Just now, Shenzhen took the lead in comprehensively relaxing investment return requirements.

A highly symbolic scene has emerged.

Shenzhen Angel Mother Fund officially released and implemented the "Application Guidelines and Selection Measures for Shenzhen Angel Investment Guidance Fund (2026 Edition)" (hereinafter referred to as: "Measures 2026"). It comprehensively relaxes the reinvestment constraints, cancels the rigid requirement for local registration of fund managers, and continuously optimizes the measures for fund establishment.

This is undoubtedly one of the most groundbreaking explorations in the venture capital industry in 2026.

Over the past 20-odd years, Shenzhen has always been the base camp for RMB funds. "As a pilot demonstration area, Shenzhen should do things that others haven't done and take paths that others haven't taken," emphasized Shenzhen Angel Mother Fund to the investment community. In the process of participating in and supporting the development of the economic industry, government-guided funds need to solve the long-criticized marketization problem at the same time - government funds should only play a guiding role, not a leading one.

In the past, many cities would follow Shenzhen's practices. The investment community learned that many local state-owned institutions have started to study Shenzhen's new attempts internally.

Symbolic move: Shenzhen cancels early-stage reinvestment requirement

Canceling the early-stage reinvestment requirement, Shenzhen has shown remarkable courage.

In the past, government-guided funds often clearly stated the reinvestment requirements in the application guidelines and selection measures. For example, the "Application Guidelines and Selection Measures for Shenzhen Angel Mother Fund" in 2020 mentioned that the proportion of the actually paid-in investment amount of the sub-fund invested in enterprises registered in Shenzhen should, in principle, be no less than 1.75 times the proportion of the actual paid-in capital of the angel mother fund to the sub-fund. However, the "Measures 2026" comprehensively relaxes the reinvestment constraints.

Currently, reinvestment is almost a problem faced by all VC/PE institutions. Shenzhen's exploration this time came in a timely manner and caused a stir in the industry.

The main implementer of this measure is Shenzhen Angel Mother Fund.

Recalling 2018, the Shenzhen municipal government took the lead in establishing the first government-guided fund specifically targeting the angel stage - Shenzhen Angel Mother Fund made its debut. Since then, various places have followed suit, promoting the development of early-stage investment in China.

Over the years, government-guided funds across the country have grown rapidly. As a result, fund investment promotion has become a common practice, and reinvestment has gradually become one of the core tasks of VC/PE.

However, practical experience shows that the reinvestment task often discourages excellent investment institutions. In the past period, we often heard such regrets from front-line personnel of guiding funds: due to requirements such as reinvestment, some leading market-oriented institutions finally declined the cooperation.

In the long run, the reinvestment requirement may have a restrictive impact on industrial development in some cases. After all, each city has its own advantageous industries, and not every region has advantages in the technology field. However, limited by the reinvestment clause, sub-funds often have to settle for local high-quality enterprises, and these projects may not be competitive enough on a national scale. Under a series of resource mismatches, it may go against the original intention of government-guided funds to develop industries.

"Against the backdrop of the national strategy of invigorating the country through science and technology and the strategy of technological self-reliance, government-guided funds need to support the solution of core and key technologies and bottleneck problems, and these problems should not be limited to Shenzhen or any one region," said an insider from Shenzhen state-owned assets.

Therefore, the relaxation of reinvestment requirements has been put on the agenda. The symbolic scene was in January this year when Document No. 1 of the General Office of the State Council, the "Guiding Opinions on Promoting the High-quality Development of Government Investment Funds", pointed out that government investment funds should not be established for the purpose of investment promotion, and it encourages the cancellation of restrictions on the registration location of funds and fund managers, and encourages the reduction or cancellation of the reinvestment ratio.

Actually, Shenzhen had explored this earlier. In October 2024, the Shenzhen Municipal Party Committee Financial Committee Office released the "Action Plan for Promoting the High-quality Development of Venture Capital in Shenzhen (2024 - 2026) (Draft for Public Comments)", which for the first time mentioned: "Classify and study the reduction of the reinvestment recognition and requirements for sub-funds. For seed and angel funds in the early stage, explore the cancellation of requirements such as the reinvestment timing progress and capital scale."

"Shenzhen is exploring a Chinese-style early-stage investment path," an insider told the investment community. Relaxing the reinvestment requirement is crucial for the development of the equity investment industry. As we can see, in some cases, reinvestment is not conducive to the better development of excellent technology enterprises.

"From Shenzhen's perspective, if we want to invest in truly disruptive and innovative industries, we must break through geographical restrictions, cooperate with excellent global teams and projects, and attract global innovation resources. This is the fundamental starting point," added Li Xinjian, the general manager of Shenzhen Angel Mother Fund.

Therefore, Shenzhen took the angel mother fund as a pilot and officially took action - in principle, cancel the reinvestment requirement at the angel stage; at the same time, launch the "postponed profit-sharing" model, that is, if the sub-fund attracts the invested enterprises to develop in Shenzhen and meets the relevant standards and requirements, it will be rewarded and given profit-sharing. In this way, the original "reinvestment requirement" in advance has become the "excess reward" in the later stage, and the mandatory reinvestment has become a positive incentive.

The investment community also learned that Shenzhen is exploring and improving the "follow-on investment" system, that is, after the seed and angel investments issue the first check for start-up enterprises, local state-owned assets and market-oriented institutions will take over to provide support for subsequent rounds of the project. This exploration will also incorporate industrial empowerment and ecological construction into the assessment indicators.

