Why traditional enterprises shy away from equity financing

Financing is difficult, equity financing is even more difficult, traditional enterprise equity financing is even more difficult! On the one hand, China's hot money surging, entrepreneurial enthusiasm in full swing, on the one hand, capital began to tighten their pockets, slowing down the pace of investment, for the majority of entrepreneurs, financing is still difficult, and many companies walking on the road of equity financing, it is even more difficult to walk!

China is a manufacturing country, and with the opening of the IPO in the first few years and the PE boom, that set of leeks have been cut, the remaining small and medium-sized enterprises have to turn to the new three boards and regional equity markets. But the author's contact with the listed companies and enterprises to be listed on the New Third Board or regional equity trading market, can get financing for very few, in addition to the listed government subsidies to offset the cost of listing incentives, but also on the better quality of assets can get some associated bank loans, as for the issuance of new shares, mergers and acquisitions, market value management, away from the enterprise is still too far.

Tier 1 cities, especially in the north, Guangzhou and Shenzhen, the venture capital environment and national policy is generous, using its innate policy, technology, talent, resource advantages, has been running ahead, but also as a huge ironstone, will be the country's second and third-tier cities of high-quality projects are a steady stream of absorption in the past, the reason is very simple, where there is a broad market, an abundance of talent and resources, and the tolerance of failure to encourage the innovation of the environment, but also the layout of the national market. The reason is simple: there is a vast market, abundant talent and resources, and an environment that accommodates failure and encourages innovation, and it is a strategic bridgehead for the national market.

In terms of my contact with the venture capital environment and the information I have learned, traditional enterprises still preferred bank loans, chamber of commerce loans, private loans, etc. There are a number of capital-conscious began to land on the regional equity exchanges and listed on the New Third Board, but they are still wary of the capital market and wait-and-see, the reason for this is mainly due to the media dissemination or the community about the The reason is mainly due to the rumors spread by the media or rumors that "capital expels founders and even puts them in jail". However, the deeper reason still stems from the lack of awareness and knowledge of capital market, capital operation, investment financing, mergers and acquisitions and restructuring, and the shortage of related talents. After all, researching products and customer psychology is the entrepreneur's line of work and expertise, trading equity and buying and selling businesses for them may not have access to, let alone the enterprise inside the expertise in this area of talent.

Another obstacle lies in the interpretation of policies. The high-pressure anti-corruption campaign in the past two years has pulled out the carrot and brought out the mud, making the relationship between the government and enterprises face tautness once again, and everyone deliberately keeps a distance from each other, which is right, but there are also some private enterprises that take this opportunity to stay away from the government, so they are not aware of the reform dividends that the country is releasing this time -- innovation and entrepreneurship support. Many of the policies are unknown, and many of the subsidies and support for entrepreneurship are unknown. Many positive changes in government agencies and decentralization of the field, more so that many technology-based, Internet-based enterprises to obtain the benefits of many traditional manufacturing enterprises gathered after each other or lamented the country no relevant support.

Faced with the above situation, I also saw many local governments and venture capital organizations, industry associations to do some positive guidance. Organized a variety of investment and financing fairs, entrepreneurial competitions, training courses, leading teams to visit the entrepreneurial street, incubators, governments around the world almost all have their own incubators, I even saw in the town of entrepreneurial cafes and farmers entrepreneurial street. These initiatives have greatly encouraged and influenced the creators. However, technology and Internet-based companies are predominant, and traditional-type companies are less enthusiastic about participating.

The reality of the problem is still on the desk, to rely on their own development and debt financing has reached a bottleneck, and to meet the venture capitalists can not be found, their own efforts for more than 10 years of business, assets of more than 10 million, revenue of more than 100 million yuan, the number of several hundred people, but can not catch up with their own next to the nephews and sons of young people of the same size, listening to people, he has just melted tens of millions of dollars, valued at 100 million yuan, is going to the listing process. And they go to the venture capitalists are more refused, the reason is also unknown.

In fact, the reason here is mainly related to the business model of venture capital organizations, venture capital organizations under the general duration of the fund 7-9 years mostly, of which 5 years for the investment period, 2-5 years for the exit period, and the project's expectations, basically a project's return to be able to cover the fund's overall amount, after all, the project's investment in the chances of success of 10-20%, so the inverse of each project, the project's growth expectations should be very Project growth expectations should be very high, the annual growth rate and the possibility of listing to be calculated and then calculated, before betting on investment, and traditional enterprises are basically over the savage growth, fast and furious stage, more than 10 years of business, management, personnel and culture are basically molded and mature, are in the second venture, the transformation of the regeneration stage, either are in a state of recession, so, generally very few favored by the capital! Therefore, generally very little capital favor. Of course, there are exceptions, if the enterprise scale, revenue, at the stage of the listing process, VC simply do not have the opportunity, the big PE is basically all wrapped up.

