China Everbright Limited (CEL), together with its core strategic technology platform Terminus Group, recently announced the joint launch of 'CEL AI New Economy Fund', aiming to raise RMB 10 billion and operate in both RMB and USD. As of now, RMB 7 billion has been collected.
Victor Ai, the head of China Everbright New Economy Fund, the Founder and the CEO of Terminus Group, believes that the industry opportunities are currently shifting from traditional economies to what we know as 'smart economies'. The key to making good investments in new smart economies lies in identifying the opportunities that new economies bring and being able to visualize the future advantages of the innovative solutions. This indeed requires the investors to step back and look at the emerging industries from a broader perspective, with a whole picture in mind. The aforementioned kind of approach is crucial to understand the secondary industries and their related sectors, and as a result – accurately estimate the valuation to the potential investment targets.
Riding the wave of smart economy investments
What is the reason behind starting the CEL AI New Economy Fund at this point in time? Victor believes that the rise of the smart economy will bring investment opportunities as good as those brought to us by the new technological revolution, if not better. The new technology giants and industry leaders are bound to emerge. It is a sea of the new investment possibilities that motivates the team to get involved with no hesitation.
"The smart economy is another technological revolution, and it is just around the corner." Victor emphasized. "The last technological revolution was dominated by the Internet, giving rise to Internet giants such as Baidu, Alibaba and Tencent. We have reasons to believe that the rise of smart economies will reshape the entire business environments and industrial landscape the way previous Internet revolution did."
Victor further pointed out that with AlphaGo's victory over Lee Sedol, 2016 was regarded as the first year of artificial intelligence. He believes that in five years, about 30% of the top 20 technology companies in China by market value will emerge from the new smart economy sector.
'These companies are different from the previous generation of Internet companies that mainly benefited from China's huge market and demographics. The new generation of tech companies will reach their full economic potential by going global.' Victor commented.
It was a huge leap forward and another iteration of the China Everbright New Economy Fund originally established in 2016, and could be described as its 2.0 version. Victor disclosed that the original China Everbright New Economy Fund had invested about 30 billion RMB in more than 70 startups in the new economy sector up to date, many of which have been either listed or have received a new round of financing. The portfolio companies include a number of familiar names such as SenseTime, 4Paradigm, iQIYI, NetEase Cloud Music, Meituan Dianping, Miss Fresh, NIO, XPENG Motors, JD Logistics, Fourth Paradigm, iQiyi, NetEase Cloud Music, China UnionPay Merchant Services, and so forth.
As investment dividends migrate from the Internet and mobile Internet sectors to the new smart economy, the fund will also shift its focus to the implementation and commercial application of technologies, and pay more attention to investing in crucial technologies remaining the core foundation of the concept of AI CITY.
According to Victor, as early as the beginning stage of the smart economy, his team already got involved in a number of related tech projects such as those of SenseTime and QIANXIN, and secured its intellectual property against future competition. As the technology matures, the new smart economy will see a surge in the number of developed tech applications and solutions. In this next phase of the enormous growth of the entirely new industry, 'CEL AI New Economy Fund' is destined to play a significant role.
It is worth mentioning that 'CEL AI New Economy Fund' purposely chooses to operate in both RMB and USD. Victor explained: 'That solution makes the fund more flexible. We plan to set the RMB to USD ratio to 1:1. The part of the funds kept in USD will prove useful for overseas mergers and acquisitions, and for the US-listed companies that decide to have secondary listings in HKSE or Mainland China. At present, in order to further expand their business, some overseas companies that have already earned a good reputation and have established their positions at the Chinese markets, are trying to seek cooperation with the lead domestic companies in their respective sectors, either by mergers, acquisitions, or joint ventures.'
The trillion USD AI City market
How to seize the right investment opportunities among variety of smart economy choices? Victor believes that the key to making good investments in the new smart economy lies in identifying the strengths and potential impacts that particular technologies can make', which requires investors to have a deep understanding of the overall scope of the future tech ecosystem. The aforementioned kind of approach is crucial to understanding the secondary industries and their related sectors, and as a result – accurately estimate the valuation to the potential investment targets.
It is the investment principle of exploring the depth of the AI plus industry ecosystem and the concept of investing in promising future industries that give the 'CEL AI New Economy Fund' the invaluable insights. Take Terminus Group as an example - the incubation of this tech company in the field of AIoT (Artificial Intelligence of Things) enables China Everbright New Economy Fund to further understand the Smart City segment in terms of its technologies, opportunities, market players, dependent industries, products, to name just a few factors. With proper financing and support of the capital, the fund is finally able to focus on the AI CITY concept and explore the opportunities that the AI plus and related industries can bring along.