It is worth mentioning that the cancellation of reinvestment will be implemented starting from the new cycle fund of Shenzhen Angel Mother Fund. However, if other LPs of the sub-fund insist on reinvestment, Shenzhen Angel Mother Fund will also set up "reinvestment under the same conditions" to prevent speculative behaviors that may arise from the implementation of the policy.

Start circular investment: Be more patient

Another milestone exploration is circular investment.

As Shenzhen Angel Mother Fund summarizes the experience of the exited sub-funds, optimizes the design of the exit path, and explores diversified exit channels, it ensures the efficient recovery of funds and their investment in new projects. It promotes the full-life cycle management of sub-funds, forms a closed loop of "raising, investing, managing, and exiting", and improves the overall operation efficiency of the fund. In terms of the duration, in principle, the duration of the sub-fund is extended from 10 years to no more than 15 years.

This is a very urgent matter.

Generally speaking, government-guided funds are established with financial allocations, and their main purpose is to leverage social capital, guide the direction of industrial investment, and promote regional economic development. However, in the traditional model, the financial investment is mostly a "one-time blood transfusion": the principal after the exit of the guiding fund needs to be returned to the finance and cannot be directly used for new funds. Each time a local government establishes a new fund, it needs to apply for a new budget. Affected by the fluctuations in fiscal revenue and expenditure, it is difficult to continue the long-term strategy.

More than one practitioner of guiding funds has reported to us that due to the tight local finances, the guiding funds they work for are recovering the invested funds to make up for the fiscal gap. "Some local governments initiate funds with a scale of tens of billions, but the first phase may only have one billion. It's hard to say when the second phase will be available," said an investor working in a state-owned mother fund in East China. They are worried that without the next round of funds, even the survival of the team will be a problem.

Another reality is that strategic emerging industries often go through a long cycle - it takes at least 6 - 10 years for a hard technology enterprise to transform its scientific and technological achievements and meet the listing requirements from its establishment. In other words, most RMB funds find it difficult to support a technology project in the long term.

To some extent, the so - called "patient capital" may need to solve the problem of capital attributes. The so - called patient capital needs to optimize the capital supply problem to a certain extent, continuously create an investment environment, make more social capital confident in the venture capital industry, and continuously obtain returns, thus forming a virtuous cycle.

Therefore, Shenzhen has taken another important step. It is understood that with the implementation of the policy and the successive repayment of funds from the previous cycle of funds, it is roughly estimated that about 7 - 8 angel funds can be established with the drive of market - oriented funds every year in the future, and finally achieve rolling investment.

The significance of this approach is not just simply reinvesting the money. It lies in the fact that Shenzhen has explored a closed loop of "financial investment - venture capital - technological innovation - industrial growth - capital return". This also opens a new chapter for government - guided funds: no longer a one - time financial support, but truly having the ability to operate continuously. This is a more long - term support for cultivating new development momentum and creating a good innovation environment.

In this way, a virtuous - cycle government - guided fund operation mechanism with the ability to continuously support innovation has emerged.

Break the involution: Shenzhen's venture capital paves a way

Quietly, the primary market has entered the era of state - owned assets.

Over the past decade or more, domestic government - guided funds have experienced a blowout development. The data report of Zero2IPO Research Center shows that as of 2025, a total of 2,164 government investment funds have been established in China, with a total target scale of about 11.08 trillion yuan and a cumulative subscribed scale of about 7.19 trillion yuan. Government - guided funds have become an important support for the Chinese venture capital market, and this has also profoundly changed the domestic venture capital ecosystem.

In this situation, Shenzhen has been thinking - how can government - guided funds better serve China's science and technology innovation cause?

As mentioned in Document No. 1 of the General Office of the State Council, government - guided funds have three main tasks: focusing on major strategies, key areas, and weak links where the market cannot fully play its role; supporting the construction of a modern industrial system; and solving the problem of market failure and attracting and driving more social capital.

The investment community often hears about a phenomenon in the industry: some state - owned institutions have fallen into a strange circle when looking at projects - they only invest in enterprises with a revenue of one billion yuan and a profit of 100 million yuan. Someone once said that such an investment logic seems to deviate from the policy goals of government - guided funds. In this regard, Shenzhen Angel Mother Fund said: "Guided funds should not compete with the private sector for profits. It is precisely those projects that have not yet generated profits or have a revenue of only a few million, have potential but are considered too risky by market - oriented funds that need the support of government - guided funds more."

"Government - guided funds should play a guiding role, not a leading one." This is the underlying logic for Shenzhen to start thinking about canceling reinvestment and circular investment - whether it is canceling reinvestment or circular investment, the hope is to let venture capital institutions return to their essence.

Of course, challenges also lie ahead. For example, after canceling reinvestment, the funds belonging to Shenzhen's finance may be invested outside, which may objectively lead to the outflow of projects or funds. In addition, such measures may not be replicable for cities with weak industries. Without the reinvestment requirement, there may be no motivation to establish a guiding fund. After implementing circular investment, how should a policy - based fund balance the pressure of losses... There are still many things to think about.

As the "reform experimental field" of China's venture capital, every innovative measure in Shenzhen plays the role of a national symbol. Recalling two years ago, Shenzhen Angel Mother Fund once told the investment community that Shenzhen's goal is to cultivate excellent enterprises for the whole country, rather than being limited to industrial competition between regions.

This is the essence of the "Shenzhen model". Just as the popular saying in the venture capital industry goes - "Shenzhen is not just Shenzhen's Shenzhen, but the whole country's Shenzhen."

This article is from the WeChat official account "Investment Community" (ID: pedaily2012), written by Zhou Jiali and Yang Wenjing, and is published by 36Kr with authorization.