A Conversation with Feng Zhao of Harvest Capital: Don't Just Stay Inside the Investment World

By Zhiyan Chen

Edited by Jing Liu

Harvest Capital has notched another IPO.

On June 12, Dameng Data listed on the STAR Market. The company, which Harvest backed in 2019, became the "first domestic database stock" on the exchange, with returns estimated at several dozen times the initial investment.

Zhao Feng, a partner at Harvest Capital — one of the most sought-after tech-focused funds among LPs in recent years — is in the midst of an extraordinarily busy harvest season. Beyond Dameng Data, his portfolio companies Sidian Semiconductor and Jiahong New Materials have both cleared their IPO reviews. But the deal drawing the most market attention came on the last trading day of 2023, when Dalicap, a tech company where Zhao serves as actual controller, with the world's fifth-largest and China's largest market share, debuted on the ChiNext board. In less than six months, two blockbuster IPOs have both carried Harvest Capital's name.

For a long time, Zhao Feng — and the cohort he represents — existed outside the investment industry's field of vision. During the era of dollar-fund narratives, Harvest Capital, much like many of its portfolio companies, remained submerged beneath the surface.

But this is no grassroots hero story. Zhao entered Shanghai Jiao Tong University's computer science department at 16. After graduating, he worked at PwC and Deloitte, then walked away from a lucrative salary to join a well-known investment institution. Within five years, he rose from the ranks to become partner and investment committee member overseeing the venture capital division. At 30, he left to found Harvest Capital, among the earliest firms to systematically research and invest in technology and advanced manufacturing.

There is something distinctly different about Zhao, something that sets him apart from the vast majority of the investment industry. In 2014, when he established Harvest, he chose advanced manufacturing and self-controllable technology as his core strategy rather than following the crowd into the easiest money of pre-IPO investments. Unlike most funds that simply deploy capital and wait for companies to grow on their own, he opted to take control of a manufacturing company and manage it through to a successful listing. In an environment where post-investment value-add is widely dismissed as "nice to have" or "investment theater," Harvest has consistently and vocally emphasized operations and management, directly intervening through structures like its "Business Management Office" and "Business Management Center."

It was precisely this positioning that made possible the story of the minority investment in Dameng Data and the controlling stake in Dalicap —

In 2019, Dameng Data opened its sole opportunity to bring in outside investors. Most dollar funds were not optimistic about the sector at the time, but Harvest Capital, having initiated contact and research several years prior, successfully invested at a valuation of just over 500 million RMB. Looking at Dameng Data's final list of major shareholders at IPO, nearly all are state-owned capital with "China" in their names — China National Software, China Electronics, China Internet Investment Fund — with Harvest Capital standing out as one of the very few non-state institutional investors.

In 2017, Harvest Capital partnered with Orient Asset, one of China's four major AMCs, to acquire over 70% of Dalicap for 317 million RMB, becoming the company's controlling shareholder. Post-investment, Harvest dispatched executives to Dalicap, restructured corporate strategy, and upgraded sales, production, and R&D. According to the prospectus, from 2020 to 2022, Dalicap's revenue was 220 million, 350 million, and 480 million RMB respectively, with non-GAAP net profit attributable to parent company shareholders of 70.88 million, 99.13 million, and 170 million RMB — revenue and profits both doubled in three years. On its listing day, the company's market cap briefly exceeded 12 billion RMB.

In Zhao's own words, in this investment and management practice, a team with an average age in the early thirties demonstrated "epic courage."

If, in an increasingly rigid market, many people have entertained thoughts of breaking conventions, what sets Zhao apart is a sense of mission that comes from within, guided by a clear roadmap. In other words, he is someone deeply familiar with local conditions and the rules of the game, yet simultaneously idealistic.

In his conversation with An Yong Waves, Zhao repeatedly returned to one line: "We don't live in the world of investment. We live in the world of business."

The full interview follows:

The Mission the World Has Given Me

An Yong: With Dameng Data's listing, how large a return will Harvest see?

Zhao Feng: We invested at a valuation of just over 500 million RMB in 2019, so returns of several dozen times are certain. Based on the stock price these past couple of days, our return is roughly over 600 million RMB, about 26 times our cost basis.

An Yong: Are you satisfied with this outcome?

Zhao Feng: Honestly, it hasn't met my expectations. Foundational databases are a massive industry and a crucial cornerstone of IT application innovation. The international benchmark, Oracle, is a $300 billion market cap company. Databases are also a product with extremely high user stickiness. As the absolute industry leader, I believe Dameng still has enormous room for business development and imagination.

