Zhangtongshe zhangtongshe.com
Recently, Shanghai's "20 Measures" for direct financing have sparked multiple discussions in the venture capital circle. The "20 Measures" specifically focus on the financing difficulties of sci-tech enterprises in their early stages, introducing multiple breakthrough initiatives: establishing a circulation mechanism for angel investment, providing further policy support for S funds, expanding the scope of the fifth listing standard on the STAR Market, and implementing differentiated adjustments to the proportion of state-owned capital investment...
The market is accustomed to breaking down policies into a "dividend list" to calculate exactly how much each party can get, but it often overlooks the overall design logic behind these policies. Unlike previous fragmented industry support policies, these 20 measures target the bottlenecks across the entire hard tech financing chain for systematic reconstruction. Relying on pilot implementation within the direct financing pilot zone, the measures promote Shanghai’s transformation from a traditional financial agglomeration center to a specialized sci-tech financial highland.
The "Triple Failure" in Hard Tech Financing
To understand the weight of this policy, we must first recognize the long-standing market shortcomings in domestic hard tech investment and financing. Hard tech features long R&D cycles, high technical barriers, and uncertain industrialization prospects. This development pattern is inherently mismatched with the logic of traditional equity investment, which relies on short-term returns and financial statement valuations. This mismatch has led to three common challenges, which are also universally faced by the development of sci-tech finance across the country.
The first is the pricing dilemma of early-stage projects, which is stuck at the "first mile" of sci-tech development. Hard tech enterprises in the laboratory stage mostly have no revenue, profit, or mature business models. The project value is concentrated in technical barriers, R&D teams, and sector potential. Traditional financial valuation models are difficult to apply.
Market-oriented institutions lack the technical assessment capabilities in segmented fields and generally adopt a wait-and-see attitude towards early-stage projects. The state has continuously guided state-owned capital to make early-stage, small-ticket investments in hard tech. State-owned capital has become an important supporting force in early sci-tech investment. However, the existing short-term assessment and fault-tolerance supporting mechanisms are still being continuously improved. The industry has not yet formed a unified early-stage technology valuation standard, making it difficult to support state-owned capital to independently complete project assessment and take the lead in investment. Many high-quality tech startups lack fair reference valuation benchmarks, and the willingness of market funds to enter the market is weak.
The second is the discontinuity of funding during the growth stage of enterprises, making it difficult to cross the "valley of death" in the industry. When hard-tech enterprises enter the critical growth stage marked by technological breakthroughs, commercial deployment and capacity ramp-up, and have not yet achieved independent profitability, early-stage investment institutions are already facing the demand for share exit. Facing hard tech projects with continuous losses and high R&D investment, mid-to-late stage capital lacks reliable valuation basis, and the market has a strong wait-and-see sentiment, creating a break in capital continuity between early and later-stage financing. Many enterprises with outstanding technical capabilities stop right before commercialization, forming a clear "valuation gap" in the primary market.
The third is the mismatch between capital cycles and industrial cycles, resulting in insufficient supply of long-term patient capital. From technological breakthroughs and prototype iteration to industrialization and scaled profitability, hard tech generally requires a cycle of 5 to 10 years or even longer, which is extremely dependent on long-term patient capital. However, funds in China’s private market are currently short-term-oriented. Channels for long-term capital sources such as social security funds and insurance funds to access the equity investment market still need to be expanded, and the assessment mechanism of state-owned funds also needs to be adapted to long-cycle sci-tech investment. Market funds are more inclined to short-term business model innovation projects, and their support for hard tech tracks with large investments and slow returns is limited.
The "20 Measures" for direct financing launched by Shanghai this time are essentially a precise combination of punches aimed at the above-mentioned triple market failures. The purpose-built direct financing pilot zone serves as the implementation vehicle, trial-and-error sandbox and iteration platform for this systematic reform, allowing institutional innovation to be implemented from policy provisions into an operable, verifiable, and optimizable industrial ecology.
More Than Agglomeration, More About Trial and Error
In the current era of fully digitalized capital flows, Shanghai plans to build a direct financing pilot zone relying on the Shanghai Equity Investment Agglomeration Zone and high-energy sci-tech agglomeration zones such as Zhangjiang Science City and Dalinghaowan. This plan is easily mistaken for merely repackaging traditional industrial park policies.
In fact, the planning of spatial carriers has two core considerations, which are also the key levers to solve the three major financing shortcomings.
On the one hand, the high-density agglomeration of industrial resources can eliminate the information gap in early-stage investment. The valuation of hard tech projects cannot rely solely on data calculation. It requires continuous communication among the scientific research end, the industrial end, and investment institutions to form a unified value judgment. Non-standard information including technology readiness, team execution capability and track growth potential cannot be fully obtained through online due diligence, and can only be continuously accumulated through field visits and industry seminars.
