Dialogue With Aurora Borealis Deng Feng: The Tech Investment Track Is Wide Enough. VC Needs To Be Patient Capital.

On the last working day of September, the network security mountain and stone network branch listed on Ke Chuang Chuang. According to the closing price in October 9th, the market value of the rockfall branch is close to 8 billion yuan.

After 13 years from its establishment to its listing, the mountain and stone branch has an institutional investor who has been accompanied by more than 12 years.

The mountain stone network is the project of the first phase fund of the northern light industry venture capital. It is also the third listed company of the northern light innovation venture after the first set up of science and technology board by Anji technology and Wald.

Deng Feng, founder and managing director of Aurora ventures, met with Luo Dongping, founder and chairman of the Department of stone networking, in the 90s of last century. Deng Feng is the founder of NetScreen, and Luo Dongping, as a member of the core founding team, is involved in NetScreen's entrepreneurship and growth process.

"They are comrades in the NetScreen era and friends of my life." In 2007, Deng Feng insisted on the investment decision of the mountain net department in the Investment Committee of the northern lights and became the first external investment organization of the Department.

By 2011, when the stone company carried out the C round of $27 million, the valuation of the company had increased five times compared with that of Aurora. Today, the initial $15 million of the northern light venture capital has been repaid by several times the cash withdrawal from the old stock. After the listing, the company still holds a Book Return of over 1 billion 760 million yuan.

The founding team of the mountain and stone branch has not gone smoothly after returning home to serve its local customers. At the early stage of its establishment, they still managed to run enterprises and customers with Silicon Valley culture, and also experienced the barbarous times of bad money driving out good money in the field of domestic network security.

Taking part in and witnessing the growth of more than ten years, Deng Feng's joy is beyond words. He said, "we will not sell during the period of lifting the ban. This kind of enterprise has a strong staying power. Listing is only one of the milestones of the company."

Investing in NetScreen business

The stone mesh section was founded in 2006. Five former NetScreen engineers came back to China from Silicon Valley, and plunged into the field of network security.

When Luo Dongping first received Tsinghua alumni, he said that the success of NetScreen has given Chinese engineers strong psychological support. "I always thought that following Deng Feng's entrepreneurial experience gave us a great spiritual wealth."

Like many NetScreen founding members, Luo Dongping graduated from Tsinghua University. He went to school in 1983 and completed undergraduate and postgraduate studies in Tsinghua. After a short time, he went to University of California at San Diego to pursue his master's degree in electronic engineering.

NetScreen is the benchmarking existence of Chinese engineers in Silicon Valley. Chen Huailin, founder of the "bend review", joined NetScreen at the end of 2000. He wrote in the past of NetScreen written by micro-blog, "NetScreen is the first time Chinese engineers have charged in the mainstream system equipment market in the form of collectives in Silicon Valley."

NetScreen was founded in four years, that is, the NASDAQ capital market. It was bought by Juniper at the price of 4 billion 200 million US dollars in 2004. This is equivalent to the total value of the three major portals of sina, NetEase and Sohu over the same period. At that time, Alibaba has just been invested by four companies such as Softbank, Baidu is about to introduce Google's strategic investment, and the listing of Tencent Hong Kong stock exchange is on the verge of battle.

Starting from 2005, NetScreen's core team members have opened up new career paths: Neil Zucker (Nir Zuk) and Mao Yuming founded Palo Alto Networks, Liu Changming led the creation of Zuk Technology (Aerohive Networks), Tong Jian and Luo Dong equal return to the establishment of mountain Shi Wangke (Hillstone).

In the Department of NetScreen venture, mountain stone, Ai Wei, Shape Security and ServiceWall have all invested in northern light.

Deng Feng did not deny that there was a perceptual factor in the investment in the mountain network department. He knew clearly that the mountain team at that time needed time to understand China's local market and made psychological preparations for "paying tuition fees" with the team.

From the perspective of financial data, the income of the company in 2018 reached 566 million yuan, with a net profit of 72 million 180 thousand yuan and a market value of more than 8 billion yuan on the day of listing. Aurora Borealis didn't quit quickly after the end of the ban period. In Deng Feng's view, network security is the evergreen industry with a promising future. Listing is only one of the important nodes on the development of the mountain network.

In the VC industry, it is a minority behavior to hold long-term project shares after the lock up period.

At the end of 2015, Zhongke Chuang was listed on the Shenzhen Stock Exchange gem and the issue price was 23.27 yuan. Three years later, the stock price of Zhongke Chuang has risen 59% to 36.93 yuan, while the northern lights have not yet been reduced substantially, and Deng Feng is also on the board of directors.

