Dong Zhanbin of Qingsong Fund: Industrial digitalization opens the second half, and early investment tests "diving" and "persistence"

In 2020, the process of industrial digitalization in China has suddenly accelerated.

On the surface, a new crown epidemic has almost subverted the way all human beings live and work, and "digitalization" has become the focus of attention of the entire society since this year - concepts such as remote collaboration, cost reduction and efficiency increase, and machine substitution have been deeply imprinted in the development context of the industry and have become a topic of common appeal from all walks of life. The reason behind this is that the economic, political, social and other parties have brought Chinese manufacturing to the next turning point, and with the blessing of artificial intelligence, big data, cloud computing, 5G and other high-tech, the industry has a new ability to change.

At the same time, after nearly 5 years of continuous fading of consumer Internet traffic, the head of large factories, entrepreneurs, investment institutions have turned around, the market dividend quickly sinks from the first line to the second and third lines, from the consumer field to the industrial field. Since then, China's supply chain system, which has been silently accumulated for decades, has become an excellent hinterland for digitalization, and finally ushered in a trillion yuan market explosion space.

As an early-stage investment institution, Qingsong Fund has continued to pay attention to the field of industrial digitalization since the third phase of the fund in 2017, and has excavated nearly 20 outstanding startups in many industries such as building materials, home appliances, PCBs, and industrial Internet. Since its establishment in 2012, Qingsong Fund has been invested in more than 200 companies, with a total of 6 RMB funds under management, with a total value of more than 3 billion YUAN, and the investment field covers the two major directions of new consumption and new technology. In the 2019 Qingsong Fund's first science and technology theme fund "Qingsong Wisdom Fund", artificial intelligence, industrial Internet, and IoT Internet of Things were listed as the three major tracks of focus, according to founding partner Dong Zhanbin, the current investment of Qingsong Fund in the direction of industrial digitalization and the recognition of industrial digitalization are undergoing a phased transformation.

Dong Zhanbin, founding partner of Qingsong Fund

From the downstream of circulation to the business level, enterprise digitalization is rising to the dimension of the industrial chain

Compared with the consumer Internet, the process of industrial digitalization in China is obviously more difficult and long-term.

The earliest entry of Qingsong Fund into the industrial field was in 2017, when it was not called industrial digitalization, called the industrial Internet, because at that time, everyone's entry point was basically biased towards the circulation basin, such as the use of Internet technology to shorten the intermediate circulation links, and strengthen the upstream and downstream link capabilities. At that time, Qingsong Fund invested in the B2B supply chain platform for building materials and auxiliary materials [Little Fat Bear], through opening up all the process links of building materials procurement, improving the procurement efficiency of enterprises, helping customers break geographical restrictions, and improving the e-commerce chain, gradually expanding the service scope of the platform from oil, water and electricity, wood, tile workers and other auxiliary materials supply to the sales and procurement of all categories of main and secondary materials, and has successfully expanded its business outlets to 20+ cities, with a total of more than 10,000 SKUs.

Dong Zhanbin told 36Kr that Xiao Fat Bear is the first project invested by Qingsong Fund in the field of industrial digitalization, and then invested in providing one-stop services such as collection and distribution and unified distribution for convenience stores, taking tens of millions of community convenience stores as the service object, using intelligent matching algorithms to help convenience stores reduce procurement costs, dealers increase sales scale, brand owners expand channels and terminal coverage, and crowdsourcing drivers receive more orders. From the data point of view, the model of asset-light and heavy operation has reduced the average procurement cost of convenience stores by 10-30%, while improving the procurement efficiency and operational efficiency by 10 times.

It is not difficult to find that qingsong fund pays more attention to small B enterprises. For this point, Dong Zhanbin believes that small and medium-sized enterprises occupy the vast majority of market share in China, but also a relatively weak part of the digital capabilities, compared with the digital upgrading of large enterprises from the inside out, as an investor, they actually prefer to see the emergence of an industrial ecological platform based on digital technology created by a third party. However, the investment direction of Qingsong Fund does not stay in the field of industrial circulation, with the deepening of industrial cognition, Qingsong Fund has also "dived" from the industrial circulation level to the deep water area - the business and operation level of enterprises.

When talking about how to view this transformation, Dong Zhanbin believes that the ultimate form of enterprise digitalization is industrial digitalization, including the concept of "industrial metacosmity" proposed now, which is also the inevitable result of industrial digitalization after a certain stage - based on the comprehensive integration of reality and virtual world, to achieve a high degree of free allocation of production factors, but it is still in a very early stage, and all aspects of technology and market cultivation are not yet mature.

