Author: Ping Xiaoping, 24 new sound
Head image from: unsplash
Since joining Zhonglu in 2010 and now becoming the founding partner of Chang Lei Capital, he started to do analysis and analysis of traditional consumer industries and high-end equipment manufacturing industries, gradually transitioning to early investment in the TMT field, and gradually focusing on To B Investment in the field. He wrote an article “ SaaS field investment logic and indicators & estimates Value judgment “has attracted industry attention; in 2019, his” On the self-cultivation of VC practitioners “serialized, which exploded the venture capital circle, and many people also knew an author named Amao. Today, he has established Changlei Capital together with his partner for many years and continues to look for investment opportunities brought about by technological innovation.
This article mainly shares Shi Mao ’s personal real perceptions along with the strategic logic of investment in recent years in the VC field.
From 0 to 1
After graduating from graduate school in 2011, I joined the Zhonglu Group. At that time, the domestic VC market was still immature, and it was a budding period for local VCs or angels.
I have gained a lot in the middle of these years. Almost all cross the river by touching stones, because the field of venture capital research is not like other mature industries. There are research coverage of securities firms, research by third-party intermediaries, or professional consulting services. At that time, the mobile Internet had just risen, and I was sent to study cloud computing. At that time, my eyes were black, and I kept asking myself three questions every day:
1. How to study an emerging industry, especially when there is no data on the track?
2. How to make a track prediction and competitive product analysis?
3. How to reach excellent entrepreneurs?
For those of us who are new to the industry, the above-mentioned problems are great challenges. Through continuous trial and error and practice, I realized the meaning of the “reference system” often mentioned in physics. In the case of not being able to attack, we must learn to study the track by analogy, for example, to cut in from the adjacent mature track, and to find breakthroughs from the neighboring US and Japanese markets.
I am curious about new things and can conduct analogy research and analysis. This is my first harvest.
I have been doing research for two years before entering the industry, and it was not until 2013 that I actually started to invest in projects. At that time, I was fortunate to meet a group of very good entrepreneurs. Looking back, I missed a lot of great projects among them, but I witnessed their growth along the way, and I learned a lot. IPO in A shares. At the same time, my own investment has gradually found a sense, and a batch of subsequent investment companies have gradually grown into industry leaders, and have brought good return on investment. But objectively speaking, the investment opportunities from 2015 to 2018 are indeed much less than those from 2010 to 2014.
There are cycles in any industry, as is VC investment. Looking back at China’s VC investment market, as early as early 2000, China’s capital market was still inactive. In terms of US dollars, China may have no more than 20 institutions that may be active. Because of the financial crisis in 2008, many institutions began to evacuate. This is actually an opportunity. Today, many of the familiar VC organizations started to rise from that year. From 2009 to 2011, the mobile Internet was in its infancy, and fully erupted from 2011 to 2016. At that time, China’s VC or angel investment also reached its peak. Then the market began to turn sharply and entered the stage of shuffling. So as you see the VC survivors today: either the head effect is concentrated, or the subdivision track is focused.
I always think: Only when we meet, will we believe. If you have not done VC, and have not experienced a complete industry cycle, cross-border VC or hastily created a new VC brand, you really have no idea. Regardless of fundraising, let ’s not say (Of course it is actually very difficult) I was very happy at the time, but when it was time to return the money to LP, you only found a bunch of exit problems waiting for you.
After staying in a company for a long time, both vision and subjective initiative will encounter bottlenecks. When you reach a certain age, you are always sexy about uncertaintyFear, so a few like-minded people choose to re-enter the road to see if they can use their own practice to inspire a stronger self.
Back in 2019, our three partners, from 0 to 1, started to establish Changlei Capital. Pan Jinzhao turned out to be my colleague at Zhonglu, and tacit understanding complemented each other. Feng Bo has the dual experience of top IT industry background and VC, and is also a friend who has known for many years. As the saying goes: three stupid masters, top Zhuge Liang, we always adhere to the strategy of three hits and one, three refers to three people playing in person; one refers to a period of time, focusing on a subdivision track, selecting the only us Recognized outstanding entrepreneur. It was later discovered that this path was not easy. We learned to do our own public account, as a manager to record, find projects, formulate investment strategies / strategies, and even social security and tax payment for employees, all of which must be done in person. The expectations at the time were not high, and as long as they survived, they gradually got better.
There are not too many employees in the current permanent capital, basically the three partners charge forward.
Investment logic and industrial strategic layout
The current market situation is more severe for newly established funds than ever before.
There is a saying in the industry: the brand is not enough, the funds come together. But compared to the current head VC on the market, the new fund’s ammunition is also stretched. How to compete on the same track is the first problem we face. It is obviously not a wise choice to face head-to-head VC in the main battlefield; however, in the local battlefield, concentrating superior strength can still annihilate the enemy ’s vitality. The solution is summarized as follows: focusing. We are currently focusing on the software-driven To B field, and do not necessarily need to be the first investor of the entrepreneur. We will pull the stage to the A round.
