and serial transceivers.

"To really do semiconductor well, you have to connect the entire industry chain. While seeing old projects, new ones continuously emerge," Yang Bo said.

In the new energy sector, hot and cutthroat as it is, Zhu Jiachun of Hengxu Capital believes caution is反而 warranted. For example, battery material projects that were still red-hot a few years ago are now under heavy pressure, and negative electrode material expansion — considered high-barrier by investors — has grown at unbelievable speed. How to seize opportunities in this rapidly shifting, fiery new energy field is the enormous challenge investors face.

The medical and consumer worlds are relatively colder. Against this backdrop, Yang Kun of Gaorong Capital observes that specialized funds are also broadening their boundaries, because many emerging fields no longer limit themselves to traditional biology or medicine but integrate more medical and AI technologies, creating cross-disciplinary impacts — even vertically medical investors inevitably face interdisciplinary scenarios.

Wang Xiaokang, founding partner of Niou Capital, opposes the recent hot narrative of consumption downgrading. In his view, economic cyclicality is merely an objective phenomenon. For instance, during the 2008 global financial crisis, people's consumption capacity also cliff-dived, "but this was just suppressed consumption, not vanished consumption." In Wang's view, consumption will inevitably upgrade — this is human nature.

Sacrificing breadth for depth may be an unavoidable choice for industrial institutions, and another question before them is: should strategic goals sacrifice financial returns?

In Zhang Shujian's view, strategic investment head at Loyal Valley Capital, industrial investment broadly divides into two categories: first, serving main business development through ecological chain layout investment, mainly with own capital; second, independently raising external capital, using industrial chain advantages for external investment, with limited actual business synergy, more providing brand endorsement and resource monetization — this type pursues financial returns more. "The first type was more common in the past; now the second type is increasingly prevalent," Zhang told Waves.

Nearly every guest seized moments during dialogues to emphasize their understanding of "the importance of financial returns." A single industrial investment may have multiple interpretations: business synergy, ecological layout, industrial chain expansion, etc. But Wang Xiaoli of YF Capital tells us: if it's a good industrial investment, it must first conform to the first principle of investment — returns.

Inovance Industry Investment belongs to the earlier cohort of industrial players, first conducting socialized fundraising in 2021 with an initial close of 800 million RMB. A year later, it expanded fund size to 1.51 billion. How to balance investment with main business? In Liu Cheng's view, supporting strategy while ignoring investment returns themselves, leading to fund underperformance or even losses, carries great risk for listed companies doing CVC.

Chen Lu put it more bluntly: "Claiming huge strategic contributions without making money long-term — can that be quantified? The likely result is the investment business gets cut." Ten years ago when Wens Investment was newly established, it also wanted to do agricultural investment along its most familiar domain. But later facts proved that due to differences in developmental stages and characteristics across fields, Wens Investment's highest-return projects in recent years have actually been in advanced manufacturing, new energy, and other hard tech areas.

Financial returns are the foundation for sustainable industrial investment operations. After all, a fund can't run just one vintage. The "survival crisis" for GPs is: regardless of whether they call it "industrial investment," if they don't make money for the company or LPs, there won't be next-vintage commitments.

Another pursuit of financial returns comes from weighing security. An investor familiar with Country Garden Venture Capital told Waves that it has in fact taken on more financial investment attributes, and in its few real estate-related strategic investments — building materials, property supporting facilities — the problem is: strategically investing upstream targets means invested companies in fact follow their own cyclical development patterns. Thus when main business hits crisis, these strategic deployments cannot form any effective moat.

For Yan Chichen, who moved from Country Garden Venture Capital to Baobi New Energy, his previous equity financing experience greatly helped in choosing capital providers. Baobi New Energy's first funding round raised 1 billion RMB, with investors including NIO Capital, XPeng Xinghang, Sunwoda, GoodWe, SenseTime, and other industrial capital. "We're very clear that for a startup's first funding round, what you need isn't just money, but industrial resources."

This corresponds to three levels of invested company needs: first, direct business introduction; second, shareholders' industrial resources; third, government relationship introduction — all extremely scarce resources for early-stage companies, and generally recognized as industrial capital's added value.

Complete post-investment empowerment, including ongoing management assistance, brand endorsement, even directly giving invested companies order support under equal conditions — these commonly recognized industrial capital advantages may stem from initial investment posture.

Chen Lu told Waves that Wenrun Investment tends to deploy at high ratios where it sees and is confident, and when becoming an invested company's shareholder, hopes to be its strategic investor. Financial returns matter greatly, but they aren't the only thing that matters.

