How to understand and evaluate the assets of the enterprise service market (invested companies)?
Editor’s note: This article is from WeChat public account “Titanium Capital” (ID: tmtcapital), author of the Titanium Capital Institute.
Foreword
The views and phased “conclusions” of this sharing may not be completely correct, as more time and cases are needed to continually iterate, but it is indeed an in-depth participation and tracking of assets from the front line. And the result of independent thinking, I believe that it has certain reference value to investors. At the same time, we advocate “starting from the end” and “going to the source”, analyzing assets from the results and summarizing the rules in continuous iteration, which may be crucial for future investment.
The Balanced Scorecard is a performance management system that is reflected in the path from strategic management to strategic execution. The four types of indicators of concern are finance, customers, internal operations, personal learning and growth. Compared with OKR, KPI, and the PBC system that IBM and Huawei have long used, there is no essential difference. It is a performance tool from strategy to landing. However, the Balanced Scorecard will set some questions for each topic, then use the structured system to show the current position, how to do better in the future, and finally use the scoring method to guide the future development direction, and the current assessment and Gradually clear the direction of the future, and then set the middle path. Titanium Capital Management Partner Li Wei, in the 29th issue of Titanium Capital’s new-generation enterprise-level technology investor investment research institute, applied the “balanced scorecard” model to explain how to understand and evaluate the assets of the enterprise service market (invested enterprises).
Li Wei is currently a managing partner of Titanium Capital, responsible for the early and mid-term corporate finance business, and concurrently serves as the managing director of the enterprise-level SaaS and Industrial Internet segments. As a former IBM senior trainer and professional corporate coach, he has 19 years of experience in private SMEs, domestic listed companies, Fortune 500 companies, and startups. He has served as a consultant for Peking University and Oracle Public Utilities. Industry Partner Marketing Director, IBM Asset Management Senior Business Manager, IBM Consulting Services Industry Director, IBM Sales Learning Senior Trainer, and has two entrepreneurial experiences spanning consulting, marketing, training and capital operations. Li Wei has provided training and consulting services to many well-known enterprises such as Huawei, Baidu, Shell, Aim, Zhenghe Island, Tianrongxin, Osram, Capital Airport, China Coal Group and Aerospace Group. He has rich experience in the venture capital industry and consulting field. Experience and independent thinking, building independent understanding and judgment with a solid, systematic foundation.
Enterprise Service Market Assets
Titanium Capital’s main business is FA (investment and financing services) in the fields of technology and corporate services. At present, Titanium Capital is full of confidence in the enterprise service market. It believes that the value and space of the enterprise service market is still far from being excavated. The next decade should be the golden decade in this field. From 2015 to 2019, every two years as a unit, we have made great progress, from the “small lotus to the sharp point” to the initial bloom, in the future may usher in a booming and large-scale Bloom – further judged that several hundred billion companies may be born in the next decade.
Why do you say that? The following analysis is based on the perspective of assets with the characteristics of a billion-dollar enterprise.
Enterprise service market assets can be divided into two categories: one is SaaS and application software, such as HR management system, fiscal management system, general-purpose application software, SaaS-based ERP, PaaS platform, etc.; It is the industry Internet and 2B operations, because its core competitiveness may not lie in the high barriers of software, but in the high efficiency of operations. Of course, the two types are constantly merging.
First, the founder’s tonality
The founder’s tonality fundamentally determines whether an asset has enough room for growth, just like a seed determines what a growing plant is. A shrub seed can never grow into a tree. Big tree.
In the group of founders of SaaS and application software, we are most concerned about the “critical inheritance.” They are from the old times, and they can overturn a series of shortcomings and shortcomings of the old times and firmly move toward a new era. The founders of American SaaS companies are mostly from the big manufacturers of traditional information vendors, such as Oracle, IBM, SAP, and HP. Through years of precipitation, these people know the needs of the industry, and at the same time can overthrow the former barriers, establish a new cognitive system, new business models, new market expansion methods, and thus become more effective. Titanium capital is mostly IBM’s genes, and it is also very concerned about colleagues in the IBM background (or OIE and people from traditional manufacturers) can better embrace the new era, in fact, these assets are very good, and some A very representative core member of the enterprise comes from a traditional big factory, which represents a critical inheritance.
