Confessions of a "Buyback Consultant" | Entering the Game

"Salvaging those who fell halfway up the mountain." "Entering the Game" is a recurring column by Waves. It grew out of our observation that once-reliable operating models are facing new challenges, and the industry rules inherited from west to east have been shattered. People urgently need a new map and new order for innovation and capital. "Entering the game" is the most precious posture one can take.

"Entering the Game" was born amid transformation. To summarize its subject in one sentence: we hope to find new players and new moves better adapted to a changing environment. This is the fifteenth article in the column.

Contributing writer | Li Su

Editor | Chen Zhiyan

When 2025's capital markets showed rare signs of life — warmed by a recovering secondary market and the sporadic reopening of IPOs — the sword of repurchase obligations hanging over many founders' heads was selectively obscured. Yet the collective crisis does not change because of a few individuals' luck; the deeper implications of repurchase agreements have not disappeared. Recently, a lawyer told Waves: the "liquidation of valuation adjustment mechanisms" for a massive number of hard-tech companies in the primary market has reached a critical point.

Ye Yu, founder of Jiangsu Lize Law Firm, has spent over a decade navigating the legal trenches of venture capital. He was once the most capable "catcher" for investment institutions — in courtrooms, he precisely asserted repurchase rights against founders, trying to help GPs recoup losses for LPs from shattered commercial contracts. But as funds from the 2017–2019 hard-tech investment wave entered their concentrated liquidation years, he discovered that the traditional, cold logic of "rigid enforcement" was dragging everyone toward the abyss: on one side, GPs forced into legal debt collection to evade accountability; on the other, over 80% of founders bearing personal joint liability faced a dual bankruptcy of credit and assets, their business failures escalating into "life liquidations."

When equity investment reveals a deeply contradictory "quasi-debt" character through highly personalized liability binding, Ye Yu chose to add a layer beyond lawyer — "repurchase advisor" — to engage with failure from a different angle.

The following is Ye Yu's account, as told to and edited by Waves —

Part 01

The Debt Collector's Dead End

Not long ago, I was still doing what amounted to "manual labor": representing investment institutions in suing founders to assert repurchase rights.

That was the most standardized move in China's primary market. When IPO windows narrow and M&A channels are blocked, the accountability pressure from fund LPs cascades down to GPs like dominoes. To avoid the red line of "state asset erosion," or simply to have something to show on the books, GPs have no choice but to pick up the legal weapon and activate repurchase clauses.

But after handling dozens of such cases, I found this had fallen into an absurd dead end.

The most practical problem: the money doesn't come back.

The vast majority of founders, absent any embezzlement, burned their funding years ago on R&D, factories, and salaries. When investors claim hundreds of millions in repurchase payments and demand founders pay out of pocket, the logic is virtually unsolvable. Founders have no money — this is the industry's worst-kept secret.

And the results of this "rigid enforcement" are typically devastating. I've seen too many cases where an investment institution's lawsuit freezes company accounts and founders' properties. The result: the enterprise instantly collapses, hundreds lose their jobs, and whatever remaining value in IP and craftsmanship drains away. In the end, the investor gets a favorable judgment but not a single yuan in cash — only a debt-ridden, possibly absconded "deadbeat" founder.

This is institutional waste. I began to wonder: if a lawyer's job is simply to send China's most innovative people onto the dishonesty list, what value does this service actually provide?

Part 02

A Structural "Collective Liquidation"

Why talk about repurchase now? Because time is no longer our friend.

If we rewind seven or eight years, 2017 to 2019 marked China's primary market's full pivot from internet models to "hard tech." In those years, massive capital flooded into semiconductors, new energy, integrated circuits, and other tracks; legions of scientists and returned overseas Chinese took the entrepreneurial plunge.

But most of this capital followed the "3+2+2" fund life cycle. Do the math: 2025, 2026, and 2027 are the peak years when these hard-tech projects' valuation-adjustment deadlines and exit windows converge. Never mind the bustling markets of 2025 — the brutal reality is that 98% of these companies can neither IPO nor find acquisition opportunities.

This means repurchase is transforming from a dusty "backup clause" in contracts into a routinely activated, large-scale exit path.

The deeper crisis is that we have entered a "quasi-debt era." When over 80% of founders bear personal joint liability for repurchase obligations, and the LPs behind that money have stringent compliance requirements, business failure ceases to be merely project termination — it can evolve into a "life liquidation" of the founder's family assets, credit, and remaining years.

Once one investment institution initiates repurchase, all shareholders will "rise up." And this pressure is structural; it yields to neither individual investors' nor founders' will. If the rules don't change, I judge that 2026 will see massive numbers of entrepreneurs hitting an insurmountable wall.

Part 03

Giving Both Sides an "Exit Ramp"

Realizing this, I decided to shift my service focus toward companies and founders.

I found that often, GPs and founders end up in court because both lack an "exit ramp." GPs need to report to bosses and LPs; they must be seen taking action. Meanwhile, founders are typically in a state of panic, confrontation, and having nowhere to turn — beyond saying "I have no money," they don't know how to present a rational proposal.

This is the space for the new role of "repurchase advisor."

My approach now is no longer "litigation" but providing systematic "structural solutions." First, establishing effective communication bridges. I represent founders as a unified external window, distinguishing between different investor types (state-owned, private, industrial capital) and crafting differentiated negotiation strategies.

What can customized solutions look like?

If tens of millions or even hundreds of millions can't be paid at once, can a smaller cash portion (say, 5% of the investment) be paid first to give institutions something to show on their books? Simultaneously, combine with valuation adjustments and equity compensation to exchange for longer extension windows. This "time-first" strategy aims not at reneging but at creating realistic space for mergers, restructuring, or performance recovery.

Beyond this, there are more fundamental protective actions. I assist founders in lawful and compliant "risk isolation," clarifying relationships between personal, family, and company debt. I also systematically audit financial risk points, ensuring that under extreme pressure, founders don't touch criminal red lines like embezzlement or misappropriation of funds through non-standard operations.

This is like, on an aircraft spiraling out of control, helping the pilot land on a crash pad rather than slamming directly into the mountainside.

Part 04

Preserving the Spark

Many ask me: isn't this helping founders "evade responsibility"?

My answer is precisely the opposite. This is longer-term, rational interest balancing. If extreme repurchase execution causes the entire market's risk-bearing willingness to completely collapse, if the price of entrepreneurial failure is credit bankruptcy for the whole family or even generations, then who in the future will dare undertake those high-risk, long-cycle innovations?

I believe Chinese commercial society should pursue "dignified exits." This means: under the premise of acknowledging阶段性 failure, through professional design, containing losses within bearable scope and preventing business failure from becoming life's final act.

This includes: (1) Preserving core business. Even if the parent company fails, legally reconstructing operations to protect core teams and valuable assets, retaining the possibility of comeback. (2) Protecting reputation. Striving to ensure commercial failure doesn't lead to complete personal credit bankruptcy, preserving the founder's future options. (3) Reshaping rules. Pushing the market toward consensus — failure is part of innovation, not a crime to be severely punished.

Repurchase is being intensively activated, but are our rules prepared to absorb this massive-scale failure? This remains an open question.

As a "repurchase advisor," my goal is simple: I want to make "failure" a manageable business process again, not a devastating trial. Let those who once dared step outside their comfort zones, after enduring this capital cycle's brutal baptism, return to the battlefield with dignity and confidence.

After all, market vitality comes not only from the peaks of success, but from how we salvage those who fell halfway up the mountain.

Layout | Yao Nan. Image source | IC Photo

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