Returning to the current stage of domestic small B enterprise development, retention can be said to be a fatal problem, which means that the platform must not only quickly acquire customers and achieve large-scale replication, but also maintain good customer stickiness. This requires entrepreneurs to understand the business logic and operating model of enterprise users, "it is not enough to just stay at the circulation level, or to seize the more painful places of customers", Dong Zhanbin mentioned. Therefore, in the past three years, Qingsong Fund has extended its vision to the use of digital technology to improve the efficiency of enterprise business operations, and thus entered the deep water area of industrial investment.

AIoT+SaaS is an effective starting point for enterprise operations. Typical application scenarios include digital management in the engineering and construction industry, such as [Zhihe Technology] through the Internet of Things technology, using a combination of hardware and software to track the status of vehicles at the work site, such as monitoring whether its fuel has been stolen. Although the solution may seem simple, it solves the real pain points of engineering companies – for a long time, due to the inefficiency of manual management of construction sites, the cost of fuel and shifts can account for an average of 80% of the cost of a locomotive. It is precisely because Zhihe Technology has identified the pain points of this industry, and its products and services have been rapidly promoted in the engineering construction industry, and have achieved nearly 100 million yuan in revenue.

Other representative companies in similar scenarios include AI+ clothing flexible supply chain company [Fei Liu Technology], electronic industry collaborative intelligent manufacturing platform [Jiebei], new energy vehicle supply chain operator [MTC supply chain], printing and packaging industry chain digital transaction service platform [Qiandori Interconnection], etc.

Dong Zhanbin said that now the industrial digitalization has moved from 1.0 to the 2.0 stage, the 1.0 stage refers to the digitalization limited to the enterprise, with the upstream and downstream of the industrial chain have carried out digital upgrading, the information barriers between enterprises also need to be broken, the supply chain collaboration ability has been upgraded to the national strategic level, which is also the main driving force to promote the Qingsong Fund from the internal digitization of the enterprise to the digitization of the industrial chain.

Breakthroughs from vertical fields, industrial venture capital pays more attention to "long-termism"

Industrial digitalization is an area that has sharpened the determination and patience of entrepreneurs and investors.

After 5 years of exploration, Dong Zhanbin said that There is still a long way to go in the digital upgrading of China's industry, and it is still in a very early stage.

For investors, projects from the industrial sector are best not to have the illusion of growing dozens of times a year like ToC, for two reasons:

The industry we are talking about is actually a collection of different vertical industries, just like the production and manufacturing of chips covers the front process of partial process manufacturing attributes, as well as the deviation of bulk manufacturing attributes, such as packaging and other post-process processes, on the basis of which there are a series of activities such as enterprise procurement, sales, logistics, after-sales, etc., and these end-to-end links often involve collaboration between different enterprises. Therefore, for startups, it is impossible to penetrate into all aspects in the early stage, there are different business logic, process knowledge, to be compatible with a variety of know-how need time, experience precipitation, which makes most of the industry field of startups to cut into a certain segment, polish out the real business user habits of the product and then gradually expand to similar scenarios.

Procurement for the industrial sector is a very rational consumer behavior, which is obviously different from the ToC scenario. "Impulse consumption" rarely occurs in enterprises, because its procurement chain usually spans multiple roles and departments, and even the decision-makers and users are not the same, "so we will often see a digital project delivered hundreds of thousands to tens of millions, it is impossible to rely on patting the head."

With the continuous sinking in the industrial field, the overall investment style of Qingsong Fund has gradually become cautious and stable. Dong Zhanbin said that the industrial projects he has observed can achieve an average annual growth effect of 2-3 times. However, compared with ToC investment, there are not many players in industrial digitalization, and the dependence on capital is not so large, if you can catch a good entrepreneurial team in the early stage, the project success rate will actually be much higher, basically reaching 60-70%, while toC may only meet expectations of only 30%.

Along with the change in investment strategy, there are also qingsong fund's requirements for investors - "If you want to become a good industrial investor, it is best to go to the industry for 3-5 years, and it is almost impossible to sit in the office like ToC and figure out the business model," Dong Zhanbin said. In fact, in the upcoming 10 years of establishment, Qingsong Fund has always adhered to the concept of "10,000 hours of research", conducted in-depth research on the industry and judged future trends, in addition to paying attention to the quality of entrepreneurs themselves, "long-termism" is also a very important value of Qingsong Fund.

Similarly, "long-termism" is also a challenge to the entrepreneurial team in the industrial field, generally speaking, most of the early start-up companies start from the project, from development, trial to delivery, acceptance basically takes 3-6 months, which puts forward very high requirements for the team's continuous customer acquisition and cash flow cycle. Therefore, even if the entrepreneur has a strong technical gene, if the market cannot be opened in the case that the product has not been fully standardized, it will be a very dangerous thing, and the market and marketing are very critical hands. Industrial digitalization has put forward the requirements of "all-round" players for investors and entrepreneurs, which also means that we are about to bid farewell to the era of barbaric growth and usher in a new round of growth cycle led by "intensive cultivation".