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Recently, Mr. Zhu Xiaohu, the managing partner of Jinsha River Venture Capital, visited the “VC Ventures” online event hosted by CEIBS Venture Capital to discuss venture investment in the post-epidemic era Strategy. Afterwards, he opened an online dialogue with Gong Yan, Professor of Entrepreneurship Management at CEIBS and Director of CEIBS Entrepreneurship Camp, to discuss the opportunities and challenges of Chinese companies serving Saas in the next ten years.

The start of 2020 is beyond everyone ’s expectations, At present, the domestic epidemic situation is basically under control, but the situation in the United States, the United Kingdom, and continental Europe is still severe, and the virus is likely to continue into the third quarter. Therefore, the epidemic situation and its impact on the economy may exceed one year.

The negative impact is spreading on a larger scale.

From the perspective of the United States, the economic depression of the last century caused the unemployment rate in the United States to be 25%. This time the unemployment rate is likely to exceed that of the Great Depression.

From a domestic perspective, data for January-February shows that the top eight provinces (Guangdong, Shandong, Jiangsu, Sichuan, Zhejiang, Hebei, Henan, and Shanghai) all closed more than 10,000 companies, making the economy unlikely. The fast V-shaped reversal is not expected to recover gradually until 2021.

So, for many startups, the most important thing is to survive, and then there may be a future.

One, how to survive? Consider “zero-based budget”

The budget made before the epidemic is no longer applicable to the current extraordinary period. We suggest that entrepreneurs can consider a zero-based budget, that is, forget about past performance, assuming that they will start business again today With only this amount of money in hand, the departmental budget will continue to be zero until the management staff proves its necessity.

Think about what must be done and what employees must be retained, so that you can see the status quo and live next year.

I think a few things are easier to cut:

• Employee benefits, basic benefits such as the cost of snacks, fruits, group building.
   

• Revisit the supplier contract, and strive to reduce or delay payment as much as possible. Cash flow is more important than cost.
   

• Brand advertising can be cut off first for startups with poor cash flow.
  

  The Focus Media Jiangnan Chunjiang always said: “In the low time, brand advertising is the first, cheaper, and the second is particularly effective.” If a startup has a lot of cash flow, it can continue to brand advertising.

  What is generous? It is assuming that your company does not have any income, and your cash flow can still support the company for more than 12 months. If you have such a generous cash flow, it is indeed better to invest in brand advertising now.

  However, if there is no such cash flow, for startups, brand advertising should be stopped and they should be switched to effect ads that can immediately generate cash income.

  Some difficult decisions are:

  • New product
     

  • investment periodNew projects over 6 months
     

  • Customers who do not make money / negative cash flow
    

    Our suggestion is that if there is no income and the cash flow does not exceed six months, these new products and new projects, including non-profitable customers, should be cut off.

    If the cash flow can support more than six months, you can consider small investment in new projects and new products as a follow-up investment.

    Second, cost and talent structure
    

    1. Quickly adjust the organization cost structure

    When I was in SARS 17 years ago, I was just starting a business. At that time, all the executives only took basic living expenses. By the end of the year, when the company ’s cash flow was turned over The salary for the whole year will be reissued later. This year’s situation is more serious than SARS. It is a life-and-death barrier for many startups. Costs must be strictly controlled and cash stuck.

    We see that many startups now only pay 20% of their executives ’salary, 50% of their middle-level employees, and 80% of their basic-level employees. This is a plan, but the adjustment of the cost structure depends entirely on the cash of each company. Situation, and these must fully communicate with employees, strive for their understanding and support, and work together to overcome the difficulties.

    2. Now is a good time to recruit excellent employees

    The epidemic also gives us a rare opportunity to discover and recruit outstanding employees, because there are many high-quality employees on the market that have not been able to recruit or even pay salaries, If such top talents can be reserved during the epidemic, and more outstanding talents can be attracted after the epidemic ends, the organizational talent structure can be optimized and upgraded accordingly.

    In addition, FireWire needs to promote employees who are willing to take risks and grow together with the company. These employees are worthy of long-term training and are expected to become the backbone of the company in the future.

    So, I think the era of epidemic situation is also a perfect time to adjust, optimize and upgrade the organization.

