An 8-Year Underwater Journey of a “Craftsman” VC: Entering the Game

“Raised 1 billion RMB against the trend.”

“Entering the Game” is a regular column of “Undercurrent Waves”. It stems from our discovery that the once-effective operating models are facing new challenges, and the industry rules inherited from the West to the East have been disrupted. People are eager for a new map and new order of innovation and capital. And “entering the game” is the most precious attitude.

“Entering the Game” was born in the changing situation. If we were to summarize the subjects of this column in one sentence: We hope to find new players and new gameplay that are more adaptable to the changing environment. The following is the fourteenth article of this column.

Text | Xu Muxin

Editor | Chen Zhiyan

After a long time, there is finally good news on the fundraising side of RMB funds. An under - the - radar market - oriented RMB fund has raised over 1 billion RMB in one year.

“Undercurrent Waves” has learned that Jingshuihu Venture Capital has completed the first close of a new 500 - million - RMB blind - pool fund. Counting the S fund, FOF fund it previously established successively, and a new S fund in the process of establishment, within less than 12 months, Jingshuihu Venture Capital has raised over 1 billion RMB in total. Jingshuihu has also successfully introduced new LPs such as Yuanhe Chenkun, Xiamen Capital, Guolian Xinchuang, Sucheng Venture Capital, and Yuanshuo Capital.

In the current RMB fund market, this is a considerable financing scale. And what makes this rather low - key investment institution even more worthy of attention is that the proportion of funds from government - guided funds is controlled below 30%, and in the past, the funds of its funds did not have “mandatory pre - investment return indicators and call - money requirements associated with the guiding funds”.

In the office of Jingshuihu Venture Capital located in Shanghai's Bund, we met Zhang Yi, its founding managing partner. Different from the typical “leadership temperament” or “ruggedness” of RMB fund leaders, Zhang Yi gives people the feeling of an “investment craftsman”.

During the conversation, he talked more about: In an era when finding beta has become a consensus, he adheres more to finding alpha companies. We also saw many more practical approaches of this under - the - radar VC. For example, in the face of the IPO backlog, Jingshuihu Venture Capital successfully introduced Yuanhe and jointly established an S fund to achieve DPI as much as possible; in order to keep its investment actions in shape, Jingshuihu Venture Capital chose to control its scale. It would rather return the money to LPs than chase expensive late - stage projects just to invest all the funds within the investment period.

In the current era when AI, embodied intelligence, and hardware investment are booming, dissecting the survival philosophy of an RMB fund may also provide another perspective to observe this market. It has come from the end of the market boom eight years ago and has been growing quietly and steadily in a hidden corner.

Part 01

Deducing from the bottom - up to find Alpha

The most typical case of Jingshuihu Venture Capital's style is the investment in Voltaware Energy.

In 2016, the domestic energy storage market was almost a desert. The attention of mainstream VCs was still on the afterglow of O2O and the last dividends of the mobile Internet. At that time, Voltaware Energy was just a newly - established startup, and some of its workshops didn't even have their lights installed. Its annual revenue was only over 10 million.

But Zhang Yi saw a variable ignored by the market: the crazy expansion of power battery manufacturers.

“At that time, I saw many power battery and cell manufacturers raising large amounts of money in the secondary market for expansion, often billions or tens of billions.” Zhang Yi, who has years of overseas M&A experience, keenly captured the transmission logic of the industrial chain - the explosion of production capacity would inevitably lead to a sharp decline in cell costs. And the core pain point of energy storage was cost. This meant that once the cell cost came down, the penetration logic of photovoltaic and energy storage would work.

Based on this “top - down” deduction, the fund managed by Zhang Yi in the early stage decisively made a heavy investment in Voltaware Energy and bet on the overseas household energy storage track. After the establishment of Jingshuihu, it continued to increase its investment in subsequent rounds.

Facts have proven Zhang Yi's judgment. A few years later, the energy storage track exploded. Voltaware Energy grew into a unicorn, with annual revenue in the billions, and its profitability and cash flow remained stable. And the return of Jingshuihu Venture Capital on this single investment supported the performance foundation of two consecutive funds.

“After the investment, the energy storage track was extremely hot from 2021 to 2023, so we chose not to touch it.” Zhang Yi told “Undercurrent Waves”, “Because that was beta money, not the alpha we wanted to earn.”

Another similar case is the investment in Polymaker, a 3D printing material developer.

As early as 2016, Zhang Yi began to pay attention to the 3D printing track. But he didn't rush to make a move. Instead, he kept a calm observation for up to two years.