The assets of the operational category or the founder of the assets of the industrial Internet are “local” and later came to the fore. How do you understand the “place”? Can be understood by comparing with “Tianpai”:
One, core strategy. Someone often said that the core competitiveness of “Tianpai” is financing, which is a fact in a certain sense, but it is by no means a derogatory description. If a company can continue to rely on external capital cash flow to supplement development, it will be more competitive than companies that rely on operating cash flow to grow. If you can continue to bring financing to the company, it is indeed healthy. The core strategy of “land” is to make money, and the self is constantly upgrading and becoming more comprehensive. However, the founder agrees that the enterprise must make money. If it cannot effectively obtain high profits, it is difficult to stick to it.
Second, execution mode. “Tianpai” is PlanA, PlanA, PlanA, which is a perseverance, courage, and rushing around in one direction, but there may be a roundabout in the middle, such as reaching A through B or C, or passing D and E. A is reached, but because there is a lot of money to supplement, you can continue to follow the existing direction. Therefore, such assets are often favored by deep dollar funds. As long as they have an infinitely broad future, they will continue to invest heavily and not pay attention to short-term and medium-term returns. “Place” is planA, planB, there will be an alternative plan PlanZ, that is, when the market changes, it may change a path, so it may be CRM at the beginning, and later become the supply chain enterprise of the industry, that is, A state of water and grass, where the water and grass are rich, where can survive in a longer period of time, where it is deposited, but later will also create a higher investment space, and the pattern will change in the process of making money continuously. .
Three, survival mode. “Tianpai” can live for a long time because it has the supplement of capital cash flow, so it may be in a loss for a long time, but it can be expected in the future. “District” may have a relatively stable life to finance. Financing only brings more room for growth and higher development efficiency. It is not a cornerstone for living or growing. Titanium capital has a percentage of projects. Seventy or eighty are of this type.
The method of “Tianpai” “land” is relatively simple. “Tianpai” gains certain market recognition through a large number of PRs, and holds high “high light” to generate a part of the premium through the halo effect. The market is expensive, and the annual income may range from 10% to 20% or even higher. For the “land”, the market cost is relatively lower than the annual income.
Now the “place” may usher in an inflection point, surpassing the “Tianpai” at a certain point in time: First, the difficulty of financing gradually increases with the arrival of capital winter; secondly, the ToB market is in a broad sense. In the slow market, there is no doubt that some assets are developing at a high speed, and even reach the rate of ToC, but the overall market is slow compared to ToC. Large, efficient, and sustainable financing requires rapid growth. This is a huge gap. Whether assets can meet expectations or even exceed expectations is a core proposition; again,”District” may be in the mind of profit, cash flow, or the existence of “skin” and “fat”, and the ability to survive relatively “winter” is stronger; finally, the comparison of Chinese and American assets will find that Whether the market is beautiful, the competition, and the track are very different. This difference will make the “Tianpai” completely copy the US market and there will be great deficiencies. Moreover, with the tension between China and the United States, the landing of “Tianpai”, such as the IPO fully recognized by overseas capital markets, and even the performance of the secondary market after IPO, may face more and more challenges. As Mike Stanley chief US equity strategist Mike Wilson said, the failure of WeWork’s initial public offering marks the end of an era. Investors have shown that they are no longer willing to pay for over-investment. Prior to this, the US stock market has been paying impressive valuations for IPOs of “Tianpai” assets that have not achieved profitability.
Especially in the “land” business class assets, may come later. Indeed, the better “local” operational assets may be “mud legs”, but most of them are “old guns” that have been in the circle for dozens or twenty years, paying close attention to robust cash flow. In the face of better market opportunities, we are brave in innovation and bravely subverting, representing a very competitive class of assets.
