Wind Rises 2005

Chapter 603 Unexpected Visitor

Jennifer is so confident, Ma Liang is of course very happy.

After all, the more capable his subordinates are, the better he can be a hands-off shopkeeper, but he would like to remind you of one detail.

“The fundraising goal doesn’t need to be set so high at the beginning. The most important thing is to explain our requirements clearly to the LPs in advance!”

As a reborn boss, Ma Liang may not be able to do anything else, but he definitely has the advantage of foresight when making investments.

At least in the next dozen years, this advantage will not be lost.

Therefore, if he plays with private equity funds, it will definitely be no problem to ensure investment returns, and he will even achieve good results.

Therefore, in this situation of a sure win, it is only normal to put more demands on the LP (financier).

Although he is short of money, there is no need to go up the pole to lick those big capitals, whether he likes to invest or not.

Jennifer was confused after hearing this. What else could be required to play private equity? The rules of the game in the industry are already very mature, and most private equity funds have similar operating models.

She couldn't help but asked curiously: "BOSS, what are your special requirements?"

"The annual management fee is 5%, and the carry fee is 30%."

Ma Liang replied lightly, as if he was talking about a very trivial thing.

Jennifer was shocked on the spot when she heard this. She never expected that her boss would make such harsh demands.

If you do this, the difficulty of raising funds will simply increase hundreds of times.

You must know that under normal circumstances, the income of a private equity fund manager (GP) is mainly divided into two parts. The first is management fees, and the second is carry (excess income sharing).

Management fees are generally 1%-3% of the fund's management scale and have nothing to do with investment income. They can be charged every year after the fund is established.

Carry is the core incentive mechanism of private equity funds, reflecting the relationship between the fund manager (GP) and investors (LP) as well as within the GP.

The most common model is "2% + 20%", that is, during the investment period of a fund, LP pays GP an annual management fee of 2%.

After the duration expires and the fund return reaches the pre-agreed bottom line, the GP will return the principal to the LP, and then can share 20% of the fund's profits.

This 20% commission is the carry reward part of GP.

So when she heard that Ma Liang actually asked for a 5% management fee every year and a 30% carry, Jennifer immediately lost confidence in raising funds.

With such harsh conditions, few venture capital institutions in the global venture capital circle dare to operate in this way. It can even be said to be unique.

If you really want to raise funds according to this standard, you may not be able to raise a penny.

Jennifer was originally full of ambitions and planned to do something big, but after hearing the request, she really had no idea at all.

So she complained with a bitter look on her face: "BOSS, this request is too high. Not many LPs will agree to it."

The management fee doesn't matter, the main reason is that Carry's standard is too high, even if it is set at 25%, she can work hard to get it.

But 30% is too exaggerated, which is equivalent to taking less than half of the income.

"Don't worry, I haven't finished speaking yet!" Ma Liang was not a fool. Of course he knew how exaggerated the standards he said were, so he explained, "There is a reason why I am so sure!

Because for each phase of private equity funds, we [Dafeng Capital] will also invest 30%.

I believe those LPs will understand the principle of "cooperation will benefit both sides, and division will cause two harms".

As long as you operate in this way, my requirements are not high at all. "

Under normal circumstances, many venture capital institutions use other people's money to invest, and they do not have to bear much responsibility even if they lose money.

Even if a lawsuit is filed, it is impossible to repay the principal of the LP.

It is impossible for GP to lose money!

Therefore, LPs will also put forward high investment return requirements for GPs. After all, throwing money to investment institutions for venture capital is also very risky.

Therefore, although many well-known investment institutions have invested in unicorn projects one after another, they can only withdraw 20% of the ultra-high profit returns as their own income.

The remaining 80% belongs to LP.

Those investment tycoons who look like shit in front of entrepreneurs are actually nothing in front of the LP dad who invests.

Who knows that you are investing with other people's money? You are born to be a dwarf.

Ma Liang was different. He had the foresight and didn't have to worry about losing money when making investments. He just wanted to borrow more funds from LPs to promote the project.

Therefore, you can invest part of your own capital in private equity funds, and everyone can get along with each other on an equal footing and advance and retreat together.

In this way, those LPs will naturally feel more secure.

After all, if everyone wants to make money together, and if everyone wants to lose money, Ma Liang will not let his own money fall into the trap, and he will think that you will be more attentive when investing.

After all, in the eyes of LPs, if [Dale Capital] is willing to operate in this way, the sense of trust will immediately change.

It is also because the venture capital circle has been in such chaos for so many years. Many well-known investors seem to be prosperous on the surface, but in fact their investment performance is a mess.

In particular, domestic venture capital institutions frequently boast of “annualized returns as high as 70%.”

In fact, few of the projects they invested in have come out, and some institutions have even lost their investment principal. I don’t know how much LP fathers’ money has been stolen.

Therefore, even if it is put internationally, if it can create more than three times the investment return for LP within 10 years, it can definitely be regarded as a super first-tier institution.