Victor added: 'CEL AI New Economy Fund is devoted to the AI CITY sector which is driven by AIoT technologies, and keeps a close eye on the software, hardware, Internet of Things, autonomous driving, robotics and other sub-sectors that are essential to the construction of the AI CITY.' It is said that the previous investments made in the sector of AI City were mainly about information, communication, and smart government systems. However, by experiencing the rapid development of IoT and AI technologies, the cost of information collection and generation has significantly decreased. The increase of cloud storage, the low-latency 5G, and the high-capacity transmission technologies have all empowered the construction of the AI CITY and the application of innovative solutions the concept encapsulates. As time passes, more and more solutions solving the emerging problems of urban life will be implemented, and therefore a huge potential in the field will be further explored.
Victor emphasized that the new fund will treat the brick-and-mortar cities as the development platforms and systematically review the interdependence of various businesses and possible service implementations to find the new investment opportunities, hoping to build the ecosystem for the new smart economy and create a trillion-worth market across the smart industry.
Victor also mentioned 'car manufacturers' as an analogy. If the investment made in the sector of the AI CITY could be compared to ‘car manufacturing’, what the team needs to do is to act like 'car manufacturers', which means managing and exploring multiple branches of the industry's industrial chain. The presented approach would help the teams find the best technologies, the best solutions, and projects that can significantly improve the operational efficiency of given solutions, and therefore revolutionize and redefine what we know as ‘traditional solutions' today.
For instance, the software layer is absolutely necessary for the functioning of each and every implementation of the AI CITY solutions, and therefore the team would seek development opportunities in the architecture of the software platform, or, since different perception systems are essential to acquiring and receiving massive amounts of information, the team would also implement the IoT solutions because of facilitations they bring. Just like the 'car manufacturer' standing at the top of the entire ecosystem, Terminus Group's teams will hold advantages in spotting good tech companies in the sector, integrating the solutions into one holistic, multi-purpose digital platform, and finally – moving from the stage of the single product into the phase of the AI CITY.
In April this year, the CEL AI Industrial Base, the fund's first AI CITY project, started construction in China's southwest city of Chongqing. Equipped with AI CITY as the core platform, solutions for more than 30 smart products' implementations such as smart parking, unmanned robots, smart utility tunnels, smart offices, and smart waste management will be implemented there. Victor Ai has also recently disclosed, AI CITY is currently riding the wave of ever-growing investments in the digital infrastructure.
The first-mover's advantage to lead the industry
Victor believes that the unique advantage of the CEL AI New Economy Fund lies in its dual role as both the participant of the industry and the investor alike. As a deeply involved participant in the emerging industry, Victor founded Terminus Group in 2015 and created the entire vision of the company's development strategy, making the AIoT its main area of expertise. So far, Terminus Group has become the unicorn in the AIoT sector and has led the development of numerous smart city projects across Mainland China, such as those in Chongqing and Shenyang. In July this year, the Expo 2020 Dubai announced Terminus Group as its Premier Partner. This is the latest tech-focused official Premier Partner chosen by the Expo along with Siemens, Cisco, Accenture, and SAP.
From the investor's point of view, the company's team not only provides funding, financial support, and professional financial management advice but also analyses the business models and identifies the market trends for other participants of the market. Moreover, the fund makes it finally possible for many smart economy companies to actually establish valuable connections with local government authorities along the process of expanding its influence on the domestic market.
Due to its extended participation and engagement in the industry, CEL AI New Economy Fund has worked out considerable advantages in both fundraising and investments, and will use its first-mover's advantageous position to move the industry forward.
As per Victor's words: 'Interestingly enough, our AI CITY strategy happens to share the same foundations with the new infrastructure plans that have been gradually developed and introduced by the local authorities in recent years. As a result of that, it became even easier for us to receive support from the government planners in terms of both industry planning and financing. Many decision-makers believe that Terminus Group has what it takes to boost local economies, facilitate the construction of new smart infrastructure in their cities, and guide them on how to further participate in the smart economy. Meanwhile, given what we have achieved in terms of both getting involved in the entire industry and successes in the financial investment sector, more and more companies tend to rely on our team as a strategic investor, and are willing to offer us favourable conditions translated into overall volume of the investments, timeframes, and general terms.'
Being deeply involved in the industry also further contributes to the team’s better understanding of the field and growing confidence in the decisions made.
According to Victor Ai, in the Internet industry, hardware companies had come first, and the giant software platforms helping extend the traditional industries soon followed, take Amazon and Alibaba as an example. Following these trends, the smart economy is also expected to grow exponentially, along with new digital platforms defining the industry standards, all driven by AI, IoT, and 5G, not to mention multiple applications built on the top of this entirely new ecosystem.
The reason why the mass adaptation of smart technology firstly appeared in the information sector is, that unlike any other traditional sectors, the information circulation on the Internet is the quickest to achieve full automatization.' - Victor concluded.
He believes, that given the current pace at which the improvements in the field of technology, there are many sectors of the economy that are yet to be revolutionized in the nearest future. The great examples are healthcare, retail, and urban services. There are also many unicorns predicted to emerge in the field rather sooner than later.
'Our fund hopes to ride this wave, make good investments, and incubate several companies exceeding multi-billion USD valuation. Before the day arrives, we will be strategically and financially prepared, and hopefully, a step ahead of our competition.'