To understand the nature of the VC financial market, it is necessary to understand the relationship between supply and demand. From the perspective of asset supply, the number of entrepreneurs in the past two years has been much smaller than before, which has led to the accumulation of funds to good projects. From the perspective of capital demand, the head VC has the vast majority of funds and investment pressure is also great. This is like the volume of the reservoir is smaller than the original, but the source of the water is still flowing; this will inevitably lead to a lot of overflowing water, obviously the overflowing water is a waste of funds.
So we see that big funds are very generous, sometimes the valuation of the project is higher than the general fund. This is also very unfavorable for general funds and even newly established funds. In the past year, we have also observed that the valuation of relatively high-quality projects in the market has even continued to rise.
However, we also have our own entry point and coping strategies. To hedge against the adverse effects of the valuation premium above, in addition to focusing, we must also strive to run faster than the head VC. The three partners of Chang Lei will think about the resumption every time, and divide and confirm the hot spots in advance. This hot spot is not a daily report from the technology media in the market, but is obtained through our own interpretation of industry policies, in-depth grass-roots research, and the information provided by industry informants or friends and business colleagues. Of course, we pay more attention to Party A. The real needs of the manufacturer.
In the VC market, especially in the early days, one more person will have more information to cover. The information coverage of the three people is far superior to any partner of a large fund. Sometimes the reason behind the establishment of a project is more meaningful than what the project looks like on the surface. These are not short-term. It can be discovered within one or two contacts. Because we have been focusing on a few tracks and continuing to track, we also have an advantage in the analysis of the industry’s competitive landscape.
Many VC institutional investors in the market are still pursuing the psychological state of pursuing the case when they are pushing the case. They are afraid that Miss will lose an important trend and miss the opportunity to earn big returns. Therefore, competition within the fund often exists, and the participants of different projects are not fixed every time. In addition, the A / B round projects have many flaws, so the final investment of many projects is not a victory of objective analysis, but Victory demonstrated within the project. This must contain a mentality of gambling. In fact, this is an unavoidable problem for any fund. As a newly established fund, the interests of the three partners in the early days of the establishment are highly bound, so we will focus on searching for a track. After the research, we will either give up the track or choose the best track we all think of. Players, so we will not blindly follow the trend. For good projects, we are waiting for and looking for trading opportunities, rather than fighting for the heat.
In addition, because we have been in the business for a long time, there is some accumulation in the industry. Although the brand is weaker, it is still possible to reach out to entrepreneurs who we think are very good through “face-washing”.
For specific industry styles, we also have our own set of ideas. According to the “vertical and horizontal principle”, we also divided the enterprise into several levels. Horizontal is to divide enterprises into large enterprises, medium-sized, small and medium-sized or small and micro enterprises.
For large-scale enterprises , we are more concerned about autonomously controllable and sophisticated software products used in the “core production environment”. The logic here is the import substitution of the stock market. For example, Oracle, SAP, Microsoft and other European and American technology giants have a lower proportion of domestic purchases of products. Domestic technology companies replace old and beautiful things.In other words, this is simple logic. Of course, the customers of these entrepreneurs are all spire customers, that is, China Fortune 500 companies.
Medium-sized enterprise is a waist customer in China; the cost of acquiring such customers is not low, so we prefer to cut vertically from an industry. The digital transformation of enterprises is also the focus of these enterprises. At the same time, you must pay attention to the major changes brought about by a policy to an industry.
For small, medium and micro enterprises , traffic is a pain point for them. If you can’t create traffic, then try to help them broaden their traffic channels and aggregate traffic; if you can’t help them broaden their traffic channels, then they must find ways to shorten the cycle of acquiring customers with technical means. And it is best to give them a powerful supply chain database to make their business more convenient.
If the horizontal direction mentioned above is divided according to the size of the enterprise, then the vertical direction is divided according to the needs of different industries or product functions. In addition to focusing on traditional finance, energy, operators and other large industries with traditional budgets, we also noticed the following two directions:
As the proportion of the tertiary industry rises, we tend to invest in the management of people with software products. In terms of global trends, the secondary industry is making a leap forward to the tertiary industry, and the proportion of services is increasing. How to use information flow to connect people, release people’s entire value, and improve efficiency is also our pursuit. Whether it is performance, salary, personal taxes or collaboration, including remote video, it also makes people’s communication and business have a strong improvement.
Another thing we care about is Industrial interconnection . This is not simply a digital connection, but the software technology really plays a role in promoting, combined with the current 5G and Internet of Things auxiliary means, to achieve the supply-side change, thereby reshaping the industry.