Who Owns the Bright Future?

If industrial investment has long existed in China, merely not entering the primary market's mainstream view, then the large model wave may well bring new variables to future industrial格局.

In Luo Xu's view, managing director of Lenovo Capital, the previous AI wave lacked a particularly complete and unified framework, so it didn't generalize well to many fields. This wave has better generalization capability, thus better landing potential.

Zang Tianyu, executive director of Jinqiu Fund, believes that in this AI wave, apart from a few companies doing underlying large models, more companies can directly build applications on this foundation, with increasing numbers making money from day one. A16Z previously had statistics showing that among global website traffic TOP50 AI projects, 48% in fact don't rely on external financing — which he believes "to some extent confirms this."

Regarding which fields this AI wave will affect, Lou Tiancheng, co-founder and CTO of Pony.ai, believes it will first strongly disrupt experience-based industries — those requiring certain learning ability but not strong logic, with final answers clearly not unique.

Yu Jun, managing director of SenseTime Guoxiang Capital, proposes that in the classic internet era, there was a shift from to-C to to-B, while today's new AI wave sees to-C and to-B starting simultaneously. C-end may consider product experience, while B-end considers whether it can solve industry efficiency problems, or collaboration and interaction problems between different job types.

Yu Hong, partner at Meituan Longzhu, told Waves that to-C will basically follow internet development trajectories — for any application, oligopoly will form, trending toward extreme concentration, even monopoly. For B-end, achieving very high market share, even dominance, requires specific reference to product moats and business analysis — this battle may be very prolonged.

From earliest machine vision to autonomous driving, to ChatGPT, a greater possibility of commercialization across numerous industries has clearly arrived. Including some institutions doing high-end manufacturing and new materials investment, who also expressed attention to AI "landing in manufacturing and manufacturing-related services."

Undoubtedly, China's industrial investors are welcoming a brand new future. But does this mean the future belongs to industrial investment?

Before joining Yuanhe Puhua, Yin Botao worked nearly 20 years in the chip industry, rising from R&D to senior VP. Many peers chose to transition from industry to investment; his institution has five or six more colleagues with decades of industry experience. For them, semiconductor investment "is a veterans' game."

Team recruitment also clearly shows industrial-background investors' preferences. Yin told Waves that his team configures 70% with industrial backgrounds, 30% financial backgrounds. In his view, some young financial investors can perform very excellently in other tracks, but for semiconductor investment, industry-born "veterans" have greater advantage.

"I don't want to see, in a field that already has many competing companies, capital still supporting another company to involute — that's what capital does, not what semiconductor people do." As a representative of industrial investors, this appeal by Yang Bo, partner at Weihao Chuangxin, won full-house applause.

Zhang Shujian once summarized for us the respective characteristics of industrial and financial investors, these seemingly incompatible groups: industrial investors are more open-minded and imaginative; financial investors are more meticulous, rigorous, and skeptical.

However, RMB funds in Shenzhen — birthplace of China's local venture capital, "battle-hardened" in capital markets — don't seem to agree.

In Ding Baoyu's view, managing partner and chief investment officer of Tongchuangweiye, American venture capital has 60+ years of history, yet even today no industrial investor ranks in the TOP10 — perhaps because industries are cyclical, and one industry may be replaced. As a CVC, choosing only one direction makes it hard to transcend the era, because the era is always changing.

Songhe Capital founding partner Li Wei summarized: "The purpose of industrial investment is to merge companies and strengthen oneself, while venture capital is to help others succeed — those who always help others succeed have more opportunities."

Such confrontations were often visible at the conference, reflecting long-standing stereotypes between financial and industrial investment. In fact, as Waves noted in an April study, when industry is elevated to current strategic height, the protagonists of industrial investment have gradually migrated from large-enterprise CVCs toward more diversified institution types. These can be leading enterprises' strategic investment departments, local government guidance funds, or of course financial institutions with industrial capabilities.

Thus, industrial and financial investors won't remain eternally incompatible. In China's current context, industrial investment as an investment practice should ultimately have only one底色 — overall industrial chain elevation. This goal means industrial investment should enable efficient transfer and utilization of capital, orders, technology, land, and other resources toward invested parties capable of evolving industry. Whoever can achieve this can complete industrial investment.

As Bao Sheng, partner at Yili Group industrial CVC Jianling Capital, said: "Pure financial institutions and industrial CVCs are mutually complementary, playing different roles at different stages. The ultimate purpose of industrial investment is achieving win-win, making companies and industries better."

Image source: Waves · 2023 Industrial Future Conference

Layout by Yunxiao Guo