This year VC/PE is most afraid of being asked DPI

This may be the most difficult scene when VC/PE raised funds this year-

"You have to talk to me about IRR (internal yields), I can only say that we are more cautious." Although I have trained a complete set of interviews with LP internally, Zheng Yue, who is responsible for fundraising It's right.

Since the spring of 2022, Zheng Yue began to be busy for the fundraising of the new phase of the institution. When visiting the new LP, she clearly felt a change: LP was still willing to discuss the fund IRR before, but now they generally open the door to see the mountain and look directly at DPI.

"Now I am most afraid of being asked about DPI." The person in charge of IR, a well -known venture capital agency in Shenzhen, also lamented. Everyone is not very embarrassed to brag about IRR. Dare to say that DPI is a real hero.

Behind this is the painful lesson of LP experience. After walking through a fund cycle, when even the principal could not be collected, more and more LP realized that DPI was the standard for measuring the performance of a investment institution. After all, money was true in the pocket.

LP doesn't believe IRR anymore

"No more vc, let alone IRR. Ask DPI first, how much is the withdrawal?" Said Wang Yan, a partner of a head -of -headed parent fund in Shanghai.

We first explain the concept -so -called DPI, invested capital dividends, which is the proportion of VC/PE funds to the overall scale of the fund of LP, that is, cash returns obtained by LP. When DPI is equal to 1 is the profit or loss balance point, which means that the cost has been recovered; when it is greater than 1, it means that LP obtains excess returns; and when it is less than 1, LP does not recover all costs; equal to 0 is no income.

It can be said that DPI is the most intuitive goldstone of the VC/PE mechanism.

IRR is the internal yield of the fund. Simply put, it is book numbers. As the valuation of the project invested in the fund has risen, IRR will also rise, so many funds still look better before the project is listed. Therefore, when fundraising, the VC/PE institution is also willing to show this number to LP as an embodiment of its ability to make money.

"In the past, if there were one or two star projects in the investment portfolio, you can basically eat the bonus of IRR, and you can raise a lot of money by PPT alone." A friend in Shenzhen described in the past few years, " When some projects are not listed, the IRR returns are particularly good. The numbers are there, and they can never move. "

From about 2015, the hot money of the first -level market has continued, and the new VC has sprung up. The wealth -making story of the Internet unicorn is very tempting. The GP avoids DPI. In the dream of IRR and willingly, everyone was kind, and everyone was kind.

The period of RMB funds is generally not long, generally 5-7 years. Over time, a large number of funds have entered the exit period, and the moment of real verification of GP has come. Since 2021, DPI has been put on the table.

However, the situation of withdrawal from the market in the past two years is obvious to everyone. With a series of international events such as the new crown epidemic, the US interest rate hike, and the Russian and Ukraine conflict, and the severe upside down of the valuation of the primary and secondary market, the withdrawal of the market is facing huge uncertainty. Data show that the number of IPOs of U.S. stocks and Hong Kong stocks has shifted sharply, and A -shares have made a lot of vivid tide. Some projects have even lost to the B round, and the situation is bleak.

The IRR bubble was pierced, and the LPs suddenly found that they had accompanied them for so many years but they could not receive the most basic principal.

Recalling a few years ago, Yan Yan, the founding manager of Saifu Asia Investment Fund, predicted at the Qingke Annual Meeting: Many VC/PEs not only cannot make money, but may not even receive the principal. "Compared with the US funds, most of the RMB fund investment cycle is seven years. By seven years, the money of the first -tier funds of the United States can be recovered and the investment cost is recovered. In the seventh year, only about 25%of the principal. "

Wu Jun, the person in charge of a domestic family office, also vomited and bitter: "Some dollar and RMB funds invested in 2014 are now too low. Exit far away. "

The money could not be collected -Wu Jun talked: "A big grabbing of less than 1 DPI, some well -known funds have opened the DPI. I used to think that it might not be as good as buying financial management. A very loud fund hides LP, in fact, the fund is losing light. "He pointed out unaware that the investment strategy was chaotic, 90%of the projects did not make money, and 80%of the teams were abolished. This fund was destined to be eliminated by the market.

DPI can't take it, this year's fundraising is blocked

Old VC starts layoffs

The situation is different now, LP, who has suffered losses, is increasingly concerned about DPI. Especially this year, DPI has become the first question to screen GP.