    Three, pay attention to the track: The next ten years will be a long cycle of enterprise service outbreak
    

    1. Corporate services are one of the industries that benefit most from the epidemic

    Not all industries have been negatively affected by the epidemic, especially many segments of the Internet industry have been beneficially affected, such as fresh e-commerce, game industry, social E-commerce, in the past few months, many fresh e-commerce companies have exploded orders, and the unit price of customers has more than doubled, quickly turning losses into profit.

    On the other hand, at present, enterprise services are welcoming a very good opportunity for development. We see that the data are:

    Zoom At the end of last year, there were more than 10 million daily active users, and now it has reached 200 million daily active users, a 20-fold increase over the past three months.

    Ding Ding In the past three months, it has always ranked first in the download of popular applications. Some SaaS service companies on Ding Ding have increased their revenues by more than 3 times this year compared to last year. They get free opportunities for B-end customers, and believe that the usage habits will continue after the epidemic.

    

    Image source: Zhu Xiaohu ’s speech PPT screenshot

    2. In the field of enterprise services, China lags behind the United States by 5 to 10 years
    

    US enterprise services have also developed in the past decade. There were no enterprise service companies in the US 20 years ago, only software-based software such as SAP and Oracle the company.

    Salesforce.com was established as the first SaaS enterprise in 1999, and even ten years later, only this enterprise service company has just exceeded the market value of $ 1 billion.
    

    Twenty years later, there are more than 100 enterprise service companies in the United States with more than one billion dollars, all of which have been developed in the past ten years. So, corporate services have also developed in the United States for about a decade, and we believe that China will have many opportunities for corporate services in the next ten years .

    

    Image source: Zhu Xiaohu ’s speech PPT screenshot

    The combined market value of all Chinese consumer Internet companies is almost 1/2 of that of the United States. The market value is about 1/3 of the total market value of American companies, so in terms of financial technology and consumer Internet, the gap between Chinese and American companies is not so far away. However, in terms of corporate services, the market value of Chinese corporate services is US $ 25 billion, which is only 1/100 of that in the United States, which is very different. Assuming ten years later, this number can reach 1/3 or even 1/5, which means huge opportunities.

    The next ten years will be a long period of outbreaks of Chinese enterprise services.

    Fourth, Enterprise service companies are superior to the consumer Internet, how to layout?
    

    We found that in the past decade, American investors have made more money from corporate services than from consumer Internet. Many successful consumer Internet companies, such as Uber, WhatsApp and Airbnb are all tens of billions of dollars, butThese consumer Internet companies are “burning money” very seriously, and the resulting capital efficiency is not high.

    Compare Zoom with Uber:
    

    Zoom had a market value of US $ 20-30 billion before the outbreak, and now it has reached US $ 40-50 billion, exceeding Uber. Before Zoom went public, it has accumulatively raised more than 100 million US dollars with a capital efficiency of 137 times (capital efficiency = market value / cumulative financing amount).

    The Uber epidemic had a market value of US $ 50 billion before. Before the listing, more than US $ 10 billion was consumed, and the capital efficiency was only 5 to 6 times.

    We can look at the stock market data in 2019. Zoom rose from US $ 90 to US $ 150, while Uber dropped from US $ 40 ~ 50 to US $ 20. Corporate services The company’s performance after going public should far exceed that of the consumer Internet. If you look at the data for the first quarter of this year, the performance of corporate services is much better than that of consumer Internet companies.

    We believe that although the market value of Chinese enterprise service companies is not as high as the consumption Internet, it is highly capital efficient. At present, Chinese enterprise service companies are all around the breakeven line. Even if the loss is also a loss of labor costs, it is controllable. This is the difference.

    So, our measures should change from “one center point” to “two-handed”.

    1. Change from a central point of consumer Internet to “consumer Internet + enterprise services”
    

    China ’s consumer Internet also has a large market, because China ’s domestic market is large, and the changes in intergenerational consumer behavior are very obvious.

    When we were hungry 9 years ago, the expectations were not high. I thought it ’s amazing to be able to make 1 billion dollars, because only college students like to call Takeaway, whether white-collar workers will call takeaway is unknown. But later I found out that after 90 and after 00, I am not used to cooking at home., All rely on take-out to solve the problem, so Meituan and Hungry are developing very fast. The market has expanded rapidly. Therefore, I believe that due to changes in consumer behavior after 90s and after 00s, China also has the opportunity to consume the Internet.