Second, development trend
The development of SaaS in China has been quite anxious in these years. The result-oriented inspection of finance and customer situation often finds that it is not as healthy as it is supposed to be, so many investors will be discouraged. From the perspective of investors, the key is whether it can change and when it will happen. This is a trend issue.
For example, the most difficult thing about SaaS is to get customers. Once you get a customer, you need to keep customers, which are software revenue, subscription fees, etc., but their income is not enough to support higher growth. And space. A better “transmutation” path is because of the “application cornerstone”, which can be generated by software-like income extensions to generate B2B-like transaction income, which is better than direct cut B2B; with transaction attributes, All aspects of the company are well-known, and it is entirely possible to move toward financial income. The income attributes of each category are improving. It is a change from river to river and from the river to the sea. It is a healthy performance.
This may be a relatively typical path of transformation. We have seen that many assets have gradually realized this “healthy transformation” in the last two or three years, and enterprises have continued to enter a rapid growth period, but this path is not necessarily the only one. . For example, we have recently seen some “spots” revealed by assets. Let’s call it the transformation from “IT to DT”: the cloud system that privatizes enterprises is essentially a more competitive IT system, but once occupied A large number of industry head data, accumulated a large amount of private domain data, and then formed a “multi-source private domain data pool”, there is an opportunity to form a vertical industry data benchmarking platform, which can further promote the “data as a service” industry data driveThe dynamic decision-making system can also use these data operation capabilities to further transform into an industry technology financial platform.
For example, sometimes SaaS will be divided into two categories: “thin and light” and “thick”. The heavy customer is difficult but the customer price is high, and the light and thin is easy to get but the customer price is low. What I usually say is “first grow bigger and then stronger” or “make stronger first and then bigger”. Traditional SaaS is “stronger” first. Later, we saw many assets from “bigger”, which are big enough. The customer base, on this basis, deep cultivation and heavy, may also be a model of metamorphosis. There are many assets on this road that are developing very fast and represent another mode of survival, so whether you can perceive the effectiveness and time of this transformation is the most important point.
In order to interpret the “transmutation”, McKinsey’s more classic “three-level growth theory” is applied. We tried to focus on this curve and found it very simple. The three rectangular squares become three arcs from the midpoint of the “wide side” to the midpoint of the “long side”. However, if you want to draw this line as a “transformation curve”, you should have several changes: First, the color change, the degree of complexity or complexity should be gradually improved, so that you can have higher competitiveness; Second, the slope, The end-to-end connection may become an average slope, which must be promoted (representing the increase in profit); third, if the rectangular box is circled as a profit area, the profit area is gradually increased.
So this may be a really attractive growth theory: the first level is the core business, it is necessary to first expand the core business in the market, so that the operation becomes more and more orderly, more stable, and keeps high. Growth; the second level, realized the second transformation, developed new business, and brought higher growth space, such as the trajectory of a typical cloud computing vendor, starting with cloud computing infrastructure sales and customer subscription business, At a certain stage, it is necessary to establish an ecological environment, and the ecology will be backed up to make the core business more robust, so it will become the second growth. The third level, that is, the third growth may face a broader future. It may be difficult to clearly define the moment when it is because of what can produce effective opportunities, it may be the conversion of ToB to ToC, or it may be the full democratization of a complex technology, but the second level is only stable. Moving forward, the transformation of the third level will come.
Many projects can clearly define the first level, the second level, and the third level in the strategic planning. However, in the sense that they will face many challenges in the implementation process, and often many changes will occur, even if The giant companies that have been seen so far have also changed this many times to achieve this transformation. Therefore, McKinsey pointed out that enterprises in this process: First, we must continue to carry out various activities of business growth; Second, use the same focus on existing business to care about the future direction, plan ahead; Third, we must study current business, new business and future Maintain a coordinated and balanced approach between businesses to determine where the future will be.
So, in this growth, investors want