This is the bloody reality, but even so, countless people are still involved.

It's just that LP won't always be so stupid after being tricked a lot. More than a decade later, the industry’s common unspoken rules require GPs to invest together with LPs.

Otherwise, no one would be interested in playing with LP, let alone throwing money at you. But even if LP makes such a request, not many investment institutions dare to make the same commitment as Ma Liang. If they can follow up and invest 10%, it is considered excellent.

It's only 2008, and Ma Liang is definitely the only one who dares to call out a 30% investment ratio.

Since I also contributed money and can guarantee your LP's rate of return, wouldn't it be normal to get a larger share?

This is his confidence. If anyone can't accept this, just go and have fun on your own.

Ma Liang explained patiently, and Jennifer understood it instantly, but she couldn't help but worry about such an aggressive strategy:

"BOSS, if we operate like this, will the risk to ourselves be too great?"

As the CEO of [Dafeng Capital], she knew very well what the purpose of Ma Liang's private equity fund was.

I just think that the projects I have invested in will be easier to raise in subsequent rounds of financing.

Especially before and after the listing, you can have enough strength to promote it. After all, whether the stock price rises or falls, funds are needed to guide it.

As long as [Dafeng Capital] establishes its own private equity fund, on the one hand, it can help those entrepreneurial projects develop better, and on the other hand, it can allow the funds invested in the early stage to be cashed out in advance.

Because funds must continue to roll in order to achieve greater returns.

After all, the size of a single project is limited. No matter how high the return multiple is, as long as the principal invested is not enough, the total return will only be a little.

Therefore, by establishing a private equity fund, [Dafeng Capital] will have stronger financial strength and greater room for advancement and retreat in capital operations.

But Jennifer didn't understand why Ma Liang was so radical and willing to pay such a high ratio.

There is nothing wrong with committing to co-financing. After all, it creates a sense of trust and makes it easier to raise funds.

But if you can contribute 10%, you are already considered a leader in the industry.

Even if a loss occurs, it will not affect the fundamentals of [Dale Capital]. Why should we pay out so much 30%? I am simply losing my mind.

This not only limits its own capital operation space, but also increases the investment risk of [Dafeng Capital]'s own funds.

Absolutely no investment institution in the venture capital circle would dare to do this unless they are crazy.

Jennifer felt that her boss was a little distracted because he had achieved great success by investing in Twitter.

She had to persuade the boss to give up this idea.

In the end, Ma Liang still had a calm expression: "Don't worry, I have my own considerations. Just make every effort to raise funds. Don't worry that we won't be able to pay the money by then.

As long as we have enough money, we can make a big investment in Twitter just before it goes public.

And those small game companies can quickly invest money in the future.

Even if it is impossible for every game company to go public, the worst case scenario is that it will be sold to Twitter like Zynga.

I dare not say too much, but at least we don’t need to panic about the rate of return of the first phase of private equity funds. "

If he didn't have some confidence, Ma Liang wouldn't be able to offer such exaggerated conditions, just because he still has a good hand.

Besides, [Dafeng Capital] has invested in many high-quality projects since its establishment.

Some of them were arranged by him in advance, while others were picked up inexplicably by Jennifer herself, including many unicorn projects.

Just those unicorn projects are enough to ensure the income of private equity funds.

What's more, there will be several super unicorn projects waiting for him to pick up in the future. Although it is not as good as Twitter, it is still the owner of tens of billions of dollars in market value.

With such confidence, there is no need to worry about not being able to pay LP.

After listening to Ma Liang's explanation, Jennifer could only agree: "Okay, you are the boss, you have the final say."

It was also after working together for a long time that she gained inexplicable trust.

After all, the projects Ma Liang arranged for [Dafeng Capital] to invest in performed much better than the projects Jennifer picked up on her own.

But this way, Jennifer is once again confident in raising funds.

She is even thinking about whether to set the total fundraising target of the first phase of private equity funds to US$20 billion.

After all, with the unique favorable conditions and the current prestige of [Dale Capital], there is no reason why those LPs should not buy it.

I dare not say anything else, but at least those capital tycoons who have invested in Twitter will definitely be willing to invest a sum of money in the first phase of [Gale Capital]’s private equity fund.

Who wouldn't want to eat meat with Ma Liang instead of just drinking some soup behind him?

The key details of the private equity fund were settled in this way, and Ma Liang started to eat breakfast seriously again.

He thought that the work matter was over and he could take Sister Jiang to play around again, but he didn't expect that Jennifer still had no intention of letting him go easily.

"BOSS, don't even think about escaping after breakfast!"

"What's wrong again?"

Ma Liang quickly raised his head and asked in confusion.

Jennifer smiled and then explained: "The two founding partners of DST Fund came to visit and said they wanted to meet you alone."

"DST Fund?"

Even Ma Liang was surprised now. Why did these old fools come to him?

(End of this chapter)