VC firms feel the chill of sluggish market, but remain warm about future

Deng Feng, co-founder of Northern Light Venture Capital, delivers a speech at 2016 Demo China in Hangzhou, Sept 22, 2016. [Photo provided to chinadaily.com.cn]

Best time for startups

However, Deng Feng, co-founder of Northern Light Venture Capital, approached the issue from a different angle. He said it is golden time to start a business when the capital market is tightening.

"(During sluggish economy) once you have the money, you will be more careful to spend it. At the same time your rivals would struggle to get the financing. Then your chance of success is bigger," said Deng, "Really excellent companies are those who could bottom out during bad business and funding environment."

Li Zhu smiles during an interview with chinadaily.com.cn in Hangzhou, Sept 22, 2016. [Photo/chinadaily.com.cn]

Such opinion was echoed by Li Zhu, co-founder of the InnoAngel Fund. "Investment in the time of capital shortage will get bigger returns in the future," Li said, and also predicted "the primary market will turnaround next year".

He said: "The State Council and other government bodies have rolled out policies to encourage more capital to flow to the investment industry, including State-owned companies, banks, and foreign capital. In years to come, thousands of billions yuan will be invested in the equity market."

In the first half year of 2016, InnoAngel Fund invested in 42 companies with a total amount of 150 million yuan, and the investment will increase in the second half, according to Li. Under sluggish economy, valuation of companies is 20 to 30 percent lower than a year earlier, making the prices more reasonable, said Li.

Read more about his view