The reason why DPI becomes so important is because IRR's "paper wealth" has contained very big risks -in the past year, many funds have experienced the dismissal from the exciting book to the smoke. The investment community learned about a star consumer fund in Shanghai. The investment return multiple of the previous three or four years was good, but with the thunderstorm of a heavy position project, everything became a bubble. This also means that the LP behind it will bear the loss with the fund.

As we can see, the experienced LP starts to not buy the IRR of a single project, and puts forward higher requirements for the DPI of the GP. Many VC/PE institutions have been funded. Stop outside the door of LP. "When seeing the first side, less than 5%of GP may make people shine." Recently, I talked a lot of GP, and Wang Yan was helpless. LP is getting more and more cautious, and even set up a DPI threshold, which has also triggered a series of chain reactions. The investment community learned from a person familiar with the matter that a large -scale VC institution headquartered in Shanghai in Shanghai was funded by a new phase of fund fundraising due to poor DPI. Poor employees, protect the winter.

Similar scenes are still performed on the VC/PE circle. Chen Wei, chairman and founding partner of Dongfang Fuhai, bluntly stated that in China, the Fund DPI for about five years is best than 1. If it is not more than 1, then the annual LP meeting will be a group group. "The days will be sad."

He further analyzed that relatively speaking, the money of the Renminbi Fund is still hot and shorter. Whether it is state -owned or private LP, everyone is more anxious. The money for ten years is not as three times as many as seven years.

For GP, it is a threshold to return the principal to LP for about 5 years. How to make DPI planning and arrangements is also an important ability to GP. But the fact is that after a cycle, DPI can achieve 1.2 and 1.5 GPs.

Of course, in practice, whether it is "IRR theory" or "only DPI theory", it is one -sided and biased. LP can still judge the fund's investment rhythm and strategic planning through IRR at different stages of the fund.

"The first 4-5 years of the fund's survival should pay more attention to IRR. After that, we should pay more attention to DPI." A friend of a parent fund in Shanghai truthfully told, "LP also needs to be more patient, although some GP existing funds also There are no good -looking DPIs, but we will make a judgment in the same period according to its phase to compare the same cycle, same symbol and strategy. In summary, DPI is a very important measure, but it is not the only one. "

Needless to say, the pursuit of absolute returns must be the lifeblood of the first -level market. If a fund allows LP to get back the principal quickly, and the remaining investment shares can have good return expectations during the duration, and even the last expectations are realized, then it will definitely be welcomed by the LP group.

The fund expires, LP has to divide the money

The market is eliminated GP that does not make money

If you can't divide the money, the LP rivers and lakes have changed.

Entering 2022, most VC funds reached the 7 -year period, and LP finally waited for the exit period. In the middle of June, it is often the day of the annual meeting of a partnership within the domestic venture capital institution. However, some people are happy and some are worried. The tension caused by the low return of GP funds has quietly spread.

Earlier, a domestic VC institution reposted a batch of investment companies to the WeChat group of their partners. In a bunch of congratulations, an embarrassing scene appeared -a LP left a message directly: "It looks very happy to look at it It feels like we have invested a bunch of powerful companies, so when will we give LP a division of money? "It is reported that the performance of the fund involved in the LP is far lower than expected.

Super high net worth individual LP Liu Kai also has similar encounters. In 2014, Liu Kai invested in the LP of the first U.S. fund of a well -known VC institution in Beijing. Today, the end of the 8 -year fund has passed, and only 20%of the invested capital is taken back. "Now seeing the full screen in his public account, there is no wave in his heart.

"For so many years of LP, my deepest feeling is that the responsibility of a GP is too important." An anonymous LP lamented that many GPs have seen these years, they have courage and ambitions, but rarely matched it. Sinking a solid research on the responsibility of underlying assets and underlying logic. "The courage and ambition are their own, and the funds are from us."

As a result, after the project had a problem, the GP seemed to be light and light, and LP had to end the game to help solve it.

This could not help but think of Shao Hongxia, a partner of the Chencai Zhizhi and the senior vice president, said before that the GP would treat the entire investment with the mood of LP, as if holding his own money to invest. I feel very uncomfortable in my own heart. "She once sighed." The trust of this industry is rare, but it is the last word to make money. I always remind our team repeatedly that only the continuous return of the cycle is LP for you The reason for money ".

Once you lose your awe, it will be abandoned by LP sooner or later. Investment interviews found that since this year, many parent funds have further emphasized the direct investment strategy, such as a market -oriented parent fund, which is active in a national background in the Yangtze River Delta region. %.

After all, the performance is king. The mission of GP is to make money for LP -GP that truly makes performance will never lack money.

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