An Yong: From first learning about Dameng in 2017, to investing in 2019, to the recent listing. What was the most difficult part of the Dameng Data investment process?

Zhao Feng: Deciding to invest. At that time, very few institutions were systematically researching databases, and those that were were predominantly dollar funds or dollar-backed institutions. But nearly all of those I spoke with voted "against" Dameng. Most felt Dameng's technology still lagged Oracle's by a considerable margin, and that investing in a substitute product that was relatively "backward" held limited value. But in the end we stuck to our own perspective, believing that a genuinely capable domestic foundational database company would inevitably rise in China, and that Dameng was the best candidate.

An Yong: Compared to the minority stake in Dameng Data, the earlier IPO of Dalicap may be an even more unusual case. We rarely see a primary market investment institution take control of a company and carry it through to listing.

Zhao Feng: Everyone discusses "an investment institution controlling a company," but from our perspective, we simply used our own capital to acquire an advanced manufacturing company we believed in, and made its products and business succeed. "Investment institution" is more of a label the outside world applies to us. Many people want to do controlling investments, but the vast majority haven't clearly grasped the rules and the considerations behind them, so they can't do proper top-level planning. The core issue is that partnership-form equity funds have finite lifespans, which creates sustainability problems for actual control — eventually you have to transfer the shares, making long-term stability of corporate control impossible. If you acquire entirely through proprietary capital and deploy into industry, many people lack both the courage and the patience to operate a business over such a long cycle. Our team understood this well, so Dalicap was not controlled through Harvest Capital's managed funds, but through our own capital. We don't simply view it as an investment; we waded in directly, treating it as an ultra-long-term operating business.

An Yong: From Harvest Capital's founding in 2014 through your entire portfolio, all investments had been minority stakes. Why did you make this choice in 2017?

Zhao Feng: In 2016, the Harvest team mapped out the electronic components sector and discovered Dalicap. At the time, the company had revenue of roughly several tens of millions, with an executive team averaging around 60 years old. It was a typical Northeastern enterprise — possessing certain technical capabilities but relatively traditional. It occupied a decent niche赛道 with some R&D and product capability, yet had substantial room waiting to be fully realized. From a minority investment perspective, this wasn't an especially attractive target, but it fit our profile for a controlling investment perfectly. Meanwhile, there happened to be a favorable window of opportunity, so we moved ahead.

An Yong: As a VC institution, why does Harvest even have a "controlling investment profile"?

Zhao Feng: From day one, Harvest has never positioned itself as a "cottage industry" investment shop. "Two or three talented people partnering up, investing in a few projects to simply make some money" — that's not our goal. We see ourselves as a long-term operating enterprise. The team often puts it quite plainly: watching from the poolside versus jumping in and swimming — ultimately, they're not the same. So, in the continuous process of exploration and accumulating our own industry know-how, controlling investment has always been part of our thinking. We hoped to use this approach to build our know-how and core competitiveness in technology industries. Dalicap was an orderly experiment in this direction. You can see the underlying spirit throughout the process: we used proprietary capital for the controlling investment, not fund capital, meaning it was ultra-long-term rather than medium-short-term. After taking control, we insisted on using our own team rather than simply hiring executives. In short, practicing operations and the ultra-long-term value creation and core capabilities that practice brings — that's our goal.

An Yong: Your ambitions are substantial.

Zhao Feng: I feel as though the world has given me a mission, so I do my utmost to fulfill it. Harvest completed our own "corporate culture handbook" in 2015. The vision consists of two parts: the first is "to become China's outstanding equity investment institution," the second is "dedicated to exploring best practices in the business world." Many of our minority investments, like Dameng Data, advance us toward the first part, but controlling and managing Dalicap corresponds more to the second. Having both visions on top of the first is what most distinguishes Harvest from other institutions. Of course, you could also call this our ambition.

An Yong: Harvest's internal management value-add team, the "Harvest Management System Center" (HMSC), was established starting in 2016. Looking back, was the controlling and operating of Dalicap actually the starting point for Harvest's emphasis on management?

Zhao Feng: Possibly even earlier. Around 2015-2016, after examining numerous companies, we found that many firms' problems weren't from 0 to 1, but from 1 to 100. It was also during that period that I encountered Danaher, the global king of industrial M&A integration with its "investment + management" dual-engine model. Then, in the process of managing Dalicap, we made more localized adaptations. That eventually led to today's HMSC. Technology and product are the 1, but management can add many zeros behind it, multiplying the efficiency of technology and product. To date, in China, both in investment circles and business circles, this has to some degree not received sufficient attention.

An Yong: Specifically, what did you do on the management front? What aspects of Dalicap did you change?