“At that time, I thought the market application demand was still relatively chaotic.” Zhang Yi recalled. At that time, 3D printing was more of a toy for enthusiasts, lacking large - scale industrial application scenarios.

Until the end of 2018, Zhang Yi observed a key signal: global industrial giants such as BASF and Philips began to enter the 3D printing field high - profile and set up large exhibition stands at industry exhibitions. In his view, this meant that 3D printing was changing from a “toy” to a “tool”, and the inflection point of industrial - grade application had arrived.

After that, Zhang Yi quickly pulled the trigger and made a heavy investment in Polymaker with the first investment, acquiring nearly 10% of the shares. Subsequently, Jingshuihu Venture Capital continuously increased its investment from 2021 to 2023. During these years, Polymaker's revenue increased dozens of times. With heavy R & D investment, its profitability continued to improve rapidly. “Whether it's product R & D ability, market share, or brand value, Polymaker is already a global leader in 3D printing FDM materials, which has brought generous returns to us investors,” Zhang Yi said.

In fact, many of the projects invested by Jingshuihu have developed into leaders in their niche tracks after the investment. These projects also represent Jingshuihu Venture Capital's consistent investment strategy: in the early stage of a company's development, make a heavy leading investment based on independent judgment and obtain a director's seat. After the enterprise has been initially verified, continue to increase the investment. After providing sufficient post - investment empowerment to the enterprise, thus earn alpha.

An example of this post - investment empowerment is that for several invested enterprises that are currently at the most critical pre - listing stage, Zhang Yi has been busy helping these enterprises with investment and financing docking in the Pre - IPO round, providing investment bank resources and cornerstone investor resources, as well as sorting out the paths and plans during the domestic and overseas listing processes.

The primary market is good at creating trends. From new energy and semiconductors to today's AI, consumer hardware, and embodied intelligence, it's all the same. But Zhang Yi said: “If no VC has ever looked at a project, it probably won't work; but if all large institutions are scrambling for it, I probably won't join the fray either.”

Jingshuihu Venture Capital's approach is: enter the market on the eve of the formation of a consensus, stay calm or even exit during the peak of the track's explosion. This is also the typical approach of a sniper - type investment institution, and the core behind it is the belief in “non - consensus”.

In 2022, the robot track experienced a wave of valuation corrections, and many once - star projects were in the dilemma of “having revenue but no profit”. The involution in the domestic market made many investors shy away. At this time, Jingshuihu Venture Capital chose to make investments against the trend and invested in a number of robot companies. But Zhang Yi's selection criteria seem to be somewhat prescient today: the companies should have a natural gene for going global.

“Judging from the results, we do prefer companies that focus on the overseas market. In the early stage, they were basically active in the overseas market.” Zhang Yi explained, “The domestic market is too competitive. Once caught in the quagmire of price - cutting and resource - competition, all technological logics will fail.”

One of the invested enterprises, MuStar Robotics, a logistics robot company, is not a traditional AGV. However, it has won orders from well - known brand enterprises or manufacturers such as Coca - Cola, Yamaha, Monde Nissin, and Ledvance overseas. In the past few years, this company has successfully covered more than 50 countries and regions around the world, serving more than 200 global customers. Overseas business contributes more than 80% of its revenue. In just the past 12 months, its order volume has increased six - fold, and just one innovative new product has won a large order worth hundreds of millions of yuan.

Zhang Yi said that what he values is not just simple hardware manufacturing, but the “algorithm + AI - driven” ability. Whether it's industrial technology or smart energy, the team is looking for companies that have underlying algorithm models and can combine them with specific scenarios to launch hardware products.

“We first look at the industry ceiling, then the real market demand, followed by the product's expandability, and the team is the cornerstone for realizing all visions.” This four - step investment method is even somewhat similar to the M & A work Zhang Yi did in his early years - not believing in stories, but only looking at whether the enterprise can make sense at the micro - level.

Currently, Jingshuihu Venture Capital has defined its investment directions as equity investments in unlisted companies in the fields of smart energy, industrial technology, and algorithm technology (artificial intelligence). The investment areas are mainly in Beijing, the Yangtze River Delta, and the Pearl River Delta regions.

Part 02

The inertia of restraint and the compound interest of trust

All along, Jingshuihu Venture Capital has mainly relied on institutional LPs, accounting for more than 70%, including Wuxi Venture Capital, Xichuangtou, Yuanhe Chenkun, Xiamen Capital, Huikaizhenghe, Wuxi Huishan High - tech Zone Mother Fund, Yixing State - owned Assets Control Group, Qingdao Langwei, etc. The reinvestment rate of each fund can reach about 70%.