In the second venture, once again, the majority of enterprises, there are now three opportunities to promote enterprises to the next level. One is the "Internet +" on the transformation of traditional business boundaries, look at the listed companies in the past two years to do the industry chain mergers and acquisitions can be a glimpse of the leopard, have internal incubation or direct acquisition or equity investment in the Internet + project, with a view to recreating the industry boundaries. This is not to mention the traditional small and medium-sized enterprises around the large groups and in the industrial chain link.

The second is the rise of the succession wave, many enterprises of the second generation have taken over the banner from their fathers, but without exception, the choice of cross-border, capital operations, some listed companies second-generation successor directly pull out of an industrial investment fund out; the third is the fierce competition in the market, with the upgrading of technological advances, the new means of manufacturing, process and technological advances in order to make customization, personalization has become a manufacturing Mainstream, if you do not take the initiative to seek new changes, by the impact of e-commerce retail is the former division of the manufacturing industry. In this take out you, have nothing to do with you in the world of three-body competition, the competition is no longer a clear rivalry.

These are both threats and opportunities. Traditional business entrepreneurs and Internet entrepreneurs, the competitive advantage is also very obvious, deep industrial base, skilled and loyal employees and suppliers, industry chain resources, years of experience in business management, these are Internet companies coveted strategic resources, so effective organic combination of resources, derived from the original industrial base and incubation of new projects or enterprises is to cause the favor of the venture capitalists It is a good choice. For example, the O2O model of connecting online and offline, such as the use of product crowdfunding and equity crowdfunding platforms, such as customization, such as the platform of vertical areas, etc. These models are only available to operators who have been y involved in the industry for many years, otherwise the tuition itself is the threshold. But the optimization of the business model depends more on the enterprise's own changes, such as dare to appoint Internet talent, bold decentralization, and even independent, after all, the rigorous and strict management model, does not apply to the Internet-based company management model, and accompanied by organizational structure, business processes, management system, incentive system, equity incentives, equity financing is to be accompanied by deepening the adjustment.

Of course, in the second and third tier cities to carry out Internet-based enterprises are also facing a lot of embarrassment, the introduction of talent, the docking of capital, the interpretation of the policy, the adaptation of the environment, are faced with bottlenecks.

Traditional SMEs also face a series of embarrassments in docking capital in second and third tier cities. First-tier cities, good projects, a woman of many families to seek, because there are few good projects, many investors. Second and third tier cities, good projects, a woman is difficult to marry, because few investors. What's more, some investment institutions directly specialize in first-tier leading investment institutions to follow the investment.

How to solve some of the financing embarrassment or predicament such as the above, the author combined with some of the local practice, in order to share and reference:

1. Traditional industries, if not for the transformation of the direction of the Internet +, or based on their own words, you can cross-border and platform-type enterprise cooperation, expand sales channels, promote products, financing options can choose the crowdfunding model of the product and the shop/equity crowdfunding model, but the shop/equity crowdfunding model, but the shop/equity crowdfunding model, but the shop/equity crowdfunding model. The financing method can choose product crowdfunding mode and storefront/equity crowdfunding mode, but the storefront/equity crowdfunding mode is a big test for the enterprise, and it needs to design supporting mechanisms to protect the interests and demands of investors.

2. Traditional industry Internet + direction of transformation and upgrading, both internal incubation, and then independent operation (equity; mechanism; personnel; financial, etc.), the use of industrial resources feeding, borrowing the Internet technology and means to enhance and transform the enterprise, then in the business data speed up to consider the introduction of investment institutions or listed companies industrial investment, and then choose to list on the New Third Board, the subsequent capital operation means such as capital increase, investment and financing, mergers and acquisitions, because the investors' interests and claims. The subsequent fixed-price, investment and financing, mergers and acquisitions, and other capital operation means because of the previous foundation can be launched one after another.

3. Incubation of high-quality projects is recommended to preferably provide policy, funding, talent, venture capital environment of the incubator stationed, on the one hand, you can enjoy a lot of policy support and support, and more is that you can be on this platform with some of the country's incubators, venture capital institutions to cooperate with the contact.

4. Policy understanding and active participation, the current government guidance funds, science and technology policies, support subsidies, landing capital market policies, one after another, complete supporting the entrepreneurial environment is constantly optimized, entrepreneurs should continue to take advantage of the situation.

5. Participate in some training or investment and financing seminars on entrepreneurship organized by the government, now many local governments will organize national venture capital institutions and investors to participate in local incubators, industry associations, guidance funds, investment and financing will be borrowed from such a platform, you can broaden the financing channels of entrepreneurs.

6. Learn to borrow strength and brain, the enterprise itself should put more energy into the operation and management, financing can be handed over to professional investment consultants to organize and coordinate, which can greatly improve the efficiency of financing.

In this ever-changing, blossoming entrepreneurial era, we look forward to the traditional enterprises to upgrade, the use of Internet + thinking, technology and means, borrowing the power of capital, to realize the manufacturing to intellectual leap.