Technological believers

The 2005 is an important year for China's VC industry, including Sequoia China, blue Chi ventures and China. In this year, Accel Partner and IDG capital (IDG VC) Co operated with China's growth fund.

It was also in this year that Deng Feng returned to Beijing from Silicon Valley. His identity changed from engineer to venture capitalist. The first office of the company landed on Tsinghua Science Park.

Prior to the establishment of the northern lights, Deng Feng received several invitations from the Silicon Valley VC organization to establish a China fund with them. Deng Feng chose a more difficult way to invest in independent fund brands. This fund was supported by top US institutional investors such as LP Greylock Partners, NEA and Princeton University foundation.

NetScreen has been supported by Sequoia Capital, Spectrum Equity, Capital Guardian Funds, GE Capital and other old institutions before listing. Deng Feng naturally understands the value of venture capital to entrepreneurs and entrepreneurial environment. After the establishment of the aurora venture, it will also focus on support for technology start-ups.

Combing the investment portfolio of northern light venture capital, we can find that the investment organization with technology and early fame invested only one Hanting Hotels consumer item in the first phase of the fund. The two phase of the investment projects of the fund only include cool and Lily nets. Today, from the number of investment cases, enterprise services still occupy the largest proportion in investment portfolios.

The mountain stone network is a typical innovative high-tech company. Since its inception, it has been focusing on the innovation of cutting-edge technology in the field of network security. Luo Dongping described northern lights and Deng Feng: "we are believers in technology, and Aurora Borealis has been with us. VC supports enterprises for five years and seven years, and they have supported us for 12 years.

Looking back over the past ten years, the market scale of China's enterprise service has been increasing. The development of business environment also gives good products the chance to stand out.

In such a market environment, based on the three major business elements of the market, the founding team and the innovation barrier, the theory of "one market, three products and nine technologies" is also refined in the field of technology services.

"A market is a kind of customer, good service, they need three products, behind it will involve nine technologies to support. Many entrepreneurs are opposed to the idea that their technology is strong enough to make multiple products and services to customers in different fields. Deng Feng said.

Patient capital

The stone net section is a project of the first phase of the northern light capital venture fund. It is also one of the few outstanding projects in the same period. The fund was set up in October 2005 with a scale of 122 million US dollars, including Hanting Hotels, exhibition technology, red children, mountain stone technology, and so on.

NetScreen took four years from establishment to listing. Deng Feng knows that China's network security market is still in the early stage of development, and it will take more time for the company to visit the capital market.

Deng Feng thought it might take six years and eventually spent 12 full years. In 2015, the mountain stone network listed on the Nasdaq, and decided to return to the domestic capital market after the launch of the strategic emerging board. After several years of expectation, the company listed on the science and innovation board and completed another milestone.

Summing up investment in the mountain and stone division, Deng Feng said: "investment in science and technology requires patient capital. The runway is wide enough and long enough, so long as you keep your breath, you will get a good return.

In the past 15 years, there has been no change in the position of "technology and early" in northern light. Today, they are still focused on early investment. "Today's investment projects may break out in five years. Wait for big waves to invest again? Too late, sorry. "

According to past investment data, nearly 80% of the project in northern aurora is A and previously, it was the earliest institutional investor in the projects of Shan Shi Wang, APUS, Zhongke Chuang Da, Shi Shi medicine, Anji microelectronics and Hongshan science and technology.

The capital of the aurora borealis is sticking to its long term capital, and its LP is funded by long-term institutional investors, including university endowment funds, pension funds and foundations.

The US dollar LP can accept the fund term of 14 years or even longer, which allows the GP team to spend more time with the growth of the enterprise. For LP, the GP team does not charge management fees during the extended period of the fund, and can get higher investment returns at the fixed capital cost.

The unique feature of aurora is Deng Feng and his team's pursuit of financial rewards, such as Deng Feng's support for the future science award with his personal identity, his support for West Lake University, and the investment in the mega innovation project to the alma mater Tsinghua University. The northern light venture team launched VC/PE Trek in 2007, and from seven top world business schools each year selects 50 top candidates who wish to join the VC/PE industry to talk with Chinese investment institutions, and also supports the Tsinghua public welfare entrepreneurship competition from 2009.

"The more money you make, the better? Not necessarily. Early investment is a timely relief, not icing on the cake, can bring more spiritual pleasure. Deng Feng said he was more willing to stay alongside the best entrepreneurs before the big waves came.