    In the next ten years, will Chinese corporate services make more profits than the consumer Internet like the US? This is not necessarily. But there is still hope for earning more than half of the consumer Internet money, and now it is also a very good opportunity. Especially in the past ten years, China’s consumer Internet has mainly relied on the demographic dividend growth, from third- and fourth-tier cities to first-tier cities, from big cities to rural markets, from young people to the elderly population … expanding all the way, and now the demographic dividend is basically no Too.

    2. When the demographic dividend finally ends, the technical dividend is the foundation of the long-term foundation

    There are still many opportunities for China ’s technology dividend, and China also has the conditions to seize the technology dividend:

    First of all, the number of Chinese college students is the first in the world; the number of Chinese patents is also the first in the world. If you only look at invention patents, it accounts for almost 20% of China ’s annual patent applications. Although this part of China ’s patents is not the first At least compared with the United States and Japan, it is also within the scope of comparison. Another number, Chinese science and technology articles cited by the world is also the world’s first, this number is relatively gold. So these dividends in China are likely to be converted into business opportunities.

    In the past ten years, consumer Internet companies have been consumer-oriented. In the future, Internet technology will deeply transform various vertical industries. There are great opportunities here. For example, Meituan is “Internet + catering”, and Didi is “Internet + transportation”. Good doctors and Ali Health are “Internet + medical”, then “Internet + education”, “Internet + manufacturing”, there are also many opportunities, and these vertical industries are hundreds of billions or even trillions in China market.

    

    Image source: Zhu Xiaohu ’s speech PPT screenshot

    For example, we invested in a company that uses artificial intelligence technology to help restaurants catch rats.
    

    In the beginning, the company used artificial intelligence to help the restaurant count the turnover rate and the service quality of the service staff. Later, it was discovered that the restaurant was not willing to buy it. Later, it changed direction and used artificial intelligence technology to help the restaurant catch the mouse. .

    There are 5 million restaurants in China. It is actually difficult to catch rats in the restaurants. It is difficult to administer medicine. Rats will pollute the environment if they die in the restaurant. They use artificial intelligence. Technology, using a camera to identify whether there is a mouse in the restaurant every night, where is the action trajectory, and where the mouse hole may be, this is more intelligent.

    In the past, all offline restaurants had mouse-catching services, which might cost 10,000 to 20,000 a year, and the effect could not be judged. However, this artificial intelligence technology is very cheap It ’s only a thousand dollars a year, and you can be sure to tell you whether there are rats in the restaurant and where are the mouse holes.

    So this service sells very well. After a restaurant is used, it will quickly spread to surrounding restaurants. This is a very good case of combining artificial intelligence technology with traditional industries.

    Another point of opportunity, we believe that this point of opportunity is not available in the United States, which is to use artificial intelligence to empower traditional manufacturing. China’s manufacturing industry generally needs to upgrade. Many post-90s and post-00s are reluctant to work in factories, and use artificial intelligence technology to empower traditional manufacturing industries. This has many opportunities in China, and we have found that in recent months. There are many projects.

    We have invested in a project that uses information technology to help factories form a flexible manufacturing chain. Most of the factory production is mass production, and the information technology requirements for the functions are relatively low. One production line even takes one year and two years.

    If you want to make flexible manufacturing in the future, the production line will change every two days. At this time, you need a lot of information technology support, so they have iPhone and iPad on the production line, what parts and production steps do they need to produce every day , You can see all the materials you need clearly.

    We also see that there are many artificial intelligence technologies that can help factories predict the production capacity, and the error rate and failure rate can be greatly reduced.

    Five, Gong Yan talks with Zhu Xiaohu
    

    Keyword 1: Breakout under the layout of giants
    

    Gong Yan: If you go to see the services of Chinese enterprises In the ecosystem, giant companies such as Dingding and WeChat have emerged, and now Toutiao is also entering the field of enterprise services. They are trying to build a platform architecture. Under the framework of relatively complete layout of Chinese giants, will there be a relatively independent super app like Zoom?

