Photo/Shetuwang

Mar. 22 (NBD) -- People from entertainment funds seem to be the last person limited partners (LPs) want to see at present, Muzi (pseudonym) who is working at an entertainment fund said bitterly. 

This, though hard to believe, mirrors the current plight of the entertainment fund industry. 

90 percent of entertainment funds to vanish in 2-3 years

"We are running out of money," one investor of a Shanghai-based cultural industry fund told Pedaily, a platform dedicated to providing information related to the venture capital (VC) and private equity (PE) industry. "We are now holding talks with the local government guidance fund for fresh capital injection, but only 10 percent of our goal has been promised. We are trying to reach out to more LPs." 

Muzi's company is also engaged in finding LPs for its second-phase entertainment fund. "LPs are becoming prudent as China is increasingly tightening the regulation over the film and TV industry," Muzi noted. 

Traditionally, every March is a busy season for LPs to look for appropriate projects. But one partner of a Beijing-based entertainment fund claimed he/she has a lot of free time these days. 

A large number of funds failed to get funding last year, with entertainment funds bearing the brunt of the chill, expected to encounter a shortage of capital soon. Around 90 percent of entertainment funds will collapse this year, one partner of a pan-entertainment institution predicted. 

This is a completely different picture from the past few years when entertainment funds mushroomed across China, largely driven by the rocketing growth of the movie market between 2010 and 2016.

At the time, lured by the tempting prospect of the movie industry, fund firms outside the film and TV realm began to invest in equities or projects of film and TV companies. 

Now, entertainment companies are also in hot water. Ni Zhengdong, founder and chairman of Zero2IPO Group, said many entertainment companies he knows didn't see any influx of money in the year. 

Many entertainment funds are currently taking a wait-and-see attitude. "We have been on the lookout for projects worth to invest, but little or even no action was taken," an investment manager with a culture fund said to Pedaily. 

Focuses of investment change

Hardships in the entertainment industry propel many VC and PE companies to shift focuses of investment. Consumption and technology, among other areas, are emerging as new favorites of some top players. 

"In today's world, technology matters the most. It is of the greatest importance in all industries, especially application areas," said Li Ruigang, chief executive officer of CMC Inc. 

Four projects invested by CMC Capital - online youth entertainment platform Bilibili, video streaming site iQiyi, LAIX Inc, developer of English learning app Liulishuo, and content provider Qutoutiao - all landed on the capital market last year. They are not pure entertainment projects, but all related to technologies. 

Just like CMC Inc., many other investment institutions are turning eyes to areas beyond entertainment.

Some VC and PE firms previously centering on the entertainment business are associating themselves with more sectors like consumption in the publicity. 

"It is a natural for entertainment funds to cast eyes to consumption, and our second-phase fund is not called entertainment fund, but new consumption fund," Zheng Peimin, chairman of Shanghai Realize Investment Consulting Co., Ltd.

In addition to consumption, education and tourism industries hold appeal to those investors.

Email: lansuying@nbd.com.cn