Every industry will be digitally reshaped from the bottom up.
Editor’s note: This article is from WeChat public account “ 红 杉 汇 ” (ID: Sequoiacap), author: Hong fir.
Looking back at the Chinese Internet for 20 years, the C-end has developed rapidly, and a large Internet company represented by BAT has been born. In recent years, the To B field is becoming an increasingly important growth point for the Chinese market. However, To B and To C have very different logics, and their entrepreneurship has many differences in their ideas and approaches. What is the underlying logic of the To B domain opportunity? What are the advantages and challenges in the domestic To B field?
In this issue, we recommend Zhai Jia, Managing Director of Sequoia Capital China Fund, to think deeply about the development of the domestic To B sector. He believes that, in the past, the development of the Internet focused on the downstream delivery side, that is, the C side. Now, as the digital transformation of this link is gradually completed, it is only natural that the opportunities in many industries will receive more and more attention. 
Domestic enterprise-level service areas have been accumulated Long
The opportunities in the domestic enterprise service (ToB) field do not suddenly emerge. If you look back, in fact, there has been a long accumulation in this field in China. It is these historical accumulations that provide the cornerstone for the further development of the field.
First of all, in terms of entrepreneurship and investment, domestic enterprise-level services have been accumulated for many years. Domestic companies that provide enterprise-level services in the early stage of the business mainly target similar companies in the United States, and mainly focus on SaaS business. After years of development, a number of better SaaS product-type companies have appeared in the domestic market, scattered in sub-segments such as sales, human resources or team collaboration. Behind these companies is the accumulation of investment institutions in the field for many years.tired. Taking Sequoia China as an example, in the past five to ten years, we have made a long-term investment layout in the above-mentioned segments.
Second, the accumulation of domestic cloud computing technology is worthy of attention. In the past five to ten years, cloud computing in China has developed rapidly. Compared with the gap between China and foreign countries at the SaaS platform level, the gap between the domestic cloud computing field and foreign countries is much smaller. Cloud computing vendors represented by Alibaba Cloud, Tencent Cloud, and Huawei Cloud can basically benchmark Amazon AWS and Microsoft Azure in the United States. The rapid development of domestic cloud computing technology has provided the growth soil for the development of domestic To B enterprises. From the perspective of the major changes in the IT industry, this is a very important accumulation.
Finally, the accumulation of big data and AI fields. In the field of big data and AI, the gap between China and the United States in software is smaller. In recent years, big data companies, AI applications and AI underlying technology companies have been developing simultaneously. It is worth mentioning that from a global perspective, Chinese AI software companies started very early and have already accumulated many valuable technologies and experience. Over the past years, Sequoia China has also made a systematic investment layout in AI fields such as infrastructure, vertical fields, and application layers.
To B ’s investment logic extends from downstream to upstream. From the perspective of investment, opportunities in the To B field are getting more and more attention, for deep reasons.
For example, C-side users want to enjoy a good, hand-made food. To meet these needs of the users, entrepreneurs have set up a takeaway platform.
If you ask further, you need to consider, how is the food in the user’s hand made? What the takeaway platform needs to solve is the O2O problem. In addition to delivering catering to users, it is also necessary to find a gourmet supplier—the catering industry. Can the catering industry be upgraded and transformed through digitalization? Just as some emerging companies have transformed industries such as coffee, the process of processing ingredients into gourmet food can also be transformed.
If you continue to ask how the cooking ingredients are obtained, people’s perspective can turn to companies such as the Shuhai supply chain invested by Sequoia China, which carries the ingredients The function of the catering industry, and digitally transform this process to be more efficient. Along the industrial chain, going further upstream, how is the food produced in the place of origin? We will see that companies like Yimu Tian and Xinxiang have done a lot of work to improve efficiency in the upstream of the industry chain.
In fact, if you look back one step further in each industry, we will find that there are many areas where efficiency needs to be improved. Upstream of the apparel manufacturing industry chain, such as Zhibu InternetThe company is accelerating the digitalization of cloth production, as well as Grace Technology, which makes clothing design, production, and shelves intelligent; in the medical field, small medicines are optimizing the process from medicines to pharmacies and hospitals. Yao is improving the process of new drug development and clinical trials. At each point of consumption, as long as you trace upstream, you can find that there are many large and traditional enterprises in each link, and they can be transformed through the Internet.