    Zhu Xiaohu: I feel that there are still many in the vertical industry Opportunity, after all, the possibility of the giants to participate in vertical applications is still relatively small. What they want to do is a platform. Why have we recently seen that many companies doing business services have been affected by the epidemic so much that they will increase by a factor of 3 compared to last year. The main reason is that the traffic of giants overflows. There is huge traffic, and after these flows overflow, the startups above SaaS services all benefit, and can actively convert these customers into paying customers.

    So, I think that entrepreneurs should actively embrace giants and explore opportunities within the opportunities that giants will not do.

    Keyword 2: Differences between China and the United States & Opportunities in China

    Gong Yan: China is late in corporate services The market value of the United States is only 1/100 of the United States in 5 to 10 years. What is the reason for this huge difference?

    Zhu Xiaohu: I think Chinese business services are later than the United States There are many reasons for 10 years, the most important are the following two points:

    First, the labor cost of front-line employees in China was relatively cheap, and many SME bosses were reluctant to spend money to buy software. The second reason is that there were many pirated software in China. A set of 10 yuan CD, you can buy all the software, do not need to spend money to buy enterprise services, and do not trust enterprise services.

    These environments are different today. First of all, the wages of front-line employees are rising fast. In addition, China ’s intellectual property protection is getting better and better today. You ca n’t see such a disc on the Internet anymore. The cloud service has been deeply rooted in people’s hearts. Everyone’s trust has been established, so we believe that rapid development will be achieved in the future.

    Gong Yan: Reference to the development of the United States, stay Where are the opportunities for serving Chinese companies with startups?

    Zhu Xiaohu: One of the more obvious shortcomings in the Chinese market is the weak ability of enterprises to pay. For example, American companies pay US dollars. It is relatively easy for ordinary small and medium-sized enterprises to pay thousands of dollars and tens of thousands of dollars. However, it is acceptable for Chinese small and medium-sized enterprises to pay 4,000 or 5,000 yuan or 10,000 or 20,000 yuan, if the annual fee exceeds 10,000 yuan The rate drops sharply.

    So I think the opportunity is that we have a lot of small and medium-sized enterprises in China. There are 30 million small and medium-sized enterprises. Although the customer price is very low, but the number is large, it requires Chinese enterprise service companies to have a very efficient sales team to obtain small and medium-sized customers.

    In addition, the demand for customization of large Chinese enterprises is much higher than that of the United States. Many large enterprises in the United States are accustomed to using standardized software, and large Chinese enterprises are accustomed to using customized services. Large-scale SaaS customers in China will be tired and longer in service.

    Keyword 3: The road from customization to productization

    Gong Yan: There are many SaaS products in the United States The ability of customization is very strong, and the SaaS service in China can easily become a customized project. What is the root cause?

    Zhu Xiaohu: I think there are two reasons, one is that Chinese customers are still in the early stages, and their customized needs There are still a lot of them, they are not used to using standardized services, or they are more accustomed to making personalized customization needs, but they do not know that the cost of customization is far more than standardized.

    The second point is that Chinese companies lack the ability to define products in a standardized manner. This ability is relatively scarce, for both reasons. Many people can only do projects to help companies do customized development, but they cannot make mature products from projects. Including system structure and professional knowledge capabilities, this is relatively scarce in China. It is recommended that companies find such talents. Microsoft China Research Institute ’s capabilities in this area are relatively good, and they do in upgrading the company ’s organizational structure and standardizing products. Very in place.

    Gong Yan: According to my observation, many SaaS companies Will face this conflict. In the past year, I have done a lot of research on SaaS companies, including nearly 30 companies that do SaaS in CEIBS, and have done a lot of research and review with the founders of these companies. Finally, it was found that this conflict manifested itself as the company would eventually establish two departments.

    One is the business department, which specializes in delivery, and often makes money, but its human investment will be very large. And in essence, although this area has profitable revenue in the business department, from the perspective of the company’s SaaS development direction, it does not represent the future.

    The other department is relatively productive. Need a very good product manager to be able to refine and abstract the user’s strange and varied needs. He needs to be based on the user ’s needs, but higher than the user ’s needs, by guiding the user to the end, rather than simply being 100% led by the user. Whether it is the team or the leader of this product, this ability is very scarce. He must have the ability to perceive the user sharply, and at the same time stand at a higher level than the user.

    It is conceivable that if there are two departments in the same company, there will be many internal conflicts, including the company and the users.