The dot-com bubble is bursting, and the venture capital industry has entered an innovation inflection point

In January 2022, the news that Lu Zhengyao, the founder and chairman of the former Luckin Coffee, laid out pre-made dishes added new heat to the already floating bubble of Internet celebrity consumption track.

An entrepreneur who is also in the prefabricated vegetable track told the first financial reporter that Lu Zhengyao's prefabricated dish project tongue technology is mainly based on offline stores and high subsidies, which is different from its own online e-commerce play, "The other party is more capital-oriented, which is also a 'common disease' for many Internet industry people to enter the consumer field - first use capital to burn a round of subsidies." But the consumer industry is long-term, and it is two different things from the Internet marketing method of buying traffic and subsidizing singles," the entrepreneur said.

In 2021, the "net red consumption track" experienced a cooling decline after the investment boom, and the head tea brand even directly reduced the price to compete for the market, which shows that investors did not see the upward space of the project's own self-driving force after the subsidy pulled the growth of the data, so they chose to withdraw and observe.

Outside the consumer track, the average investment in the industry will continue to rise in 2021, including transportation logistics, finance, energy, building materials, automotive and cutting-edge technologies. Investment data shows that in 2021, a total of 9350 new funds were established in the VC (venture capital) /PE (private equity investment) market, up 70.53% year-on-year, and the stability of market policies in 2021 and the good control of the epidemic in the mainland have promoted the rapid recovery of the fundraising market.

Superimposed on the impact of epidemic factors, policy orientation and the international environment, the investment industry in 2021 and 2022 has changed, after model innovation and technological innovation, it no longer relies on the assistance of the Internet's money-burning play, and "what is true innovation" has become the focus of PEVC's careful consideration in the new situation.

Consumer investment, led by traffic logic, needs to cool down

2020 was once called the "new consumption year", and capital frantically poured into the coffee, catering, and prefabricated cuisine track. In the first half of 2021, this heat is still continuing.

According to the enterprise investigation data, before 2021, Milk Tea Brands such as Michelle Ice City, Neixue's Tea, XiCha, and Shanghai Auntie obtained financing, of which Naixue's tea received a strategic investment of HK$5.858 billion and went public in Hong Kong on June 30; Heytea completed a $500 million Series D financing; Michelle Ice City received a strategic investment of 2 billion yuan, investors such as Hillhouse Capital, Meituan Dragon Ball, etc.; Shanghai Auntie obtained a round of A+ financing of nearly 100 million yuan.

Enterprise chacha data analysts believe that as the tea market enters a relatively mature stage, cutting-edge brands can only find market cracks if they stand out in the subdivision track. For example, guofeng traditional health medicine tea drink "Hetian Water Shop", healthy boutique tea drink "Future Tea Wave", healthy new Chinese tea brand "Bawang Tea Ji", and "Chun Feng" inspired by the same origin of medicine and food, etc., all focus on health care.

In addition, in 2021, there were more than 12 financing incidents of noodle rice noodles, and in recent years, the noodle industry has turned to high-end development, and the intruding investors include Tencent, Country Garden, Sequoia Capital, IDG and other investors. According to the data of the enterprise investigation, many brands such as Wuye Mixed Noodles, Hefu Fishing Noodles, Meet Small Noodles, porcelain Noodles and Rivers and Lakes have obtained financing last year. Among them, Hefu Lao noodles completed nearly 800 million yuan of E-round financing, positioning Chinese-style noodles; "meet small noodles" with Sichuan-Chongqing flavor and high regional characteristics completed a strategic financing of more than 100 million yuan.

The hot project in the net red consumption track is the domestic competitive coffee category, in 2021, the capital market accelerated the pace of investment in the coffee market, and the track is hot. Enterprise investigation data shows that the total amount of financing disclosures related to the domestic coffee industry in the first Ten months was close to 6 billion yuan. Including offline brands such as Manner and M Stand, as well as new brands such as Santo and a Half, Yongpu, Algebraist, and Nowwa Nova Coffee.

In response to the heat of the consumer track, Ji Wei, managing partner of Huaying Capital, said that the rise of new brands in 2017 is the inevitable result of media diversification and media channel unification. Both media and channels have revolutionized in the era of new brands. Before, people were looking for goods, merchants placed advertisements on mainstream media, and users went to channels and supermarkets to find goods. With the diversification of media and the recommendation of e-commerce platform algorithms becoming more and more accurate, it has become a commodity to find people. After the channels of the Tao brand era began to be online, the content platform itself accelerated the e-commerce closed loop and became a channel. Nowadays, all platforms are vigorously promoting the closed loop of transactions, such as Douyin, Kuaishou, Tencent Mini Programs, etc.

But Ji Wei also said that consumption is not like medical or technology tracks, with clear barriers and thresholds. Everyone is a consumer, and everyone can express their consumer experience, but to form a consistent logic and methodology, it is indeed susceptible to subjective feelings.