Global mature sci-tech agglomeration zones such as Silicon Valley all follow this rule. Innovation elements are centrally laid out, information from all parties flows efficiently, and the speed of forming consensus on project pricing is greatly improved. Shanghai will concentrate venture capital institutions, scientific research platforms, securities firm research institutes, industrial leaders, and equity trading service institutions in the pilot zone. Dense interaction among these resources will reduce information asymmetry and build a supporting ecology for the fair pricing of early-stage projects.
On the other hand, the closed-area pilot model can reduce the trial-and-error cost of institutional innovation. Many measures in the 20 Measures belong to pioneering explorations nationwide, including the qualification certification for angel investors and cross-cycle long-term evaluation mechanisms for state-owned capital, optimization of S fund trading rules, and the construction of offshore RMB sci-tech investment channels. At present, there are no unified implementation rules nationwide. If implemented directly across the city, the policy implementation risks and execution costs will significantly increase.
Relying on the closed pilot in the pilot zone, Shanghai can implement innovative rules first, polish the operation model within the area, and verify the implementation effects. After the mechanism matures, it will be replicated and promoted to the whole city and even the whole country. While safeguarding reform risk boundaries, the model maximizes room for institutional experimentation. The pilot zone is not only a registered agglomeration place for various institutions, but also a testing ground for new transaction and investment rules in sci-tech finance.
This is also the core difference between Shanghai and venture capital agglomeration zones in other cities. Most regions rely on tax cuts and office subsidies to build favourable policy regimes, attracting institutions to settle with financial concessions. The core path for Shanghai to build a direct financing pilot zone is rule innovation and mechanism reconstruction. It builds a development highland with institutional advantages and resolves the long-standing financing bottlenecks in sci-tech finance from the root.
A New Dimension in Urban Competition
In the broader context of national urban sci-tech competition, the long-term strategic value carried by the 20 Measures is clearer. Domestic cities cultivating the sci-tech industry have gone through two generations of development paths.
In the early stage, local governments generally adopted the industrial investment promotion model, attracting mature enterprises to settle with preferential policies such as tax, land, and subsidies. The core competition was the intensity of policy concessions. This model was quick to take effect and could quickly bring incremental tax revenue and employment, but it was difficult to cultivate local native innovative enterprises.
Later, cities represented by Hefei pioneered the industrial investment banking model, where governments make direct equity investments to attract major industrial chain projects, and realized the upgrade from simple investment promotion to actively screening high-quality industrial projects. However, the core logic of both models is still to introduce already formed industrial resources.
Shanghai's launch of the 20 Measures for direct financing this time has ushered in a new stage of domestic urban sci-tech competition: compete for rule-setting power over sci-tech finance and project pricing.
The policy goal is not only to attract top investment institutions, cultivate a group of hard tech enterprises, and expand the scale of the sci-tech industry, but also to fill the existing rules gap in the domestic sci-tech finance field. In areas lacking unified national standards — including early-stage valuation benchmarks, angel investor eligibility rules, private equity share trading mechanisms, cross-border sci-tech financing pathways and future listing review standards, Shanghai will take the lead in implementing pilots, polishing operation paradigms, and forming replicable and promotable "Shanghai standards".
Industry rules are the core competitiveness of the development of the sci-tech industry. Previously, the launch of the STAR Market established the listing evaluation standards for hard tech in A-shares, and high-quality sci-tech enterprises from all over the country chose Shanghai to enter the capital market. Today, the continuous exploration of the direct financing pilot zone is expected to unify the operation rules of the entire chain of domestic early-stage equity investment, share circulation, and long-term capital investment, making Shanghai a core city for capital pricing of domestic hard tech projects, industry rule formulation, and sci-tech ecology cultivation.
Shanghai has a solid industrial foundation to implement this top-level reform. Equity fundraising volume has risen more than 40% year-on-year for two consecutive years, as of June 2026, and the investment scale in the sci-tech field has continuously ranked first in the country. The QFLP pilot has cumulatively landed 108 institutions, leveraging 56 billion yuan of domestic investment, and the "50+100+1,000" hundred million RMB sci-tech fund matrix has taken shape and shown results. Benefiting from its cross-border capital channels as an international financial hub, world-class research resources and industrial cluster strengths, Shanghai is one of the few cities in China that can completely run through the entire chain of sci-tech direct financing and has cross-border opening capabilities.
The 20 Measures for direct financing are not a short-term phased policy dividend, but a systematic reform: sci-tech financial services are shifting from fragmented point-by-point support to the construction of a complete institutional system; the development model is shifting from simply agglomerating industrial capital to taking the lead in the reconstruction of industry rules.
Once the full system covering project pricing, funding continuity, long-term capital support and compliant equity circulation is fully operational, Shanghai will harvest not only a nationally leading sci-tech finance industrial cluster, but also master the rule-making, project pricing, and ecology leadership of the next generation of domestic sci-tech finance system.
With the surging vitality of institutional innovation and the growth of hard tech innovation, a brand-new landscape for Shanghai's sci-tech finance has officially unfolded.
Text by Shiwu | Edited by Yida