Zhao Feng: After taking over, we built upon the company's solid existing technical foundation to formulate a global development strategy and continuously increase investment. On team building, we dispatched a series of mid-to-senior management to strengthen the team. On operations, we introduced modern management systems and implemented lean management, comprehensively upgrading capabilities in production, quality, R&D, and sales. Post-acquisition, Dalicap grew rapidly from several tens of millions in revenue to 480 million RMB in 2022 — more than fivefold growth in five to six years — while achieving substantial profitability and healthy operating cash flow. Through seven years of acquisition and continuous operation, we generated handsome financial returns for the central SOE, cultivated an excellent global enterprise and listed company for the local government, solved chokepoint problems and strengthened the industry, successfully achieving wins for the SOE, local government, industry, Harvest, and all other partners. In essence, Dalicap was a "China-characteristic" industrial acquisition, with virtually no precedent in this market.

An Yong: Investing in Dalicap and carrying it to listing involved some combination of timing, positioning, and human factors. Do you believe such transaction opportunities will continue to emerge?

Zhao Feng: I believe they will. Of course, there's a precondition: you can't want too much. On one hand, at China's current stage, there remain vast numbers of enterprises with enormous room for improvement. On the other hand, if you pursue fewer but better deals — whether minority or controlling investments, limiting the number of projects — such opportunities still exist given the total population of Chinese enterprises. Another key point to clarify is, what kind of companies do we choose? We chose Dameng Data because they had accumulated decades in foundational databases, an industry with extremely high barriers, and very few domestic companies could genuinely compete with them. This field is simply too difficult; everyone is essentially catching up to foreign players, with most growth coming from competing against traditional foreign leaders like Oracle in the China market. With Dalicap, we saw its inherent advantages from the start. On product, the technical barriers were very high — it was already supplying GE, Philips, and others — yet still had considerable upside, and domestic competition wasn't intense, with few domestic companies focused on this space. This gave us a relatively relaxed operating environment post-acquisition, allowing us to focus single-mindedly on what needed to be done and create substantial incremental value for the industry. We prefer to do our utmost in certain niche segments that "not many in China are willing to do, or haven't done that well yet," but that "hold enormous value" — first establishing ourselves in China, then going global.

Understanding the Environment, Understanding Yourself, Understanding the Path

An Yong: Were there unforeseeable risks in investing in Dalicap?

Zhao Feng: For me, the risk is simple: it's my own money invested. Once that money is lost, that's the end of the risk.

I definitely want to innovate and experiment, but I also strictly control risk boundaries and live within my means. So my approach is to think things through thoroughly in advance, to conceptualize properly — everything then becomes twice the result with half the effort. If you look carefully at Harvest Capital's way of operating, you'll find we very much enjoy innovating and iterating within our domain, but the premise is that we practice "controllable innovation."

An Yong: How do you understand "controllable innovation"?

Zhao Feng: It's not that complicated. Take managing a company: if you have 100 million in profit this year, approving 80 million for R&D is completely fine, but approving 300 million might directly kill the company. I don't do that kind of thing. You must actively explore and break through while ensuring survival, making your greatest effort within your capabilities.

My worldview is to fight battles that are well-prepared and well-considered. So from the outside, our investment in Dalicap might appear to carry enormous risk, but in my eyes it really doesn't. Through meticulous upfront research and careful consideration, we had examined its industry, product characteristics, transaction structure, valuation, subsequent management, and even the consequences of potential losses. Do as much work as possible upfront, then do your utmost.

An Yong: In 2014, you left your previous firm as a partner to found Harvest Capital at just 30. Did you already have confidence of success then?

Zhao Feng: One premise was my belief that venture investment in China would have tremendous potential for decades to come, and that the industry's structure would undergo continuous change.

Then, building an enterprise is like going to battle. Before the battle begins, I had thought through my advantages: after years of training, I understood local conditions extremely well, and I was young. My market judgment was that the international situation might shift, and that advanced manufacturing would see systematic opportunities under national strategy. In the five years before founding Harvest, I had led research and discussion on over 2,000 projects, investing over 10,000 hours across pharmaceuticals, consumer, manufacturing, and other investments. I analyzed this and concluded that if I went out on my own to invest in pharma, I might reach top 50 nationally; same for consumer; but in advanced manufacturing, I had a shot at top 1. We must choose domains where we have competitive advantage — this is both for the enterprise's survival and development, and for maximizing social and industrial value under "comparative advantage."

An Yong: Taking a domestic investment institution from 2014 to 2024 probably wasn't as easy as you make it sound.