What projects have you watched in the past two years
First talk about a project we invested in. In 2018, Chang Lei Capital invested in Yu Xiao Er. This is a SaaS project focusing on long-term rental apartments. In fact, it is an industrial interconnection. At that time, because the fund was still in the process of being established, it first invested in the name of an individual. Investment is about time and place. With the continuous investment of capital in the long-term rental market this year, this market has gradually matured in China, and there are more and more participants. Because real estate leasing is real estate, unlike the e-commerce platform we saw before, as long as the subsidies are closed, the flow can be obtained, and then use the flow as a bargaining chip to negotiate with the supplier to obtain a premium. Long rentThe apartment has a two-level status. The first few brands are crazy financing, but the losses are serious; the long-tail small brand or the second landlord is steadily playing a nourishing life, because no matter how much money you have, it is impossible to sweep China Listings; so you will see that some of the head companies are slowly closing down, splitting out many small brands, this is a market with a long tail.
Afterwards, it proved that our investment logic was correct. Some industries are always killing others, and some industries are difficult. For example, in the field of e-commerce, Ali occupies the vast majority of transactions, so it is profitable. JD.com will be very tired, but it still has its market, and Pinduoduo is also catching up quickly. But the following e-commerce platform is almost difficult to survive, this is the winner-take-all. However, the real estate is real estate, and the expansion is very slow. B to C at the head does this. There is a market for it, but it is impossible to monopolize quickly. Long-term rental apartments ushered in thunder last year. Although the eggshell and Qingke are on the market, they have a hard time. The epidemic has also had a great impact on the long-term rental apartment in the head, but Yu Xiaoer ’s paid product revenue in the past three months has increased by 300% over the same period last year. This is an inflection point, and the current monthly recharge of up to 3 million .
In 2019, we watched a lot of projects, but regardless of RPA technology, mid-stage, low-code, etc., we do n’t think these are new independent innovations, we think they may still be done in separate scenarios To become an industry solution, the concept itself is not important; it is like an independent AI company that is not very large in the United States, but in fact, SaaS companies with a market value of more than 10 billion US dollars are using AI technology to continuously integrate with their products. Taking our previous investment cases, such as the cloud account room invested, it uses RPA technology to change the field of finance and taxation and realize automated processing in this field; for example, the Brocade software we invested before will also land on the Science and Technology Board Yes, it uses low-code technology to create its own Yigo language platform, thereby achieving the flexibility and modularity of upper-layer applications, which is similar to SAP ’s Abap. Therefore, we still pay more attention to the landing of application scenarios and the actual needs of Party A.
In fact, the companies we have invested in are also the touchstones of our judgment projects. For example, no matter what image recognition and RPA technology, we will know when we try to connect to the cloud account room; many low-code tools we bring to Brocade to be a POC can see the comparison. Of course, there are many such examples.
Overall, many of the projects I watched last year did not meet the ideal expectations. Instead, I did n’t make a shot. I did not find a too eye-catching point. Of course, some projects might be missed. But for the first fund, we still have to pursue the success rate.
VC is essentially an information and intelligence center
Changli Capital focuses on the vertical track of information technology and enterprise services. Although the scale is not large, we will not stick to the early stage, because we continue to track the entire cycle of an industry. Contacted, in fact, is the reuse of investment and research capabilities, we will leave a part of the funds invested in 1 or 2 relatively mature industry leading enterprises. For me, the focus will be on the A round, but it is not that the assets behind will not be concerned, so it is actually wrong to focus on one area in one way. We also abandon many of the early methods of diversification in the past, and the way of spreading the net has been difficult for today’s investment to earn excess returns.
Because you also participate in the later stage, you will spend your energy studying the overall situation of an industry. A trend and a strategy of a mature enterprise in the later period may affect the judgment of your early project. So this is also our advantage, focusing on the A round, but not sticking to the A round. Our whole is still a play of partial industry.
Everyone must also pay attention to our sources obtained by the project , I can also share with you:
First, because we are actually familiar with many CEOs and entrepreneurs, and also have a CIO circle, they will be exposed to a variety of products, will give us some recommendations, this is from the first-line product use Experience, this is very important. And the quality of such projects is quite high.
Second, the senior head FA organization, maybe they are doing B / C round, but the A round can also reach some good entrepreneurs, they are also happy to share with us, we are actually an industrial synergy.
Third, among so many entrepreneurs who have voted in the past, good entrepreneurs will still meet good entrepreneurs and will recommend them to us.
Fourth, the media channel, we will also regularly do some high-profile projects and track tracking. In terms of information acquisition, the business card database platform has given us great help and can be used as a basis for industry research and competitive product analysis.
In addition, we will also analyze what new opportunities national policies and trends will bring, so we will also cooperate and communicate with some industry associations or industry formulators, and will also bring some clues.
About the pursuit of life, I think life is divided into several 10 years. I am now in my 30s. For the past 10 years, I have been a migrant worker. I have been learning industry knowledge and understanding the changes in the world, but I have always maintained a curiosity about fresh food. Being independent now can be regarded as a new road, and I hope to participate in it through investment