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Author, Liu Bo, PEdaily, investment industry
This is a great mark in the history of global venture capital.
Not long ago, Huang Renxun mentioned his first financing in his life in his speech at his alma mater, Stanford University. In 1993, the two angel investors jointly invested $2 million, with a valuation of $6 million.It is this investment that has brought Nvidia, which is facing the risk of bankruptcy as soon as it was established, from danger to safety.
Since then, the Nvidia Empire, which was later dominated by the world.
In short, an angel wheel that year has created a myth of $2.8 trillion in market value so far, which is undoubtedly the best interpretation of venture capital helping technology giants rise.Historical experience shows that whether venture capital is active directly affects the prosperity of technology innovation enterprises, and this point is more worthy of our deep consideration.
No business planAngel Round raises $2 million
This investment will start from 1993.
At that time, Huang Renxun was working as an engineer in a chip company. His two friends Chris and Curtis found him and expressed his desire to leave and start a business, hoping that Huang Renxun could join them.It was before the outbreak of the PC revolution, Windows 95 was not yet launched, and the Pentium processor had not been released yet. It was obvious that microprocessors would be very important, and Nvidia came into being.
There is also an interesting little episode in this – when Huang Renxun told his mother that he was starting a business and was preparing to start a 3D image chip company that consumers could use to play games, his mother asked directly: “Why don’t you find an electronics factory?”Where are you going to work?”
In short, Huang Renxun’s business starts extremely tortuously, and he didn’t even know how to write a business plan at that time.To this end, he went to the bookstore to find a book called “How to Write a Business Plan”, which had a total of 450 pages. He only turned a few pages and gave up, “When I finished reading it, the companyIt probably went bankrupt and spent all the money.”
How difficult was it for Nvidia to raise funds at that time?
Sid Siddeek, who is in charge of Nvidia’s venture capital department, still remembers it vividly: with speech materials, he rushed to several investor meetings to help Nvidia CEOs and management teams promote their stories.And his office was just a small mobile room.
In his speech, Huang Renxun recalled that at that time, he had only had about six months of living expenses in the bank, and the whole family could only live on the deposit at hand.So he simply did not write a business plan, but went directly to find former boss CEO Wilfred Corrigan.
When Wilfred Corrigan listened to Huang Renxun’s introduction, he said frankly that he had no idea what he was saying, “This is one of the worst entrepreneurial sales promotions I have ever heard of.” Even so, Wilfred Corrigan picked up the phone and called Sequoia (Red)Don Valentine, founder of Shan Capital, “I want to send you a young man over and hope you can invest in him. He was one of our best employees.”
However, when Huang Renxun finished the display, Don Valentine said, “Startups should not invest in startups or cooperate with startups.”His point is that in order for Nvidia to succeed, another startup is needed to succeed, which is Electronic Arts, a video game development company.The CTO of that company was only 14 years old at the time and his mother had to drive him to work.
In this way, Don Valentine and Sartre Hill Capital each invested $1 million, allowing Nvidia to obtain a $2 million angel round of financing, with a post-investment valuation of $6 million.You should know that before that, Don Valentine invested in Apple only paid hundreds of thousands of dollars in the early years.
This investment is still indelible, and Huang Renxun still remembers what Don Valentine said at the meeting: “If you lose my money, I will kill you.” Fortunately, Huang Renxun and Nvidia did not disappoint his expectations.
A mirrorThose capitals that dare to take risks
To this day, this angel investment has been recorded in history.
In 1999, Nvidia was listed on Nasdaq with an issuance market value of US$230 million.Based on this calculation, the valuation of Nvidia’s Angel Round is 38 times higher. Even if it partially withdraws after it goes public, it is a good choice.But I believe that with Don Valentine’s investment philosophy, I will definitely persist and get higher returns.
There is no need to repeat the story behind. Nvidia has risen all the way to become a chip giant, and with the emergence of OpenAI, it has become a well-deserved ruler of AI chips.Accompanying this is Nvidia’s Rockets-Nvidia’s stock price has grown 28 times in the past five years, with its latest market value reaching an astonishing $2.8 trillion.
Perhaps only by experiencing it can you empathize.Huang Renxun has emphasized the importance of financing more than once before. In his opinion, startups are companies that are about to go bankrupt.”When I founded Nvidia, I immediately started to raise the next round after every round of financing, and then the third round of financing. Survival is very important, cash is king. As CEO, you either make money, save money, or raise money.”
At the same time, Nvidia has quietly built a huge investment map.According to S&P Global data, Nvidia has become the fourth largest venture capital company after Microsoft, SoftBank and Google in 2023, with its investment areas covering healthcare and biotechnology, AI infrastructure, generative AI and RPA technology,In the fields of autonomous driving, robotics, 3D printing, etc.
