Some people in the industry believe that since 2014, the next 9-10 years will be the era of VC 2.0.

The VC 2.0 era can be said to be the beginning of a new round of pattern changes in China's VC industry. At that time, China's VC industry was undergoing a profound change. Since 2014, more and more mature VC investors have been eager to leave the original investment institutions and establish new funds to start a new round of investor Entrepreneurship Based on their years of investment experience and new investment logic.

At the beginning of 2014, Zhang Zhen, a partner of IDG capital, resigned and jointly established a new fund - Gaorong capital with his colleagues Gao Xiang and Yue bin to focus on new consumption and new technology;

In the same year, Cao Yi, vice president of Sequoia Capital China fund, resigned and founded source capital to focus on new finance, industrial Internet and other tracks;

In 2015, Liu Erhai, managing director of Junlian capital, ended his 12-year career and turned to happy capital to focus on TMT and innovative consumption;

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In this context, in 2018, Lu Qinchao, former partner of Sequoia Capital China fund, and Su Zhenbo, former managing partner of sharing investment, established a professional medical fund - Danlu capital to focus on investing in innovative medical technology companies in early and growing stages.

"Danlu capital is a typical VC 2.0 fund. 70% of our funds are invested in innovative medical technology and 30% in innovative drugs. At present, we manage two RMB funds. There are 15 invested projects in phase I fund, two of which have been IPO, and it is likely that there will be a home run opportunity; eight projects have completed a new round of financing; the investment in phase II fund projects is progressing smoothly and half a year During the year, the valuation of invested enterprises has increased more than three times. Looking back on the past three years, our fund's IRR performance is relatively bright. "Lu Qinchao told Shenghui, who is the founder and executive partner of Danlu capital.

In 2021, the invested companies of Danlu capital made frequent progress. At the beginning of the year, manteia, a radiation therapy system R & D company, completed a new round of financing of nearly 100 million yuan; Then, the first domestic vitrified freezing solution and thawing solution developed by Weituo biology, an assisted reproductive technology company, was approved; Liangyihui, a digital medical company, completed round C financing of RMB 100 million; Zhishan medical, a medical device R & D company, made an innovative breakthrough in the field of noninvasive weight loss medical devices, realizing the first complete noninvasive implantation of swallowable intragastric balloon in China.

On this occasion, Shenghui talked with Lu Qinchao about the investment logic and thinking "key" of Danlu capital.

Lu Qinchao graduated from Tongji Medical University majoring in clinical medicine. In 2005, he joined Sequoia Capital China to focus on the investment of medical segments for 13 years. Before joining Sequoia, he engaged in marketing and project cooperation in the field of medical and health.

Figure | founder and executive partner of Danlu capital (source: provided by respondents)

"Return to what we do best"

In the era of VC 2.0, on the one hand, many star investors began to come out of comprehensive funds and set up their own doors, and a large number of VC's sprung up; On the other hand, VC in the 2.0 era began to focus on subdivided fields to a certain extent, and gradually moved towards the development path of industrialization and specialization.

"By analyzing the investment development process in Europe and the United States, I think it is a general trend for funds to move towards a more professional vertical investment field. After 2014, many VC's in China split out of comprehensive funds, or investors set up professional funds according to their fields of expertise." Lu Qinchao said.

After working in Sequoia Capital China for 13 years, Lu Qinchao decided to establish a professional medical fund. By chance, Su Zhenbo, who has the same clinical medicine and marketing background, decided to jointly set up a fund focusing on the field of medical and health - Danlu capital.

In 2018, a number of professional medical funds have been established in the VC Circle, and many comprehensive funds also regard the medical and health field as the next "must compete" track after the Internet. Therefore, it is particularly important for Danlu capital to find its own positioning and advantages.

"When we founded Danlu capital, we have been thinking about two issues - one is to do what we are best at, and the other is to realize differentiated competition," Lu Qinchao said with emotion.

