After the difficult venture in 2018, many investors have shifted their focuses to the anti-cyclical industries or weak-cyclical industries. What is weak-cyclical industry? Mr. Liu Qiuming has the clear and profound understanding of his own.
The strong-cyclical industries are more likely the traditional industries relying on resources or policies instead of their own business capabilities and teams. They are more easily affected by global changes and economic fluctuations and it’s also difficult for investment institutions to predict their peaks and valleys. However, the core competitiveness of weak-cyclical companies comes from the sustainable development of the industry as well as their own strength.
The textual records are as follows:
Q1
What good cases have been invested recently?
We are more concerned about the counter-cyclical industries or the industries with weak relations to economic cycles as well as the opportunities highlighted in current adjustment of international industrial labor division. The scientific and technological field is, of course, the most representative one of them.
For instance, in the field of science and technology, the CMIG Capital has invested in AISPEECH which focuses on AI voice recognition and semantic understanding. Our technology intelligence investment team has been combing and following up the AI industry chain to explore two major directions of investment in this field: artificial intelligence and new energy smart car industry chain.
There are many AI startup companies. After investigation on various competing companies as well as full comparisons, we finally decided to invest on AISPEECH with a leading investment institution. In fact, other investors of AISPEECH are also leading industry chain enterprises or excellent investment institutions. Not only the investment institutions but also other enterprises in the industry chain are optimistic about this company, so we just followed the thought to make further comparisons and decided to invest one AISPEECH.
The CMIG Capital is optimistic about the industry chain direction of new energy smart car. New energy is a form of energy and smart cars is not only the form of new energy, but also includes other intelligent technologies such as the interactive platform of vehicle network.
Although certain degree of accumulation has been made in the two fields in China, there is still room for improvement compared with the leading companies in the world. We hope to invest on the competitive enterprise with a clear vision, aggressive mindset as well as technological innovations.
Q2
Why optimistic about the weak-cyclical industry? Is it the established or adjusted investment strategy?
It’s a throughout reflection of our team indeed and we have just had it refined more clearly. The reason why we focus on weak-cyclical industry is that they are mostly self-independent.
Let’s think reversely, the opposite of the weak-cyclical company is the strong-cyclical one, which most probably depend on resources or policies instead of the company team and their own business capability. Moreover, they more tend to belong to the traditional industry.
With the economic fluctuations and the changes of global patterns, these industries will suffer from violent ups and downs. For the institutions with equity investment, the longer the cycle is, the more difficult it is to predict the peaks and valleys.
We hope to find the companies with strong core competitiveness, which should be derived from the continued development and growth in the industry and be weakly related to the economic cycles at the same time, so that we can make clear prediction on such companies and have the patience to expect for its progress and growth.
Q3
Compared with other PE and VC institutions, how different are the judgment standards and post-investment services of the CMIG Capital?
In fact, there is no essential difference between the CMIG Capital and other investment institutions.
If any, there are mainly in two aspects: First, the CMIG Capital is very concerned about the industry chain network and mutual coordination; Second, many investment teams of the CMIG Capital are investment banks and commercial banks.
Therefore, we will specially boost all the invested companies to obtain resources of industry chain since we have helped many companies to be listed and the accumulation of all the resources will be greatly benefit the startups. Moreover, we can also provide some valuable advice on company governance and equity incentive designs.
During the development, the startups may need next round of financing to be listed or start industrial mergers and acquisitions, and our team can provide reference for them since we own very rich practical experience in this regard so that they will waste less time on trifles.
It is not easy to choose a good target. Once done, we will focus on not only financial investment but also more assistance. Excellent company will trust the one who can provide aid instead of just money.
Q4
How does the CMIG Capital use its own advantages to provide reference and resources for projects? Can you give an example?
I can give an example, which is also our high-quality investment this year, the Thunderstone Technology with Karaoke solutions. It used to provide KTV with music library, VOD system and ERP system with very high market share.
Later, when the Thunderstone Technology came to us for financing, they told us that they intended to create a business model of mini KTV, e.g. the Wow booth in shopping malls and cinemas. However, we didn’t think it had enough attraction.
According to my view at that time, the first problem was the heavy burden of assets and the second was the small quantity due to low usage frequency. I strongly recommended that they should access to the home market so that Karaoke can enter the daily life and the residential community to provide more personalized services for smaller group of people.
It’s quite feasible for the Thunderstone Technology because it owned a rich library of music and a very strong capability and efficiency of converting songs to karaoke. At the same time, they had certain technical advantages in microphones and earphones, which can ensure their users to completely immersed in singing without affecting others.
I tried to lead them to head for this direction when I was talking with the founding team. After careful demonstration, they believed it’s a huge market. Now, they are gradually establishing a multi-level and multi-scene karaoke ecology from the private KTV room to mini KTV and then to the KTV in living room.
Moreover, we believe that voice recognition technology can be used for VOD in the future. We are helping the team to connect with the companies with voice recognition technology to integrate it into microphones and headphones so that the karaoke will be easier and more convenient.
Then, how can karaoke access to family life? Due to a large amount of property management area in many residential communities, the CMIG Capital can help them with the promotion.
Q5
Have you ever felt the "cold winter" of the capital market?
In the past year, there appeared major adjustments and changes in economy, financial markets and international environment, especially the superposition of economic cycle and financial cycle has made many entities and financial enterprises suffer from many troubles.
The growth rate of economy had also suffered setbacks, which could be experienced by all the companies in the market. We cannot conclude that we are in "cold winter" now, because it depends on how long the cycle will last.
Even if it is winter now, the spring will not be afar after all. We have seen a lot of turning points, including the easing of Sino-US relations as well as the adjustment of financial cycle and financial deleveraging practices.
The CMIG Capital didn’t deliberately cut down the investments last year, on the contrary, they have been increased, particularly the good cases in some industries.
At the time of the fourth anniversary, the CMIG has started the strategic transformation to build two major platforms: urban community service sharing platform and rural revitalization service platform to cultivate some new industries by shifting focus from assets to operations for the sake of the 150 million population in urban and rural areas.
The CMIG Capital has also adjusted the investment rhythm accordingly. Since 2017, we have shifted from the original mode of self-owned capital investment to the model with industry strategy as the mainline and the direct investment plus fund investment as the supplement, then conduct comprehensive layout along the focused industries.
Adhering to the concept “data is the only criterion to test influence”, China Renaissance Group unveils the “VC/PE Annual Influential Investor Awards” once again. Meanwhile, based on the criteria of "Data Is King" as well as the principle of "fairness, openness and justice" in combination with our industry investment institutions and investor accurate transaction data, we will carry out in-depth data analysis and year-on-year comparison to create a list with high credibility and influence which can be truly recognized by the market and the industry.