As Huang Renxun emphasized on many occasions, the technology industry is developing rapidly, and investing in the distant future as soon as possible is Nvidia’s must-see path.
In the view of Mi Lei, founding partner of Zhongke Chuangxing, Nvidia’s success once again emphasizes the long-term attributes of “hard technology” and the importance of “knowledge value”. To continue to occupy a leading position, we need to focus on technological innovation for a long time.A steady stream of R&D investment is required.
As an investor, Mi Lei was deeply touched.He believes that for venture capital institutions,Too much pursuit of short-term financial returns, you can’t invest in a great business.”The essence of venture capital is to promote technological progress and industry change by supporting disruptive innovative technologies and creating greater value, and ultimately gain ‘knowledge value’, ‘social value’ and ‘economic value’.”
To a certain extent, this is also the best mirror for domestic venture capital.
In the 1990s, venture capital began to sprout in China and has been in operation for thirty years.However, at present, venture capital, an imported product, is becoming an unprecedented localization.Some VCs no longer have the meaning of risk capture, but have become a guarantee of returns for rigid redemption, which must be short in cycles, risk-free, and guaranteed.
For a time, repurchases, betting, and dividends were heard in the domestic primary market.For example, the repurchase agreement between the founder and the investment institution is not surprising, but since last year, the situation has changed – repurchase has even been listed as a hard condition for the SPIC, if the actual controller is unwilling to do so.Sign a repurchase, then don’t invest.
“The charm of venture capital lies in finding innovations that are uncertain but may be extremely disruptive.” A venture capital partner who did not want to be named sighed that we need to be wary of some current practices – which may cause us to lose sight of other great innovations.Chance.
Patient capitalThe road to the rise of science and technology in China
What role should venture capital play in the rise of technology?This is undoubtedly worthy of deep thought by every venture capitalist.
As we all know, scientific and technological innovation is not a one-day achievement. To achieve original and disruptive results, we often have to go through the bumpy process of laying the foundation and breakthrough of technology and the market-oriented application of the results. The return cycle is long and faces many uncertainties.In the market tide, many technology start-ups are unlikely to perform well for a long time due to large initial capital investment and obstacles in the transformation of results, and may even “fall before dawn.”The more this happens, the more you need to strengthen your patient capital.
What is patient capital?As the name suggests, it means guiding capital to be “friends of time”, not being disturbed by short-term market fluctuations, and accompanying hard technology, scientists and entrepreneurs to “run long-distance”.But in the face of the current reality, some investment institutions seem to no longer attach so much importance to imagination and long-termism.
A local venture capital tycoon in Shenzhen said bluntly that the domestic venture capital fund general fund period is 3+2 years, with a maximum of 7 years.It takes 6-10 years for a general enterprise to be established to meet the listing requirements, which makes it impossible for some RMB funds to hold excellent enterprises for a long time.
“Some investors are used to making quick money and adapt to the short, flat and fast investment rhythm. It is indeed difficult to convince them to invest for more than ten years; and Chinese investors do not like to entrust funds to professional institutions.If you are in charge, you often end up doing investments by yourself.” Yang Bin, president of Shanghai Science and Technology Innovation Fund, once sighed about this.
Chang Junsheng, executive director, investment committee director and general manager of Jinshi Investment, pointed out the differences behind it – the main overseas investors are pursuing long-term asset allocation, and even hope to extend the investment period.”But now, whether it is an individual or an institution, the assessment cycle is relatively short. If I cannot withdraw during my term of office, then I will definitely not do this project. So to fundamentally solve this problem, I can only hope for more long-termFunds enter the equity investment market.”
At the same time, he also emphasized the need to give LP reasonable expectations.”From the progress of China’s overall economic development, our capital returns, including the expected returns of our LP, have appropriately moved downward, or the maturity is extended appropriately. Everyone adheres to the concept of long-term investment and grows together with time.”
In this regard, Mi Lei gave several suggestions. He believed that to strengthen patient capital, first of all, we must emancipate our minds, update our concepts, and realize that only long-term cycles can we get higher returns.From governments to enterprises to all LPs, we should recognize the long-term value of patient capital and generate huge future returns, support VC/PE to make longer-term investments, and then we can have more than 10 years ofCyclical funds appear.Patient capital should also be given certain preferential treatment in terms of policies.For example, for real patient capital and patient capital that supports technological innovation, this kind of tax preferential treatment is given.
Starting a business is difficult, and innovation from “0 to 1” is the most exciting, but before this moment comes, you often have to go through a long and difficult and lonely road, and you need venture capital to accompany you all the way.As Don Valentine said in Historical Venture Capital:
“Visit investment is not a God’s perspective, it is also a entrepreneurship, it is a entrepreneurship with entrepreneurs.”
