Li Lulu of Yunyue Capital: Business success comes first, and then transaction success follows.

From a few engineers who initially had no idea what FA was, to now being the FA team that has firmly ranked first in the Greater Bay Area for many years, Yunyue Capital, with the steady and practical style of its engineering team, has become a banner leading the industrial investment bank in the industry.

On-site photo of Yunyue Capital's Industrial Investment Training Camp

In the domestic FA field, financial institutions that originate from and serve the industry are not numerous or long-standing. The industrial investment bank becoming a trend basically started in 2019, following the fading of the Internet dividend and the increasingly crowded To C track. Yunyue Capital has a keen eye for industrial changes. Since its establishment in 2017, it has positioned itself at the industrial end. It is one of the few financial advisory companies in China that raised the banner of "industrial investment bank" at that time, and their focus is closely on projects that "have commercial value", especially in the more mature fields of intelligent manufacturing, high-end equipment, and technology going global in the Greater Bay Area. At that time, the tracks of mass consumption, enterprise services, and TMT were booming, while Yunyue Capital, with the observation and accumulation of its own team in the industry for decades, chose projects that did not pursue the trend and concentrated on running a long-term race with start-up companies with real commercial value. Up to now, Yunyue Capital has served more than 300 enterprises, distributed in the fields of technology, new energy, consumption and going global, biomedicine, digital economy, etc., including ZTE, Newlinks Technology, Hengyinen, Jianghai Technology, Snack Youming, Bosheng Medical, etc. The deep industrial background and unique engineering service model have also made the bond between Yunyue and the industry increasingly close. For this reason, we interviewed Li Lulu, a senior partner of Yunyue Capital, who is also an outstanding young financial advisor under the age of 35 in the Greater Bay Area, leading the team to serve and complete 20 - 30 cases on average every year in the past five years.

As one of the important founding members of Yunyue Capital, at first glance, Li Lulu's background and experience are quite different from the other founding members. However, after communication, it will be found that her working style and thinking logic are in the same line as the style of the entire founding team of Yunyue. "There are three characteristics of Yunyue that impress me the most," Li Lulu said. "First, several partners are from large companies such as Huawei and ZTE. Before this, they have very rich experience in the operation and management of enterprises, especially in leading the team to fight, and they also have unique insights into the industry itself. My career also started in an industrial listed company, and we are all engineers, using an engineering thinking to consider and solve problems, so there is a high degree of coincidence and tacit understanding in decision-making; Second, the founders of Yunyue have the dual characteristics of the typical 'boldness of Hunan people and the wolfishness of Huawei people', daring to fight and strive. I am a typical Hakka, and my characteristics are diligence and tenacity. I think it can just form a complement in the business work, and can bring efficient solutions to client enterprises at both the strategic and execution levels; Third, Yunyue is positioned as an industrial investment bank, which is very different from the FA companies I have come across before. It can truly come from the industry, serve the industry, and return to the industry, which coincides with my idea." From the end of 2018 to 2019, under the repeated invitations of Yang Weiwu, the founder of Yunyue Capital, Li Lulu finally chose to leave the brokerage platform where she worked and joined Yunyue Capital.

Li Lulu, Senior Partner of Yunyue Capital

Yunyue Capital, topping the FA list in the Greater Bay Area for many years, has a unique business philosophy

In recent years, significant changes have occurred in the primary market equity investment. On the one hand, the investment environment has become increasingly complex, and uncertainty has increased. Fluctuations in the macroeconomic situation, intensifying industry competition, and adjustments in regulatory policies have made investors more cautious in decision-making. On the other hand, the market's requirements for investment targets are constantly increasing. It not only focuses on short-term financial returns but also pays more attention to the long-term development potential, innovation ability, and industrial synergy effect of enterprises.

In such a difficult financing environment, Yunyue Capital, as a representative of the industrial investment bank, can complete many financing cases, and its success is not accidental. Li Lulu told 36Kr: "Many start-up teams that have come to our office for tea will say that we are not like a financial institution, but more like an industrial company."

Compared with other FAs, Yunyue Capital emphasizes that it is an original industrial investment bank, which is inseparable from the team's strong engineering background and a unique service system from the industry.

How to understand "original"? Li Lulu said, first, the industrial original factory background. The core team of Yunyue comes from industrial giants such as Huawei, ZTE, Goodix, Dongfeng Motor, TCL, and DaAn Gene; second, the industrial methodology. In its own workflow and service process, Yunyue deeply combines Huawei's operation and management practice with financial advisory services and creates a unique service SOP; third, the industrial practical experience, especially in the To B marketing and market end, the core team of Yunyue has accumulated hundreds of business transaction cases and has once created many market awards and breakthrough awards in blank fields in Huawei, ZTE and other large companies.

