Shenzhen has rolled out a raft of measures to advance the sustainable and high-quality development of venture capital (VC) investing and build the city into an international VC center, with the measures effective Thursday and valid for five years.
The city is offering a reward of 5 million yuan (US$785,500) to the management company of a newly established or relocated private equity (PE) and VC firm if it has invested a total of 400 million yuan or its equivalent in foreign currency in unlisted companies in Shenzhen within three years of its establishment.
A single reward for the management company is limited to a maximum of 20 million yuan.
Newly established or relocated management companies of private securities investment funds that manage 10 billion yuan and 20 billion yuan or its equivalent in foreign currency, will be awarded 3 million yuan and 5 million yuan, respectively.
For PE and VC firms, as well as their management companies, with operating income (including investment income) of more than 200 million yuan and a year-on-year increase of over 10%, or total profit of over 200 million yuan in the previous full fiscal year, they will be rewarded 5% of the investment income generated upon exit in the previous year, with a maximum reward of 20 million yuan for each management company.
Shenzhen supports PE and VC firms to increase investment in the city’s innovative technology companies in the seed stage or startup stage, as per the measures.
Investors of management companies who have invested in the city’s innovative technology companies in the seed or startup stage for more than two years will be rewarded 10% of the actual investment. The maximum reward for investing in a single company is 1 million yuan.
All districts as well as Dapeng New Area and Shenshan Special Cooperation Zone are encouraged to initiate the establishment and participation of angel funds and VC funds, and to explore the establishment of risk sharing and profit transfer mechanisms, according to the measures.
Meanwhile, Shenzhen will offer subsidies to PE and VC firms, as well as their management companies that purchase or rent self-use office space in the city and supports the construction of VC investing demonstration areas.
The city strives to direct social capital to invest in innovative projects in high-tech industries, strategic emerging industries and future industries, as well as to enrich the exit channels for private market investors, according to the measures.
Shenzhen will establish a PE fund dispute mediation center in line with international practices, strengthen intellectual property rights protection, improve investor education and protection, and encourage the use of legal means to resolve disputes.
Official data showed that Shenzhen ranked second in China with 4,308 registered PE firms managing 19,800 funds as of the end of 2021. The city ranked third in China, following Beijing and Shanghai, in terms of assets under management by PE firms, which totaled 2.27 trillion yuan.