In the past 20 years, investment institutions have found a lot of good platform-type opportunities from various downstream links in the industry chain. These opportunities appear in the final process of delivering C-side users, and it is also the easiest link to achieve Internetization and scale. Now with the improvement of the C-end transformation, we should think about how to take one, two, or even more steps upstream of the industrial chain. Such thinking and practice will promote the significant improvement of the operating efficiency of the entire society, which has great social value and significance.
AI is a historical opportunity for China’s To B field. Globally, China has many very leading areas on the C-end, such as mobile payments, but by comparison, The digitalization level and efficiency of domestic enterprises at the B-end are still relatively low, and the internal IT construction and digitalization of enterprises are far behind compared to the United States.
If you look at the operating efficiency of domestic companies, most domestic companies have a lot of room for improvement, except for some leading Internet companies. The theme of future To B services is to rely on excellent enterprise-level service companies to take the lead and digitally reshape China’s major industries along the value chain.
In this process, domestic enterprises have unique development opportunities. In the fields of software development, hardware manufacturing, and scenario applications represented by AI, the gap between China and the United States is small, and Chinese companies have great historical opportunities.
In the above fields, we have trained a large number of experts in academic and engineering fields in China, and have a very good talent reserve. Continued development in these areas where the gap between China and the United States is small, or even China’s leading areas, is likely to be an important way for Chinese companies to achieve overtaking in curves.
But we are also concerned that there are still some obstacles to development in the domestic enterprise service sector.
First of all, it may be difficult for many standardized software to appear in China. It is difficult for a pure point-product company to develop faster than similar companies in the US. Because the IT construction in American companies is relatively mature, companies will buy certain products according to their needs, and software companies are more open. Software and software, products and products will provide good data interfaces and API interfaces. Achieve coexistence within the industry. In this regard, China’s infrastructure needs to be improved.
Second, the unique environment facing the development of Chinese enterprises also brings unique challenges. The survival rate of SMEs in the United States is relatively high, and their development is relatively stable, which allows American enterprise-level service companies to serve many high-quality SMEs. There will be many customized needs for serving large customers, but it is easier to serve standardized services for SMEs.
But there may not be such a soil in China. To B companies in China need to think about how to better and more efficiently serve large customers. These are the unique features of the Chinese market .
For example, C-side users want to enjoy a good, hand-made food. To meet these needs of the users, entrepreneurs have set up a takeaway platform.
If you ask further, you need to consider, how is the food in the user’s hand made? What the takeaway platform needs to solve is the O2O problem. In addition to delivering catering to users, it is also necessary to find a gourmet supplier—the catering industry. Can the catering industry be upgraded and transformed through digitalization? Just as some emerging companies have transformed industries such as coffee, the process of processing ingredients into gourmet food can also be transformed.
If you continue to ask how the cooking ingredients are obtained, people’s perspective can turn to companies such as the Shuhai supply chain invested by Sequoia China, which carries the ingredients The function of the catering industry, and digitally transform this process to be more efficient. Along the industrial chain, going further upstream, how is the food produced in the place of origin? We will see that companies like Yimu Tian and Xinxiang have done a lot of work to improve efficiency in the upstream of the industry chain.
In fact, if you look back one step further in each industry, we will find that there are many areas where efficiency needs to be improved. Upstream of the apparel manufacturing industry chain, such as Zhibu InternetThe company is accelerating the digitalization of cloth production, as well as Grace Technology, which makes clothing design, production, and shelves intelligent; in the medical field, small medicines are optimizing the process from medicines to pharmacies and hospitals. Yao is improving the process of new drug development and clinical trials. At each point of consumption, as long as you trace upstream, you can find that there are many large and traditional enterprises in each link, and they can be transformed through the Internet.
In the past 20 years, investment institutions have found a lot of good platform-type opportunities from various downstream links in the industry chain. These opportunities appear in the final process of delivering C-side users, and it is also the easiest link to achieve Internetization and scale. Now with the improvement of the C-end transformation, we should think about how to take one, two, or even more steps upstream of the industrial chain. Such thinking and practice will promote the significant improvement of the operating efficiency of the entire society, which has great social value and significance.