"In fact, the development process of Yunyue is the same as that of all start-up teams, experiencing the early hesitation and confusion. The core of Yunyue's ability to achieve today's achievements lies in always adhering to 'customer-centered, goal-oriented'." Li Lulu believes that although this sentence seems simple, not many FA institutions can truly achieve it.

First, the real customers that Yunyue serves are enterprises rather than institutions, which is different from many of its peers. Yunyue adheres to the concept that "those who give money are customers, and those who give more money are high-quality customers". Therefore, in the service process, Yunyue must unswervingly provide the best service to the real customers and high-quality customers, and will not sacrifice the service quality in order to pursue the success of the transaction or expose the customers to huge transaction risks. Secondly, Yunyue does things based on goals, while many enterprises do things based on resources. The biggest difference between the two is whether you can persist when encountering strong resistance, and truly achieve "celebrate when you win, and fight to the death when you lose".

From the initial few people to the current dozens of teams, Yunyue has always been communicating in the language of the industry and doing things with the methodology of the industry. Li Lulu uses the naming of Huawei's departments to vividly analogize Yunyue's combat method - the engineering combat method, that is, using the engineering method to solve all sales and management problems.

"The naming of Huawei's departments is actually very interesting. Many departments end with 'Engineering Department', even the reception department is called 'Customer Engineering Department'; this is the representative of engineering thinking. In popular terms, it is 'using the certainty of rules to deal with the uncertainty of the market'." Li Lulu shared with 36Kr. "For example, in the underwriting department I am in charge of, it provides end-to-end services in accordance with Huawei's LTC (Lead to Cash) process, integrating the entire financing process, service team, control points and supporting IT systems. Based on the 'engineering' method, the uncertain financing actions are turned into highly certain process nodes." Li Lulu said.

Only when start-up companies have a solid business foundation can they have capital value

In judging the investment value of start-up companies, Yunyue Capital puts forward its core point - Business success comes first, and then transaction success.

"Many times, people are eager to facilitate a financing or M&A transaction, but they do not deeply consider whether the enterprise really has the ability to sustain development." Li Lulu said. Yunyue Capital also went through such an exploration stage in the early days. Through continuous project practice and experience accumulation, it gradually realized that only when the enterprise's own business model is mature, it can firmly stand in the market and achieve business success, can the transaction be meaningful and sustainable.

In many years of working experience in the primary market as the transaction responsible person, Li Lulu has witnessed too many cases that only focus on the transaction conclusion while ignoring the construction of the enterprise's own business logic. Li Lulu said that Yunyue always insists that capital value and business value are in the same line, and the ultimate destination of both is the 'profit logic'. It is precisely because we come from the industry that our understanding of the entire underlying logic will be deeper than others.

Financing success, or being able to obtain appropriate funds in a relatively short period of time, mainly has the following three characteristics:

• The first is the industry window period, which just meets the current policies, environment, and major technological change period; such as new energy, going global, AI large models, etc.;
• The second is to have relatively outstanding data, and the financial situation and performance during the financing process are quite good;
• The third is the background and mentality of the founder. The background determines the starting line of the start-up, but the mentality is an important factor that determines whether you can complete this start-up marathon.

If the above three points are exactly met, or at least two of them are met, and the other point is not too bad, the financing can be achieved in a more ideal state.

As for the most lacking elements in the financing process of most enterprises, Li Lulu said: "I think there are mainly two points. First, the lack of strategic insight and planning ability for the future, and what investors invest in is precisely your future; second, the continuous growth of performance. This is a fatal weakness for many technical founding teams. For entrepreneurs, they must first understand that capital is profit-driven, and the ambition and dream of the founder must be reflected in the financial statements to achieve investment value. Only by understanding the underlying logic behind this investment logic can one truly understand the so-called shallow investment logic."

Especially in the current relatively pessimistic market environment, whether the company's performance can maintain continuous growth is even more important. How does Yunyue internally judge whether an enterprise is commercially successful or not?

