Zhang Yingzhi warp/weft CEO internal letter: the capital market will turn cold

cloud network hunting on September 23

matrix partners, a partner at zhang ying released today to internal letter, warp/weft is CEO zhang ying, warned that the heat of the capital market will turn cold, whether or not the bubble is coming, must be prepared to buck the trend.

zhang ying said that 2014 years of the early TMT investment and financing in the market of China, the phenomenon of hot is abnormal. All mainstream fund in investment projects, crazily before less common tens or even hundreds of millions of dollars in financing began to become extremely common.

“a lot of people would say today this point for entrepreneurs is the best of times, I agree and believe. Over the next 10 years, China’s Internet/wireless emerging companies share of GDP will be more and more big, must be more and more bright future.”

zhang ying, points out that extremes meet, the change of the capital market in 2012 from hot to cold occurs only in a few months, when adjustment, the original can be tens of millions of dollars of financing the company at the time cut in half, cut blending less than two-thirds of the financing, there will be a lot of money into the startup of the fall will be for a short period of darkness. “Now, it seems, optimism is very dangerous.”

zhang ying said to financing of enterprises, the suggestion is the best time is today, the financing is not a one-time deal, certainly need time, market sentiment may change suddenly.

zhang ying, founder must find suits own between valuation and financing speed balance. Warp/weft will help you to filter the most suitable for everyone’s industry and the stage of investors, focused on the effort of the financing, increase the probability of success.

here is a letter in full within the matrix partners partner zhang ying:

a few hours ago, my colleague has just signed a matrix partners 45 case – just over three quarters of this year! I think it’s time to send a letter to you.

in the past nine months, if a little attention, you should also can feel the vc circle is becoming very crazy. Raised reached new highs, company valuations and listed prices rising – successful listing a few days ago, more let the world information industry in China, there is a new understanding of the Internet company’s strength.

today, I want to chat with you the other side of the coin: market from “greed” to “fear” of key nodes only at their fingertips.

warp/weft today has invested more than 190 companies in China, any one point in time we all have 30 companies in financing, M& A or prepared. Behind so many companies and frequent communication and trade, make us in a sense, become a rich samples of “big data”.

we to any point on the market direction, strategy of all mainstream investment institutions and even each GP individual tendencies are extremely sensitive to subtle changes, it will be easier to make predictions based on this for a certain trend.

that is so, I can’t tell you accurate arrival when low tide, can’t even come to the conclusion that responsibly is low in the coming 12 months. But I’ll share with you this logic: why do I say now heat will turn cold; And if the market change really, warp/weft will do something with you. Whether or not a bubble, today we can choose the best strategy is to: ready to buck the trend.

I want to have two indications can for your reference:

1. The secondary market, the possibility of large-scale callback high

the standard & poor’s 500 index has 33 times hit a record high in 2014, but the fact is that constantly hit new high behind the prosperity of the great hidden trouble; In the nasdaq composite index, compared to about 47% of the stocks they are at the peak in the past 12 months there have been at least 20% of the decline.

recently, I and the former Morgan Stanley analyst/all-star fund founder Mr Richard ji, he also expressed a similar concern; He analysis for the past 20 years in the near future the s&p 500 index and the ratio of the GNP by data; This data is 2001 first put forward by the fortune magazine, buffett is also considered to measure (stock market) “single index” valuations are the best.

Zhang Yingzhi warp/weft CEO internal letter: capital market will turn cold

in the past 20 years, which is close to 100% or more than two times, respectively is 1999-2000 and 2007-2000, compared with the corresponding respectively is the first time and the bursting of the dotcom bubble in 2007-2008 economic crisis. Over the past five years the stocks of big bull market has pull the index again to 100%, while no amounted to 120% of the Internet bubble for the first time, but the callback may have close – buffett now assets, the proportion of cash has hit an all-time high, it may also be a signal.

if we put a time line stretched, look at the past 80 years the s&p 500 index of 5 year rolling yield, as shown in figure:

Zhang Yingzhi warp/weft CEO internal letter: capital market will turn cold

so in the past 80 years, the standard & poor’s 500 index – a five-year rolling yield happened three times: a total of more than 200% in 1937, 1987 and 2000, after three times of global economic crisis and the slashing of the stock market, and the indexes on this point has been reached 180%, conclusion speak I don’t think so.

