(Yicai Global) April 7 -- China’s most popular business magazine, CBNweekly, has released its annual rankings of the best Chinese venture capital firms. The 10 top-rated companies are GSR Ventures, Sequoia Capital China, Matrix Partners China, Tencent, Morningside Venture Capital, Bertelsmann Asia Investments, ZhenFund, K2VC, Redpoint Ventures and Qiming Venture Partners.

The entire list and an in-depth feature will be published in the 13th issue (April 10), as well as on the CBNweekly website (www.cbnweek.com) and CBN mobile apps.

The most difficult part of ranking venture capital firms is to establish the criteria of success for these companies. During a public debate held by the Wall Street Journal last September, Scott Kupor, partner at one of the top-tier VC firms in Silicon Valley --- a16z -- argued that cash actually earned and realizable equity distributed to limited partners are the only effective and non-manipulatable criteria to judge whether a VC business is successful or not. However, what Kupor proposed only works in theory, as no third-party companies have access to these data.

China’s venture capital market is less transparent, and it is simply unrealistic to expect Chinese VC firms to share their financials. CBNweekly assessed the capacity and value of individual VC companies using a new measure -- Unicorn Rank. It examines the candidates’ ability to identify unicorns, how powerful their business connections are, and the influence of companies they invest in.

The magazine distributed a questionnaire to the best venture funds in China in recent months, and we also obtained basic data about funding received by unicorns, lead and secondary investors, and valuations and user data of unicorns, from third-party data service providers Itjuzi, Jiguang Big Data and TalkingData.

Unicorn typically refers to tech startups less than 10 years’ old that are valued at over USD1 billion. We broadened the definition to include young tech firms valued above USD143.5 million (CNY1 billion). A total of 50 Chinese unicorns that had completed series-C financing round as of February were included in the ranking, and they are divided into three classes by valuation -- CNY1-5 billion, CNY5-10 billion and over CNY10 billion -- to glean insights into the investors’ ability to identify unicorns.

The ability to unearth unicorns is the most important dimension of Unicorn Rank. In this respect, we assessed the VC firms based on series A and series B investments, with the greatest weighting given to those acting as lead investors in unicorns in series A financing. Last year, GSR Ventures demonstrated the strongest ability to identify unicorns, investing in bike-sharing service Ofo, food-delivery service Ele.me, ride-hailing app DiDi Chuxing and shopping website Xiaohongshu.com, ranking it indisputably as the best VC firm of the year.

Business connections, or rather ‘investment followers,’ are another important aspect of Unicorn Rank. It refers to the number and quality of venture capital investments during series C and later funding rounds. Unlike the notion of ‘follower’ in social media, VC followers are an effective criterion and are ranked by actual actions and capital contributions. In this respect, Sequoia Capital China, Matrix Partners China and Tencent outperformed other candidates. Startups invested by them respectively attracted 31, 26 and 29 VC funds (or companies) during later investment rounds.

The last important dimension of Unicorn Rank concerns the influence of business ventures invested in by the candidates, which is measured based on the unicorns’ user base, coverage, growth rate, and user activity. Naturally, greater weighting is assigned to unicorns that have strong influence on the everyday lives of office workers. Bike-sharing service providers Mobike and Ofo made a dramatic difference in the lives of office workers within a very short space of time. As the only series-A investor in Mobike, JOY Capital made it to the annual ranking list less than two years after its inception. For the same reason, Tencent has been selected as one of the top-10 most successful investment companies, in recognition of its insightful understanding of the everyday needs of Chinese people. It is unique in that Tencent is not a VC fund as such, but its venture investments were very successful last year. 

Invested companies’ influence in the corporate world is established as a key criterion. As a result, many B2B unicorns and some less creative businesses were not considered, and this may affect the final rankings of many fund companies.

Unlike their counterparts in other parts of the world, Chinese unicorns have developed their own product or business models based on local market demand, changing people’s perception of them as mere copycats of successful Silicon Valley firms. Chinese unicorns such as Meituan-Dianping and Zhihu started out first by copying Silicon Valley companies, but later found their unique development paths. Mobike, Ofo and Douyu TV created their own product and business models that have never been seen in Silicon Valley.

“The Chinese market abounds with hot money, but what is really valuable is money that is smartly invested. As a media company oriented toward the corporate world, we don’t rank VC companies based entirely on earnings covering all businesses. Our only objective is to identify the smartest venture capitalists, who invested in startups that wield considerable influence in the corporate world. Most great companies actually operate businesses closely connected with the everyday lives of office workers,” noted Dong Xiaochang, compiler of the rankings and deputy editor-in-chief of CBNweekly.

[Both CBNweekly and Yicai Global are owned by Yicai Media Group, the largest financial news group in China. Over the past 13 years, Yicai Media Group has dominated Chinese financial media through radio, television, newspaper, magazine, new media, information services, business research and other mediums. It is the first choice of partner for the world's top financial forums and international economic organizations.]

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