Zhang Yi attributes this high reinvestment rate to “the consistent understanding of scientific and technological innovation investment between both parties”. After all, there are many GPs to choose from in the market, but whether there is “common language” requires long - term investigation.

To explain this trust, let's rewind the clock to the time when Jingshuihu Venture Capital was established - 2017.

At that time, the RMB fund market was at the end of the previous round of prosperity, and the upsurge of mass entrepreneurship and innovation had not completely subsided.

“In the past nearly ten years, I mainly engaged in overseas investment and M & A.” Zhang Yi recalled. At that stage, he was like an in - house investment banker in the industry, responsible for M & A transactions, participating in restructuring, operation, and then selling. The cruelty of M & A transactions lies in that there is no “track dividend” to cover up, each case is a real low - buy - high - sell deal, and every link must be precisely calculated.

By chance, after managing two RMB funds as an executive partner and achieving good results, at the suggestion of LPs, Zhang Yi focused on RMB VC investment and founded Jingshuihu Venture Capital. However, his previous M & A experience brought the perspective of “buying the whole company” to the VC industry. He is used to examining an enterprise from the micro - level.

As mentioned above, Zhang Yi neither believes in the “hidden gems” that are unknown to the public nor the “pigs on the tuyere” that are over - packaged and highly sought after. What he is looking for is the “non - consensus” that makes sense at the micro - level but has not been submerged by the macro - consensus.

On the other hand, the characteristics of an “investment craftsman” are also reflected in the fundraising side.

The scale of Jingshuihu Venture Capital's blind - pool funds has always been intentionally controlled at around 500 million RMB per period. In Zhang Yi's view, this is not because it can't raise more money, but a “best range” after precise calculation.

“This scale is the best range for investing in early - stage alpha.” Zhang Yi explained, “Once the scale is too large, our investment strategy will be difficult to implement, and our actions will be distorted. We will be forced to invest in beta. If the scale is too small, we can only make small follow - up investments like sprinkling pepper, which also does not conform to our investment logic.”

Under such a logic, Zhang Yi even made a rare move in the industry. In the operation of a certain fund, since he couldn't find enough targets that met his strict criteria within the investment period, Zhang Yi didn't choose to “invest for the sake of investing” and force - fit several late - stage projects to fill the quota. Instead, he chose to directly return about 20% of the remaining funds to the LPs.

Another profound impact brought by his M & A background is the sensitivity to liquidity.

In Zhang Yi's dictionary, VC is not a never - ending feast but a capital cycle with a clear time boundary. “Exit and distribute, no recycling investment.” Zhang Yi believes, “Capital has a time cost, and liquidity is the lifeline of VC.”

At the same time, investing in early - stage Alpha requires a very high degree of freedom for GPs to make moves. Therefore, Jingshuihu Venture Capital spent a relatively long time learning, understanding, and coordinating with state - owned LPs, and gradually established a sense of trust and boundary that made both parties comfortable. However, in actual investment actions, the enterprise landing will be naturally completed.

For example, it has invested in and introduced 7 enterprises to Wuxi, with a total landed economic value of billions of yuan. In Zhang Yi's view, this is not to meet the assessment requirements but a natural result based on the industrial logic - enterprises need to reduce costs and increase efficiency, local areas need industrial upgrading, and funds need returns. This is a win - win “natural result”.

According to “Undercurrent Waves”, in the LP structure of Jingshuihu Venture Capital, the reinvestment rate of old LPs exceeds 70%. Behind this is a simple and powerful logic: you make LPs earn money and let them get the money in time.

Among the early LPs of Jingshuihu Venture Capital, there are many friends Zhang Yi accumulated when he was doing early - stage investment in 2015. “The DPI of that fund exceeded 1 in about 3 or 4 years.”

Part 03

Persistent, flexible, and win - win

In 2023, Jingshuihu Venture Capital jointly established an S fund with Yuanhe Chenkun. It not only completed the continuation of some assets in the old fund but also achieved fundraising expansion within one year.

This is not common in the industry.

The result is wonderful, but the beginning of the decision to do S was actually due to the IPO backlog that has given the entire primary market a “headache”. Zhang Yi told “Undercurrent Waves”: “Our original intention of doing S was to solve the liquidity problem and create DPI for old LPs.”

Around 2023, a fund managed by Jingshuihu Venture Capital began to enter the fifth - year exit period, and a number of projects in the fund entered the IPO process. However, due to a series of tightened policies, “in the