Zhao Feng: Honestly, Harvest Capital's first two or three years were also not that ideal in terms of investments. Part of it was the particular nature of the industry itself; part was that as a new institution in a new strategy and direction, we weren't that mature. Fortunately, before the 2018 fundraising winter, we raised our third fund, further reflected on, iterated, and adjusted our direction, and then from 2019 to 2021, under our new strategy and direction, we gradually invested in Dameng Data, Sidian Semiconductor, and five or six other excellent projects, making Harvest Advanced Manufacturing Fund I a standout in the industry.

Internally, we conducted detailed post-mortems on the problems. These twists and turns were part of normal growth — nothing is accomplished without bumps. So even at this moment — Harvest's tenth year — I'd say we've been fairly lucky.

An Yong: "Luck" probably includes entering the investment industry in 2009, leaving your previous firm to found Harvest in 2014, and further focusing on technology investments in 2018. Looking back, you seem to have timed every inflection point correctly.

Zhao Feng: We've really had good luck. In hindsight, at critical junctures we basically didn't make major mistakes.

There's another point too — perhaps because I'm relatively thick-skinned, a person with a fairly strong sense of security. From the internal reflection and adjustment phase starting in late 2017, to gradually seeing many results by 2021. For example, Dameng Data gained industry-wide recognition; Dalicap's profits reached 100 million. These gradually offset previous problems and shortcomings, while we ourselves were growing frantically, then continuing forward along these positive outcomes.

From another angle, I may be relatively good at thinking about things purely, filtering out the vast majority of noise — such as the pressure and temptation that money brings in the short term.

An Yong: Kazuo Inamori said that reading and making money are a person's best forms of cultivation. Was there ever a moment when you felt you should be making more money?

Zhao Feng: No. Both my choices in 2009 and 2014 involved giving up considerable benefits, and I don't trade stocks. I feel there are too many things I should be doing, so I focus on those. When you do things right, money will follow. Harvest has spent heavily on many things that don't make money in the short term. For example, the "Harvest Management System Center" — over seven or eight years, we've probably invested over 10 million RMB.

I greatly admire Toyota's spirit of lean manufacturing. Lean comes from Zen Buddhism: do what should be done to the best of your ability, and let go of what should be let go. These two are not contradictory. Do what should be done, day by day, don't lie flat; but what isn't yours, let go of it, don't lose sleep over it every day. The world issues a mission statement to every person; the hardest part is sensing it. Since I've sensed it, I do my utmost to fulfill it.

An Yong: What do you identify as the things that should be done?

Zhao Feng: In the wave of China's development these past two to three decades, I hope Harvest can invest in dozens or even over a hundred domestic industry leaders across various niche sectors in China, and help them grow from small leaders into globally competitive enterprises. Not just invest in them, but help them go further.

In this process, minority investment where appropriate, controlling investment where appropriate — the specific form has no restriction. Harvest itself is also an enterprise, so we must take care of our clients, form long-term core competitiveness, and continuously create value. Because we don't just live in the investment world, but in the business world. Investment is merely one angle and one form of behavior in business; ultimately, what governs it are the laws of the business world.

This is also why Harvest so emphasizes operations and management. Whether it's Berkshire Hathaway or Danaher, when an enterprise reaches a certain stage, the boundary between investment and operations becomes blurred. To ensure a company survives long enough and lives well enough, you must understand more than one product, more than one industry, and have the capability to implement operations and management. For Harvest's team, both investment and operational capabilities must be strong; the most outstanding enterprises possess both.

An Yong: Many people are driven forward by a sense of crisis, yet much of your motivation seems to come from security instead.

Zhao Feng: Perhaps because I was a good student who didn't study that hard from a young age, haha.

Because I have a sense of security, I'm generally very willing to trust others. On the Harvest team, I'm willing to bear costs for colleagues. Returning to the Dalicap case: the team Harvest dispatched was also very young, but this is something we insisted on doing. A very important Harvest philosophy is that we believe in young people with relatively strong fundamental qualities, believe that placing them in the right positions will allow them to quickly adapt and learn everything, creating extraordinary performance.

Ultimately, I'm willing to believe that good things will happen.

An Yong: Is this belief a consensus on the Harvest team?

Zhao Feng: First, everyone on the Harvest team wants to accomplish things; second, we've also proven that we indeed have the capability to accomplish important things. On Dalicap's listing day, a colleague even said to me: I've discovered that most of the bold claims you've made have come true.

An Yong: That's happiness.

Zhao Feng: I believe the vast majority of things in this world can be summarized quite simply: First, understand the environment; second, understand yourself; third, based on the first two, find your position and path in this environment.