Lu Qinchao has spent 13 years in Sequoia Capital China, and more than half of the investment targets are medical devices, including Jianfan Biology (300529), new industrial biology (300832), Yirui Technology (688301), robust medical (300888), etc; In terms of new drug research and development, it has invested in tumor immunotherapy company ARMA Biosciences (NASDAQ ARMA) and AI + small molecule pharmaceutical leader Jingtai technology.

Su Zhenbo has nearly 18 years of experience in the medical industry and once served as a manager in well-known foreign medical enterprises such as Johnson & Johnson. During the period of sharing and investing in the medical fund, he invested in medical device companies such as Beijing panshengzi (NASDAQ GTH), Guangzhou Maipu, and innovative drug companies such as Beijing tiankeya.

Based on their investment experience and expertise in the field of medical and health care, 70% of Danlu capital's investment targets are innovative medical technologies (medical devices, cross innovative technologies) and 30% are innovative drugs.

Figure | partial investment projects of Danlu capital (source: Danlu capital)

For differentiated innovation, Lu Qinchao shared that Danlu capital began to pay attention to cross innovation when it was established. Our pursuit of innovation is a combination of clinical needs and product innovation. First, focus on the technology of providing new methods for prevention, diagnosis and treatment in the fields with clinical needs and lack of effective treatment methods; Second, focus on product or model innovation. Taking Kefu medical as an example, this target is not how high the technical barrier is, but its sinking in the grass-roots market of household medical devices. This is an innovative marketing model, and the demand for household medical devices will further increase in the future.

"Innovation is not just a one-way process. Sometimes the innovative changes are created by entrepreneurs and sometimes by entrepreneurs and doctors. It is also a very valuable and differentiated project to solve basic clinical problems based on clinical needs," Lu Qinchao added.

Another investment style of Danlu capital is mainly reflected in the company in the early stage and early growth stage, and the leading investment. "We will start decisively for the projects we are interested in, and generally lead the investment."

Investment "key"

The medical and health industry is known as the "sunrise industry that will never decline". In recent years, this field is in a period of vigorous development, with huge market development space and potential.

"I think China's innovation has gone through a phased process, from 'me too' in the 1.0 era to 'me better' in the 2.0 era, and then to the 3.0 era, pursuing original innovation, including FIC, BIC, etc. foreign basic research has made faster progress, but China has developed rapidly in recent years, and industrialization based on basic research Progress is narrowing the gap with foreign countries, "Lu said.

"Now, all sectors of society are encouraging innovation and promoting the transformation and implementation of scientific and technological achievements in scientific research institutions and colleges. The whole industrial chain has a strong momentum of development from the source, the industrialization of intermediate innovation, and then to paying the bill," Lu Qinchao added.

At present, China's medical and health field is developing rapidly, innovative medical devices and innovative drugs are rising exponentially, and investment innovation has also become the highlight of investment institutions.

For Danlu capital, of course, it is no exception.

Based on its understanding of innovation, Danlu capital's research and judgment on the target company includes the following aspects:

First, value the market development potential of single product track, and focus on measuring the market space of the company's core products under research. For example, whether the market scale of the product will exceed 2 billion yuan and whether there is sufficient profit margin after it is listed in the future;

Second, after determining the product track, pay attention to the industrial status of the company; Products should have high technical barriers, and the company should be ranked in the top three in its subdivided field and lead other companies for 1-2 years. For example, in innovative drug projects, they pay more attention to the characteristics of product pipeline and the advantages of technology platform;

Third, value the team background. For example, whether there is a team of experienced scientists with deep knowledge precipitation and a team with rich operation experience; Whether it can lead the company to continue to become the leading enterprise in the industry;

Fourth, evaluate the rationality of the valuation.

In addition to doing enough research before investment, Danlu capital also provides follow-up post investment support and help for the invested company.

Lu Qinchao said that on the one hand, we give the invested company enough development space to help not make trouble; On the other hand, it will provide suggestions on internal management and development strategies, actively communicate with the invested company at key nodes, connect industrial resources, and help the invested company promote the next round of financing.

"The logo of Danlu capital is like a triangular mountain. When we make early investment, we basically accompany entrepreneurs to climb up from the foot of the mountain until they reach the peak of their career," Lu Qinchao said.