Source: 21st Century Business Herald
Journalist: Pan Wei | Intern reporter: Tang Yue Reported from Shanghai
"Investment circle has become TMT investment circle.” A partner of one foreign invested VC Fund summarized the investment trend in the entire VC industry in 2014 with one sentence. Indeed, in the past two years, RMB funds rushed into TMT field, including both local VC such as Shenzhen Venture Capital, Fortune Capital, Shenzhen Co-win Venture Capital Investments Limited etc, and the ubiquitous angel investors, and more “individual investors” made investment in TMT start-up enterprises through “Crowd Funding”.
In this tide of investment into Internet and mobile Internet sectors, the previously little known Meridian Capital has made early strategic arrangements and deployments. Despite the fact that, in a result-oriented industry like venture capital, future investment performance of RMB funds represented by Meridian Capital perhaps will only become known after five years, their investment strategy, plus understanding and thinking approaches toward investment in the Internet industry may deserve attention.
"825” Fund
In 2008, David Shong (former Investment Director of IDG Capital in 2004) founded Meridian Capital in Singapore. In this year, Meridian Capital obtained approval from Singapore Economic Development Board, meanwhile introduced immigration financing into Singapore, the size of its first fund was about 80 million Singapore dollars, equivalent to over RMB 400 million yuan, LPs (limited partner) were mostly individuals. Afterwards, Meridian Capital raised another fund in Singapore.
In 2010, Meridian Capital raised one fund: From 2010 to 2011, it raised three funds, whose sizes are between RMB 100 million and 300 million yuan. These three funds were respectively registered at Suzhou, Wuxi, and Changshu.
According to Tracy Ji, partner of Meridian Capital, among these funds, LPs include regional guiding funds, or media groups such as Beijing Media, Suzhou Press Group, and Wuxi Radio & Television, plus some listed companies and individual LPs.
In 2014, Meridian Capital successfully raised a 1.2 billion yuan size “825 Fund”, which was named after the listing code of Xinhua Media (600825). Wherein, Shanghai United Media Group and its subsidiary Xinhua Media (600825.SH) jointly invested 300 million yuan, Fund of Fund Oriza Chenkun, a subsidiary of Suzhou Oriza Holdings, invested 150 million yuan.
Investment strategy
The first three funds of Meridian Capital focused investment in TMT industry and the great culture industry. Meridian Capital divided TMT investment industries into traffic entry type and cash conversion tool type, which is a rather unique classification method; of course, throughout the development of mobile Internet till today, Meridian Capital also emphasized more on general vertical classification method, i.e. preference in investing gaming, digital marketing, e-commerce, online education, Internet finance etc in the TMT industry.
David Shong said: “Today, big Internet companies all cover very integrated businesses, BAT are nearly all upstream investment contents, there are a lot of E-commerce and advertising income, therefore, if start-up companies concentrate on contents alone without cash conversion, they would be weaker in the fiercely competitive situation. As a fund, from the beginning we will assist entrepreneurs to make better deployment, emphasize both content and cash conversion. We will regularly arrange gatherings of our invested enterprises, and will also introduce them to enterprises we have made investment in and have exited, in this way some of their traffic entry may originally have cooperation with cash conversion tool companies, they can even have equity participation.”
Take adSage, which received investment from Meridian Capital, as an example, this is a mobile Internet advertising marketing company. David Shong said, in the early days of Internet, APP was a separate individual unit, cash conversion was relatively difficult; and adSage is able to converge these small and medium sized new media, and help the latter to quickly reap considerable benefits. In August 2014, BesTV (600637) (600637.SH) announced it would acquire 51% equity of adSage with USD 100 million.
Tracy Ji outlined Meridian Capital’s preference of investment in TMT companies: “The industry to which this company belongs has relatively high informatization degree; the company is close to trading, even if it is not involved in trading temporarily, its self-model is easy to generate positive cash flow.” Tracy Ji specially added that, Meridian Capital almost made no investment in companies which need massive amount of money to cultivate user habits in its early stage, one consideration involved is that Meridian Capital’s fund size is not large, if the company keeps spending and the investment lags behind, it will bring high investment risks.
In the recent two years, tides in TMT investment surged high, both investment amount and density surpassed the industry average level in the past several years, in the market there will be inevitably certain degree of valuation bubbles. Nevertheless, it is exactly such environment that can better reflect the investment ability of investment organizations, those with deep insight, clear investment logic, and sharp market acumen will ultimately distinguish themselves.
