Lang Chunhui, partner of Sinovation Ventures (Photo/NBD)

Nov. 20 (NBD) -- As entrepreneurship is greatly encouraged and the number of startup projects increase constantly, how to find the right target for angel investments has become a hot issue.

Startup projects generally face capital pressure and investors should keep focusing on the same sector, covering industries both in the upstream and the downstream, Lang Chunhui, partner of Sinovation Ventures told NBD in Global Angel Investment Summit 2017 held on November 17-18th in central China's Wuhan city.

Once investors selected a certain industry, they should strive with the entrepreneurs and share the investment profit with them, added Lang.

As one of the major forms of seed round investments, angel investments bear extremely high risks. A chairman from a private equity company told NBD that 90% of the angel investments endure losses, a case which is regarded as normal by Lang. 

She further noted that it is normal for projects which are run by non-professionals to has a success rate of 10 percent, considering those which are managed by professional investors have a success rate of 30 percent.   

Wendy Kok, former CFO of Sequoia Capital China, shared the same observation during the summit, saying that over a half of the angel investments in the U.S. are losing money.

However, high-quality projects still draw capitals. According to data from Zero2IPO Research, the average size of a single early investment in the first half of 2017 reached around 7.66 million yuan (1.16 million U.S. dollars), with a year-on-year increase of 34.3 percent, despite of the decline in the number of investments and investment amount during the same period.

NBD learned from the summit that investors tend to favor industries such as artificial intelligence, consumption upgrading, and creative culture and entertainment.

Many investors believe that the next investment highland will be the TMT (Technology, Media and Telecom) industry.

Zhu Bo, a fund founder, pointed out that Chinese and U.S. investments were funneled into the mobile Internet start-ups in the past decade. But the online services make much more profits than offline ones, thus the technology such as big data, chain blocks and artificial intelligence will lead to a new wave of entrepreneurship, Zhu said.

Angel investments need to set up entrepreneurship service platforms to attract outstanding entrepreneurs, and hence a high possibility to find an excellent project, said He Ju, founder and secretary-general of Guangdong Angels Canton.

Lang Chunhui suggested that many investors are eyeing on the same sector, but they should not make any investments in the sector without fully analyzing its situation, because they will likely lose the game if other players in the sector get much stronger financial backup than they do. When it comes to analyzing the sector, an investor should find out whether any industry giant has already entered the sector and whether it has large funds, and if the answer is affirmative, the investor should quit immediately, said Lang. The earlier investors make investments in the sector, the more advantages they will enjoy, she added.

Email: zhanglingxiao@nbd.com.cn