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From “Venture Lending” to “Equity Investments,” Zhongji Intellectual Property Fund is First to Achieve “Debt & Equity Linkage”

Browse:176Times | latest update:2016-09-30

On September 2016, as the IP Fund closed the investments on ANTVR and CHIPONE, the Zhongji Intellectual Property Financial Services System’s “Venture Lending + Options” business model also achieved a milestone. After 2 years of theoretical research and 18 months of practices, Zhongji Financial Services successfully opened the pathway from “venture lending” to “equity investments” to provide innovative financial services for technology companies.   In December 2014, under the directions of the State Intellectual Property Office and Haidian District Government, given the favorable policies on Zhongguancun Demo Zone’s core financial innovation, Haidian State-Owned Assets and CSC co-established China’s first 5-in-1 “evaluation – guaranty – loan – investment – transaction” IP financial services system, i.e. Zhongji Financial Services. Zhongji Financial Services tailor-made the “IP and Equity Pledge” (Venture Lending + Options) model, through a smooth flow among IP evaluation, guaranty, fund guaranty, bank loan approval, Zhongji helps companies secure bank loans. When companies are strained in capital, Zhongji also provides bridge financing through factoring.   Since the beginning, Zhongji Financial Services has provided 5 million to 50 million in “venture lending” to over 60 tech companies, amounting to bank credit total of 700 million. At the same time as providing “Venture Lending” to companies, Zhongji Fund receives certain amount of options. ANTVR and CHIPONE are the first ones in which options are exercised and turned into equity investments.      1. ANTVR     Founded in 2014, ANTVR is a startup that focuses on wearable devices for virtual reality and augmented reality. The company owns numerous patents that are closely tied to core products. Centering on products, the development direction for companies is a business ecosystem that leads people to an elevated consumption experience. Zhongji Financial Services has provided ANTVR with 10 million “Venture Lending” since July 2015. During the year between lending and option exercise, ANTVR exceeded growth expectations. As ANTVR begins Round B financing, Zhongji decided to exercise options at the same time as loan extension.   2. ChipOne    ChipOne is the first chip design company to focus on the tablet display and the only provider of complete solutions for the tablet industry in mainland China. The company made large R&D investments and expanded its scale rapidly. Zhongji provided 20 million venture lending while the company was losing money. The venture lending provided the necessary liquid capital for the company to grow and also supported ChipOne in catching the wave of buyouts in global integrated circuit companies. Since June 2016, ChipOne began to orchestrate an acquisition of US power management chip design company iML. Meanwhile, Zhongji Fund decided to join the investment as a strategic partner by exercising its options.  Operator’s Comments     Zhongji IP Fund President Fang Yinhe says there are 4 criteria for qualifying companies in “venture lending”: 1. Sectors with favorable policies; 2. Technology oriented company; 3. Obvious technological advantage, scalability of customers, reasonable team structure and manageable financials; 4. Concrete financing plans.   Given these criteria, Zhongji provided venture lending to ANTVR and ChipOne in 2015 and obtained 20 million in options each. After a year, both companies grew rapidly and showed investors more promise. When the new round of financing comes, Zhongji Fund decided to exercise its options. The creation of investment opportunities is a core value brought by “venture lending” to “equity investments.” Mentor’s Comments   The controlling shareholder of Zhongji Fund and Chairman of CSC – Wang Guangyu said that “Two most difficult points in PE are: valuation and time of investment. Venture lending business resolves both. Through lending, we get the chance to review the company’s potential for growth in the coming year. We can choose to exercise options when the company has future round of financing. The timing is more mature and pricing is more comparable. We hope venture lending will become an option pool for equity investment and even buyout opportunities.” ANTVR and ChipOne’s successful closing both validated the model. Designer’s Comments   Chairman of Zhongji Financial Services and Zhongji Fund – Cao Yi said that “Zhongji Financial Services has 2 weapons: the proven “five-in-one” structure and model provide synergies; and Zhongji IP evaluations have come up with multi-dimensional IP analytical methodologies. These two weapons create certain technological barriers to entry within a certain period of time. Our future directions includes closing the loop in the “5-in-1” model and provide the optimal financing solutions for tech companies, and open up a new path for the developments of technology and finance in China.