2. Unlisted enterprise financing environment is extremely crazy

the second grade market “hot” in the very great degree is also affecting the primary market, only a few years ago we measure the value of a technology company listed after the index or the billion dollar club, but today you will find many on the municipal science and technology enterprises have been easy to an order of magnitude (given the fabric for several years in the field of wireless early layout, we have seven companies listed this year alone, or more than $1 billion in market value), moreover, such as Uber, Dropbox these enterprises through VC financing before the unlisted have reach the market value of billions dollars, billions of dollars, or even billions of dollars of acquisition (WhatsApp, Oculus) also frequently appear in today’s technology industry in the United States and China.

in the early stage, startup days make, the price of A wheel is than in the past has large improvement, like silicon valley veteran investors Bill Gurley recently expressed: “No one ‘s fearful, everyone’ s greedy, and it will eventually end.” even in the United States there have been some technology companies at the time of choosing the office space directly signed A contract with the landlord for 10 years or 15 years, financing the capital is obtained for these companies to grow, No investors will think they have to rent A house in such A long time, it also shows that real estate developers also think today’s rent price is high, so they are willing to sign A long.

2014 years of the early TMT investment and financing in the market of China, the phenomenon of hot and anomalies is obvious. All mainstream fund in investment projects, crazily before less common tens or even hundreds of millions of dollars in financing become extremely common, project financing the lag between each round has been rapidly reduced, or even just after the last round price several times to start the next new financing situation has become a “reasonable” and frequently.

very many people would say today this point for entrepreneurs is “the best of times,” I agree and believe. Over the next 10 years, China’s Internet/wireless emerging companies share of GDP will be more and more big, must be more to more bright future. But too much I think everyone knows, the principle of the domestic VC industry in 2011, had a short peak and then in 2012, with a window problem quickly back to cold, from hot to cold changes only occur within a few months, when adjustment, the original can be tens of millions of dollars of financing the company at the time cut in half, cut blending less than two-thirds of the financing, there will be a lot of money into the startup of the pour in brief in the dark.

we are familiar with this industry may know a lot of fund raise money this year, we try very hard to do case, including our several more mainstream fund, as of the end of this year the number of cases to invest today has been more than 2 times than that of last year. How long can such a situation can continue? A fund size, the team determines its investment case quantity and speed, it now seems, optimism is very dangerous.

on September 22, the tiger fund founder Julian Robertson publicly said: he don’t know when the bubble will burst, but must be based on “very bad” way to burst.

it says so much about the future direction of the market sentiment and, as a man of everyday working with entrepreneurs, I think we can do is to give the company some Suggestions: we cast

to the financing of enterprises, my advice is the best time is today, the financing is not a one-time deal, certainly need time, market sentiment may change suddenly.

founder must find suits own between valuation and financing speed balance. Warp/weft will help you to filter the most suitable for everyone’s industry and the stage of investors, focused on the effort of the financing, increase the probability of success. The embodiment of my personal ability here, too, that is to help companies in financing ideas, and accurate hold of the key terms, financing the rhythm.

is the financing of enterprise, this point today financing priority is higher than the speed of the valuation of the absolute value of the gap. Now go back on our word rate after investors to sign a letter of intent in rapidly increase, should try to strive for new investors bridge loan is given. I’m not saying that valuation is not important, but quickly get the money within a certain scope is perhaps the most important; With money you can prepare for the winter and keep the steady development in the winter, even if we are not sure when the winter to the bottom will come, and how long the winter. We also found that raised more than $twenty million of enterprises, the financing process is more and more difficult.

for completed financing companies, my suggestion is to carefully to the founder of intuition and careful analysis of the data plan you spend money. That a wave of callback if happen, the motion of the balance on both ends of the ultra will naturally increase the difficulty of future financing, so don’t be too optimistic estimate you the pace of development and progress of financing, especially the 2015 plan.

in addition, those who are ready to go to the United States jinwei series companies listed, please be good “internal strength”; Market good tolerance to science and technology company revenues and profits is high, the market on the growth curve of indicators, such as users, month living and market share than; But once the heat cold, the market is extremely value to revenues and profits, and then abandon those weak of small market value company revenues and profits.

in the end I want to say, the capital market changes, my idea is only one of the countless voice; I don’t want the arrival of the winter so quickly, but to assume that you also need not too afraid, warp/weft will, as always, to provide support and help for you.

however, ceos, please find the fabric of related colleagues communication with you as soon as possible under the specific coping strategies, at the same time, please ensure that your account has enough cash reserves 9-12 months.

bubbles itself is not terrible, is always a danger in the face of crisis and opportunities coexist, as long as it is in itself of a team, melts at a reasonable valuation amount money earlier, the arrival of winter in the long run is a good thing. It will only accelerate not prepared the demise of competitors, and in a new wave of the bull market comes, a more powerful force of his own achievements. “Let’s Win Together.”

matrix partners

zhang ying

on September 23, 2014

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