Li Lulu believes that the manifestation of commercial success has two points. The first is to really get the recognition of the top customers - proving that the enterprise has discovered and solved the real needs of the customers, which is the basis for survival; the second is to really be able to get enough orders - reflecting the core competitiveness and market occupancy ability of the enterprise, which is the value of development. Among the projects served by Yunyue, there are two more prominent examples that meet the above characteristics:

At the end of 2019, Yunyue took over a new energy equipment project. At that time, the new energy track had not yet become popular. They were just starting to do business with the top battery manufacturers, and the cash flow was very tight. At that time, Yunyue had less than 3 months to complete the transaction. Because if it was not closed within 3 months, the company might not be able to fulfill the orders of the top customers, but the premise of fulfilling the orders is that you must have enough reserve funds to expand production capacity. Generally, market-oriented funds dare not easily take action when seeing such a financial situation. After Yunyue took over, it quickly connected with many funds familiar with the industrial chain and persuaded them to unanimously agree that if so many top battery enterprises can be locked, it shows that the technical ability of the enterprise itself is undoubtedly. The remaining problem is the funds. Just because this enterprise proved its commercial value, Yunyue successfully helped it complete several transactions of industrial capital within 3 months. Then in January 2020, Tesla's Chinese factory in Shanghai officially went into production, detonating the new energy vehicle industry, and this new energy equipment enterprise survived the most difficult period.

Another case is an intelligent cockpit project that Yunyue did in 2021. Due to the fact that the order performance has not yet increased, it was very difficult in the first few months of financing. However, after the company's semi-annual report came out, the enterprise's own data achieved a 3-fold year-on-year growth. Coupled with the good fundamentals of the enterprise's own team and products, as soon as this data came out, many funds that were previously waiting and watching began to rush in. Finally, Yunyue received multiple TS within one month after the data came out, and finally selected several funders that are most suitable for the enterprise's development to complete the transaction.

In the cold winter, the persistence and adaptability of the industrial investment bank

Before joining Yunyue Capital, Li Lulu once worked at Zhongtian Guofu Securities, DaAn Gene, and SanYou Medical Incubator. She also has a compound background in biomedical engineering and journalism and communication, which gives her a natural advantage in the "translation" of technology and capital language. From sinking from a large investment bank to an FA start-up team and leading the front-line transaction team, especially after experiencing the cold winter of the capital market in recent years, Li Lulu has a deeper understanding of entrepreneurship, investment and financing in the industrial field.

She believes that in the past, especially in the transaction market dominated by US dollar funds and market-oriented funds, the essence of the transaction is to earn sufficient returns. Therefore, as long as the investment logic of the project is reasonable and has a certain attractiveness, a transaction can be completed; but now, because the fund attributes that dominate the market are mostly state-owned capital background, the essence of the transaction has undergone a fundamental change. Becoming a more important model that can drive local economic development on the premise of capital preservation.

Therefore, for the current FA, the entire market transaction has actually added many links, that is, from the original "assets + funds" to the current "assets + funds (GP) + investment attraction and landing (LP) + industrial synergy (LP) +...". The complexity of the entire transaction link also increases with the increase of participants. In addition to considering the exit path of the GP's own position, how to fully understand the different investment attraction and landing needs, and how to cooperate with the synergy needs of a few industrial LPs, are all topics that FA needs to think structurally about.

For this reason, in the process of doing transactions, Yunyue's philosophy is - Make customers satisfied and transactions smooth, and promote all parties to move forward even in the most difficult financing time.

In the process of communication, Li Lulu shared the transaction negotiation process of several cases. The most impressive one is that "Yunyue will interpret the significance and rationality of this clause at this stage from the perspective of both parties, rather than making a judgment of right or wrong from a purely legal level". "Last year, we had a project in the investment agreement negotiation stage. All parties had lawyers, and the core clauses could not be agreed upon. Later, we participated in the negotiation from 4:00 p.m. to 11:00 p.m. before leaving the negotiation table, and also achieved the satisfaction and expectations of multiple parties." Li Lulu mentioned.

In addition to positioning itself as an "original industrial investment bank" and operating investment and financing from an industrial perspective, Yunyue's service system is also a combination of "strategic consultant + marketing consultant + financial consultant". Li Lulu told 36Kr that to be a business-running consultant for enterprises that achieve "commercial success", in addition to financing, more importantly, it is the support for its future strategy and marketing.

It can be seen from a large number of case libraries that very few early-stage projects can reach the end. The main reason is that early-stage projects are actually difficult to be falsified. However, once financing starts, if the company's performance does not increase, or the growth is not reflected, it is difficult for the enterprise to continuously obtain capital in this environment, and it is even difficult to match the corresponding valuation level in the past. And this is precisely the most difficult hurdle for technology-based enterprises to overcome. Because most technology-based enterprises, especially the founding teams of "hardcore technology" enterprises, are particularly good at the innovation of products and the breakthrough of technology, but they are more or less struggling in marketing and strategic directions, which has also been confirmed in hundreds of cases we have contacted and served in the past.

The founding team members of Yunyue used to have more than 20 years of experience in large customer sales and marketing experience in the country and even the world in the world's top 500 and domestic large companies. This ability can precisely form a strong complement with the above-mentioned start-up companies and provide them with growth assistance. Yunyue specifically established a consulting