author：Helen Wang

Some people try their best but can’t even get money by kneeling down, while there are some people who don’t want money from others and are even ready to give it back, which makes people very jealous.

Why does this happen?

Silicon valley’s rush of refunds

The same is happening in Silicon Valley.

Faced with a situation in which the primary and secondary markets are inverted, Silicon valley’s venture capitalists are starting to worry:

On the one hand, they are worried about the rising valuations of start-ups and slowing exit activities such as IPOs.

On the other hand, they are not sure about how to invest in startups.

Faced with the economic environment of 2019 in particular, these investors began to return the funds raised to the LP due to lack of confidence in the return.

“These people value their reputation more.” according to an informed source.

This leaves the American LPS in a quandary: If the money is returned, who should they hand it over to?

This is a real headache.

Why?

In the venture capital world of Silicon Valley, as in China, the winds are shifting.

Today, for example, unicorns in Silicon Valley are rushing to go public, just like China’s Xiaomi and Meituan.

This year, tech IPOs have raised more than $7 billion, more than the total in 2015 and 2016, and more than half the $13 billion raised in 2017, according to market data firm Dealogic.

This has led to a shift in market risk.

“I’ve been talking to bankers and their attitude is: ‘We have news. There will be a lot of deals.” Rob Hayes, general partner at First Round Capital, said he led Uber’s $1.5 million funding Round in 2010. Uber was valued at $4 million at the time, but is now valued at $68 billion.

That is to say, the risk of the primary market before was mitigated, but now the risk of the secondary market begins.

Can the secondary market of the United States bear this risk?

This is a problem that no one can predict. So, against an unpredictable backdrop, some investors who value their word of mouth are taking a break from the market.

What about Chinese venture capital?

In China, after a decade of development, both the dollar fund and the RMB fund are now on their way out, and their true performance is starting to show.

Whether it is really good or exaggerated on external media reports actually, LP is clear in mind, and the funds returned can be quantified with numbers.

Therefore, in 2018, it can be seen that some people are struggling to raise funds, while some people still come to the GP for investment even if they do not raise funds. Then the GP was in a pickle and had to reject the LPS: “we are really sorry for our limited ability to manage money.”

In contrast, it is embarrassing.

Why? That’s karma.

Though propaganda is useful, it will eventually come to light.

For this, the LP has accused the GP of poor performance

Some GP also complained that China’s LP is too immature to be a qualified investor.

Different people have different views.

Clearly, there are problems on both sides.

For example, China’s LP distrusts GP, which is always involved in decision-making and interferes with GP’s day-to-day operations. From time to time, they asked about what projects they had invested in and how much they valued them, and the interval is only one month or half a month.

China’s GP also has ethical issues, such as inflating valuations so that investment managers and even partners can reap many cash benefits. Some GP even buy a house or a car after receiving LP funding.

Many GP practices are not professional. They went around raising money under a well-known name, but after 10 years of management, the performance was not ideal, which made the LP hard to trust.

In the end, both the LP and GP have suffered the consequences of blind investment. GP is difficult to raise money even if it has a reputation, while LP’s performance is not much better in terms of investment ability. After all, venture capital industry is a high-risk and high-return industry, and only 10% of investors can get high returns, most of them are out of pocket.

“When the tide goes out, you know who’s swimming naked,” Buffett once said.

Perhaps it’s really a good thing, at least the lie was exposed. Then who’s going to shine for the next decade?

We will see.