The three core keywords of the industry Internet: one industry, multiple links, deep connections
Editor’s note: This article is from WeChat public account “Sorghum Capital” (ID: CygnusEquity), author Jin Ming. Authorized to reprint.
Jin Ming is the managing partner of China’s leading boutique investment bank, Gao Yi Capital, with over 17 years of experience in equity investment, investment banking and corporate management. Prior to founding Gaochun Capital, Jin Ming was the head of Providence Equity China, the world’s largest TMT PE fund. Earlier, he worked for Huaping Investment. The representative cases led by Jin Ming include: big search car, hungry, Netease cloud music, horse honeycomb, graffiti intelligence, chasing one technology, and Senpu.
The entire Chinese investment community is paying more and more attention to To B’s investment, in addition to the strong corporate service model in the US market (represented by SaaS), with strong transactions The industry Internet of properties (including goods and services) is particularly optimistic about capital. What is exciting is that the trading and revenue scale of the head industry Internet platform has been very impressive, and it may be possible for batch enterprises to move toward IPO in the next 2-3 years.
Sorghum is fortunate to go ahead. Since 2016, the company has helped the automotive industry’s Internet platform, Dashun Auto, to continue to communicate with industry Internet leaders in various fields, to accompany entrepreneurs to grow together, and to explore the success of the industry’s Internet. Many friends are asking, what is the industrial Internet? How to evaluate the quality of an industry Internet company? In this regard, our understanding is:
The way Consumer Web creates value, usually one link in multiple industries to achieve broadness connections to e-commerce For example, it is in a number of industries, from sellers to buyers, to achieve breadth of connectivity. The typical feature of “Industry Internet” is: Implementing deep connections in multiple links in a vertical industry. There are three core keywords: oneIndustry, multiple links, deep connections.
This development path is a batch of entrepreneurs who have tried and wronged. The first batch of entrepreneurs who have entered the industry Internet, some of them adopt the consumption Internet style of inertia, covering only one link of the industry, and making large GMV through subsidies. This is a typical “consumer Internet” model to do “industry Internet”, because it is too thin, and it is difficult to survive when it is squeezed up and down.
After these years of development, more and more industrial Internet entrepreneurs have begun to build connections in multiple links, doing deeper and deeper, and the profit margins acquired in the industry chain are getting bigger and bigger, even beginning. Affect and reshape the entire industry chain.
The above-mentioned model characteristics of the Internet have determined that Internet giants do not have an absolute competitive advantage in this field, because deep and heavy play is inseparable from deep industry understanding and resources, and is inseparable from BD and ground. Pushing such dirty work. Moreover, many of the headed industrial Internet companies have been immersed in the industry in the past few years. Before the completion of the business puzzle, the user and income scale are limited. It is difficult to measure the output value with quantitative indicators. This is in line with the mature KPIs of the giants. The assessment system is contrary.
So, this is a vast world of entrepreneurs.
What industry is suitable for the industry Internet?
The scale of the industry should be large enough
How big is it right?
A consumer Internet platform that covers an industry market with no trillions of dollars, and the platform effect is hard to come by. There are only a handful of industries that are suitable for the industrial Internet and can reach the scale of tens of billions – clothing, medicine, automobiles, MRO, etc. However, the demand for market size of the industrial Internet is lower than that of the consumer Internet, and hundreds of billions is not too small.
Industrial Internet companies are deeply involved in an industry. By connecting more links, it is possible to eat multiple links of profits. Even if the industry market is smaller, multi-link value creation can still support the high value of a platform.
Alibaba’s GMV in the last fiscal year was 5.7 trillion yuan, and Taobao and Tmall’s revenue was about 200 billion yuan, supporting its market value of nearly 500 billion US dollars. Suppose that in a vertical industry of RMB 500 billion, if the head industry Internet company can occupy 20% of the market share and the comprehensive gross profit margin reaches 20%, it can generate 20 billion yuan of income, and the potential market value may reach 500. Billion dollars, this is as much as the big red and purple. There are more than a dozen industries with a scale of more than 500 billion yuan, and the industrial Internet competition has the opportunity to create a few more.
The industry chain should be long enough and there are inefficient links
The industry chain is long enough, and the value space created by the platform to improve collaboration efficiency is large.
Typical industry such as after the carIn the market, the spare parts of a car range from thousands to tens of thousands. There are nearly 3,000 county-level administrative districts in China. In addition to the large brands of tires, which are high-priced large-priced items, most of the spare parts. Enterprises do not have the ability to cover the national channels. After the products leave the factory, they must be sold to the stores through multi-layer wholesalers and distributors. The intermediate links are huge and wasteful, so the automobile industry has at least twice the zero ratio: a whole vehicle Selling spare parts to sell, at least twice the price of the original car.
The players in each link in the industry chain should be moderately dispersed
The two ends of the industry chain are very concentrated, which is definitely not conducive to the establishment of the industrial Internet, but is it more dispersed? In practice, industries that are extremely fragmented at both ends often face a situation where they do not grasp their hands when establishing connections. The most extreme example is the taxi market. It is difficult to borrow cleverness when establishing a connection between a million drivers and hundreds of millions of passengers. The best way is to establish trading habits through huge subsidies.
In addition, if the two ends of the industry chain are too scattered, the head of the industrial Internet company is difficult to be a big one, and later it is easy to grab some customers and quickly do large-scale.
The most ideal pattern may be that one end is relatively dispersed and the other end is relatively concentrated. Take the new car market as an example. At one end, there are hundreds of automakers. At the other end, there are more than 100,000 car dealers. By locking a car factory through BD, it is possible to shake thousands of car dealers and connect thousands of car dealers. In turn, it is possible to lock more OEMs, so that it is easy to do large-scale, and it has created a higher entry threshold for later generations.
When we talked about this topic with the founder of the big search car, Yao Junhong, he believed that the automotive industry has the above core elements, and the auto transaction is heavily delivered and the consumer Internet is completely unmoved, while the industrial Internet Can make more value:
First, the Chinese auto market is huge enough to affect the global auto market.
Second, the industry chain is long, the assets are heavy, and the value of each mismatch waste in the industry chain is very large.
Third, the industry is concentrated at one end. There are tens of thousands of accessories manufacturers in the industry, more than 100 automakers, 20,000 10,000 dealers, and millions of service providers. Everyone is doing things around the car.
The above conditions determine the value of the multi-link connection in the automotive industry. The Chinese market itself is large and fragmented, and many industries have long-term and long-term chains. This characteristic determines that many sub-sectors have the opportunity to do industry Internet.
What are the multiple links?
The connection of multiple links, the core value is to change the industry