The essence of being outstanding is different, and the difference is that you ca n’t use precedent to measure the judgment. “>” WeDeal Wei land “(ID: WeDeal8) , author: Wei places.

Sometimes, the results (good or bad) are often unexpected. This is the true story of our missed investment in the American “Douyin” and the important lessons we have learned.

Monday, July 6, 2015

My partner Tom sent me and my partner Jeter an email with the content: “Did we ever talk to Musical.ly? I really like their user growth curve, but are they? Will you rely too much on Instagram? “

In less than three months, Musical.ly jumped from fifth to fifth in the US app store downloads from a position other than 1500. When Tom sent the email, they added more than 350,000 installations per day in the US Apple App Store, ranking first overall in the United States!

As an investor who focuses on early opportunities in the consumer space, nothing is more important than seeing consumer apps with social networking potential rise to the head of mobile app stores so quickly. They beat all the heavyweight applications, including Facebook, Messenger, Instagram, Pinterest, Netflix, Snapchat, Spotify and so on.

Brendan told WeDeal (WeChat public account: WeDeal Weidi) that seeing this situation is like a super bowl in the investment circle. We will squeeze our heads and take a look.

(Note: SuperBowl is the annual championship game of the American Professional Football League. The Super Bowl is generally the last one or two in January each yearHeld on the first Sunday of the month, that day is called the Super Bowl Sunday. The Super Bowl is the highest-rated TV show in the United States and has gradually become an unofficial national festival in the United States. In addition, Super Bowl Sunday is the second-highest single-day food consumption in the United States, second only to Thanksgiving. )

Tuesday, July 7, 2015

We try to get in touch with the team through various channels. Fortunately, Alex Hofmann, President of Musical.ly, responded to our email. Alex thanked us for contacting the company. The company is doing round A financing and has received several offers from VCs. It needs to make a decision this week and hopes to make a phone call immediately.

We quickly called and confirmed some numbers, so we asked Alex Hofmann, President of Musical.ly, if someone was in Palo Alto ’s office in Silicon Valley. We can come to our San Francisco office for an interview on Wednesday. On Wednesday, July 8, 2015, Musical.ly’s other co-founding teams were in Shanghai. So I emailed co-founder Alex Zhu (朱俊), asking for data about engagement, and hoped that our Asian partner Akio could meet the company’s team in Shanghai the next day.

Thursday, July 9, 2015

When our Asian partner Akio received our email, it was already Thursday morning. So he canceled all meetings in Beijing that day and flew to Shanghai that night to meet with the team of Musical.ly. Musical.ly’s operating team is in the suburbs of Shanghai. Coincidentally, the Musical.ly app for Android was launched that evening. Akio and the Musical.ly management team talked for four hours and talked to me before he went to bed. Obviously, we need to make a decision the next day. (Because Musical.ly has received several VC offers, the company needs to make a decision that week.)

The Deal (The Deal) Due to the crazy growth of Musical.ly, the company ’s management stated that it will “finance $ 10 million at a post-investment valuation of $ 100 million”, and this is a “love to vote” quote. Making a decision To make an investment decision for a transaction that writes a $ 10 million check requires a lot of analysis. In addition to the data we requested from the company above, we also need to make further adjustments to the following questions:

· Is the team strong enough to ensure scale growth on this basis?

· What are the advantages and disadvantages of user engagement compared to other social applications?

· The existing version is only a function or the final platform?

· How dependent is the company’s growth on Instagram?

· Is there a music copyright issue?

· How much room for improvement?

· Can growth continue?

Some of the above problems can be solved by ourselves, but we have no answers to many problems.

In terms of risks and rewards, investments in social applications are: a) completely binary, and b) even a valuation of $ 100 million may be the most profitable investment. The best example is Accel (a famous VC in the US) investing in Facebook at a valuation of $ 100 million. We are very satisfied with Musical.ly’s user engagement, but our biggest concern is the ranking growth rate of the app in the app store.

We have two main concerns: 1. At that time, it took more than a year for the apps with the longest endurance in the app store to be among the top ten, and most apps remained in the meantime Steady growth. For example, Snapchat spent 9 months from entering the top 1,500 to entering the top 10, while Musical.ly did it within 2.5 months.

2. Is this just a flash in the pan? Building a social networking platform is a bit like building a sand castle. Without a solid and scalable foundation, it is ultimately difficult to sustain growth. With this in mind, we are concerned that users will not spend enough time on the Musical.ly application. We saw the quick results of YikYak app coming in the summer of last year. Yik Yak’s business is seasonal (mainly aimed at college students), so it can be expected that there will be some decline, but they cannot maintain their position in the top ten. With these issues in mind, our internal data scientists conducted an analysis of the app store and looked at the performance of each app at a similar growth rate as Musical.ly.

Decision Our decision is not to vote. Our data shows that it is impossible for applications to grow rapidly and continue to maintain a leading position. At the same time, we have a deeper consideration than the ranking history itself: 1. We feel that Musical.ly seems to be just a utility (each user still spends very little time on the app every day);

2. Does Musical.ly only use the Instagram platform to reach the top of the app store? People posted theirMusical.ly video, which drives downloads. Given that Instagram controls the content displayed on its platform, this is a big risk;

3. The Musical.ly app does not have the traditional communication features of top social apps. We are right for the next three years and we are very satisfied with this decision. Although Musical.ly ranks among the top 100 app stores in the United States, it is not consistently in the top 10, and the top 10 is where most corporate value is created. For example, today (March 27, 2020) in the top ten applications, we have Facebook, Messenger, Instagram, Disney +, Zoom and Netflix.

We were wrong. On November 9, 2017, Musical.ly was acquired by Chinese social platform company ByteDance, with a price of about $ 1 billion. Ten months later, ByteDance merged Musical.ly with their other application, TikTok. The app is unstoppable, with 3 million monthly downloads in the United States, and it has real endurance.

At this time, the valuation of byte bounce has reached 78 billion US dollars. The lesson we are engaged in is to discover and invest in outstanding companies that can eventually grow and win. Comparing a company with other previous companies, people will not see what this company may become, and pay too much attention to who this company might be more like. The essence of being outstanding is to be different. You ca n’t use precedent to measure judgment.

The original author of this article, Brendan Wales, is a partner of Silicon Valley VC company eventures, focusing on the consumer Internet field,