Cashing out 2.1 billion yuan, ByteDance's old shareholders are leaving: The reasons are quite realistic.

Today, an interesting piece of news emerged: Bank of China Group, an old shareholder of ByteDance, is selling its old shares.

As a result, the shares were quite popular and were bought by the well - known institution, Capital Today.

It is reported that after seven institutions bid, the shares originally worth $200 million were finally sold for $300 million (2.1 billion yuan).

This round of transactions also drove up the valuation. The valuation of the old shares when they were put up for sale was about $360 billion, and the valuation at the time of the transaction was about $480 billion (3.4 trillion yuan).

What inspiration does this event hold for the startup circle?

Previously, we used to say that a successful startup takes 10 years. I think we need to change that statement now: at least to 15 or 20 years. Why? ByteDance, such a profitable unicorn, has been established for 13 years, yet it is still not listed, and many old shareholders have not exited. Let alone other unicorns.

What do you think? Leave your thoughts in the comment section.

- 01 - How much was earned from selling the old shares?

How much money did ByteDance's investor (Bank of China Group) earn from this sale of old shares? We can make a rough estimate based on public information.

It is reported that Bank of China Group invested in ByteDance twice, once in 2013 and once in 2018.

Conservatively estimated, if we only consider the investment in 2018 and skip the process to give the conclusion directly: the investment return is about $260 million (1.9 billion yuan), and the total return rate is 7.5 times (with an annualized return of about 33%).

Of course, this estimate may deviate significantly from the facts. For example, it is uncertain whether Bank of China sold all or part of its shares, and whether the shares sold were from the 2013 or 2018 investment.

However, the details do not affect the conclusion. What I mainly want to convey is that this return is quite substantial, but it is not that exaggerated.

You know, in the past 15 years, ByteDance has been almost the most successful unicorn. In the past 15 years, it has been the only one of its kind. A 33% annualized return is not exceptionally high in the investment return level of top - tier unicorns.

Why? Let's compare it with other investors in ByteDance.

Zhang Yiming, the founder of ByteDance, had a tough time in the early days of the startup. He was short of money, borrowed money from friends, and raised funds from individual angels. Many of those who helped ByteDance have already received huge returns, although some are still on - paper returns.

For example, in 2012, ByteDance received an angel - round investment of "several million yuan". The investors included Cao Yi of Source Code Capital, individual angels Liu Jun, and Zhou Zijing (the founder of Ether Cap). Among them, Zhou Zijing once "lent a sum of money" to Zhang Yiming.

Another example is SIG Asia Investments. It invested $1 million in ByteDance in 2012 (Series A).

The list of investors also includes some young people. According to media reports, Huang Gongyu, the co - founder of Paradigm, came to Beijing from Silicon Valley for a trip at the age of 24 and accidentally invested in Zhang Yiming. He claims that the return rate of this investment has exceeded 10,000 times.

- 02 - The old shareholders' hasty exit was a loss

Then another question arises: Since the old shareholders of ByteDance haven't waited for excessive returns, why did they choose to exit?

Personally, I think it is because of the limitation of the fund cycle. They couldn't wait any longer, but this is very disadvantageous, just like missing a goal in a football game at the last kick.

ByteDance was founded in March 2012. Although it has been the fastest - growing company in the past 13 years, 13 years have passed. For domestic RMB funds, a 10 - year cycle is already good, and many have a cycle of 5 - 7 years.

If it is a market - oriented fund (non - state - owned), the form is more flexible, and it may be able to wait. For example, it can be extended 1 - 2 times, and extending it for another 3 - 5 years is not a problem. If it is a state - owned fund, the flexibility is very small. Once it reaches the expiration date, it has to take corresponding actions.

And Bank of China Group is of this nature. Its full name is "Bank of China Group Investment Limited", which is a state - controlled enterprise.

This also reflects another problem: For a unicorn, a 10 - year growth cycle (from scratch to listing) is still not enough.

We used to say that a successful startup takes at least 10 years. Now, this statement probably needs to be revised. It may take 15 or 20 years. Why? For a profitable company like ByteDance, you can't exit even after 13 years of investment. Let alone other unicorns.

Market sources say that ByteDance's net profit in 2024 is about $33 billion, at least $2 billion more than Tencent's.

So in this context, patient capital with a longer cycle has an advantage. For example, the buyer this time, Capital Today.

Its fund cycle is up to 28 years.

Xu Xin, its founder, once said in an interview, "The life cycle of a fund is limited... Then you can't earn the money from the compound interest of time as Buffett mentioned. The solution to this problem is very simple. We launched a 28 - year fund."

She said that for a single project with a return of over $1 billion, there are several characteristics. Without exception, the project has been held for a long time.

"We've held Yifeng Pharmacy for 14 years, Meituan for 10 years, and Boss Zhipin for 6 years."

This approach has an advantage. Why? When a company reaches the unicorn stage, risk assessment becomes simpler, and its future potential can also be basically seen.

It means that as an investor, since you've taken 99% of the risks and are just one step away from the best exit period, but are held back by the "fund cycle", it's really not worth it.

- 03 - Two suggestions

So, regarding the sale of ByteDance's old shares, I have two suggestions:

1. For entrepreneurs, don't be too anxious. Don't regard 10 years as the upper limit of a startup. It's quite common for a successful startup to take 15 or 20 years. ByteDance has been developing for 13 years, yet it is still not listed, and many old shareholders have not exited.

We should be sufficiently long - term oriented and aim to build a 30 - year - old, 50 - year - old, or even a century - old business.

2. For investors, strive to be "patient capital". Try to learn from Capital Today and extend the fund cycle to 10, 15, or 20 years so as to earn the money from the compound interest of time.

This article does not constitute any investment advice.

This article is from the WeChat official account "Pencil News" (ID: pencilnews). The author is Pencil News. It is published by 36Kr with permission.