Li Kanglin, a partner at Tiantu Investment, believes that the last wave of new consumption bubbles has ended, and now everyone is collectively in reflection. The whole market is caught up in the thinking of "what should we do after the traffic logic goes wrong", and we have to re-learn what a brand is. But overall, the tea market is far from saturated, because none of them have reached the size of Starbucks. Objectively speaking, most Chinese people are far more receptive to tea than coffee, especially in second- and third-tier cities. Looking at the current volume of Starbucks, you can estimate the volume of the next Naisher, so this market is far from arriving, and there is a lot of room for tea to operate.

Zoe, who is responsible for the communication of a number of popular consumer track brands, told the first financial reporter that the industry currently needs to clarify a concept that is completely different from consumer goods and Internet technology companies, and currently sees a large number of Internet manufacturers and investors who originally invested in the technology track enter the consumer goods industry, many explosive models, Internet celebrities, traffic Logic are the logic of the original Internet entrepreneurship, subsidies, benefits, free, "wool out of the pig", After cutting a stubble of leeks to find a plate taker, this kind of thing is now completely impossible. Whether consumer goods are done well or not, the time is a little longer to see the results. Luck, capital promotion and smart marketing can create a so-called Internet celebrity in a short period of time (half a year), but in the end, whether it can become a consumer product loved by users takes a longer time to verify, including products, supply chain, quality control management, packaging design, and brand image, etc. Continue to follow the iterative changes of the times, which is the core value.

Long-term investment in the field of hard science and technology

In addition to the consumption track, technology is still the focus of institutional investment layout.

According to the data of the Investment Research Institute, the outbreak of the new crown epidemic in 2019 has made the capital market worse, and although the decline in 2020 has decreased, it is still in a trough. In 2021, the effective control of the epidemic in the mainland and the steady development of private equity funds have played an increasingly prominent role in increasing direct financing, promoting the formation of innovative capital, and supporting scientific and technological innovation and industrial restructuring.

In 2021, a total of 3938 institutions participated in the establishment of new funds, of which more than 40% of institutions set up multiple funds, and about 20% of institutions set up 3 or more funds. Institutions that have set up multiple funds include Xinding Capital, Sequoia China, Linxin Investment, etc.

On January 26, 2022, Sequoia China announced the completion of the fundraising of Sequoia China's New Infrastructure Equity Investment Fund, which has received the participation and support of a number of the world's leading investment institutions, including Brookfield. In the future, the new infrastructure fund will focus on supporting the infrastructure construction in the three major fields of digital economy, new energy and life sciences, and the investment direction will mainly cover new energy infrastructure, high-standard logistics, cold storage, data centers, new economy industrial parks, high-end manufacturing plants, biomedical industrial parks, etc.

In recent years, the rapid development of the mainland economy, but specialized, refined enterprises are still in short supply, under the guidance of specialized new policies, many enterprises have followed up and actively responded to the call of this policy. At the same time, a number of leading institutions participated in it, and while supporting small and micro enterprises, they got more returns, and Shenzhen Venture Capital, Sequoia China, Tencent Investment and so on shot the most.

Speaking of the layout of cutting-edge technologies, Shen Jin, global vice president of Qualcomm and managing director of Qualcomm Ventures China, told the first financial reporter that in the process of building an intelligent and interconnected world of all things, Qualcomm has found 15 key industry development trends, including 5G to enterprise network expansion, digitalization and automation of automobiles, cloud connectivity of automobiles, and XR becoming a meta-universe terminal platform.

Liu Lu, managing partner of Haier Capital, who has been paying attention to the hard technology track, said that the projects known as "intelligent manufacturing" ten years ago are now called "hard technology", and a semiconductor research and development project with a price-earnings ratio of more than ten times ten times ten years ago will still be considered expensive by venture capital institutions, but now similar projects have a price-to-sales ratio of more than 10 times, which shows that the investment main line and valuation system of the current venture capital market have undergone tremendous changes.

The exhaustion of the mobile Internet dividend and the influx of many institutions into the hard technology track have made the competition in the field of subdivision tracks more and more intense. Liu Lu said that the current industry volume, one is manifested in the fierce competition at the project end, and the other is the fierce competition at the capital end.

A PE investor told the first financial reporter that investment is a cycle of reincarnation, currently under the influence of multiple factors, hard technology has become an investment hotspot, but the current valuation bubble is gradually punctured, PE is becoming more and more difficult to do.

Fu Jixun, managing partner of GGV Capital, said that from 2020 to 2021, GGV has raised nearly 20 billion yuan and 2.5 billion US dollars, plus a scale of more than 3 billion yuan, and the total management scale has exceeded 9.2 billion US dollars. In recent years, GGV's layout in science and technology has accelerated: 50% of the layout in the field of cutting-edge technology, the Internet accounts for about 30%, and about 20% of the investment around new consumption and new brands.

"With the introduction of the policy, we will pay more attention to the market of technology +, AI+ and robot +, especially in the field of accelerated development in the past two or three years, semiconductors are one direction, AI+ medical treatment is a direction, and robots are also a direction of our layout." Fu Jixun said.

Venture capital industry enters an "inflection point"

Although the scale of investment in 2021 continues to rise, the domestic venture capital market has changed in many aspects such as policy environment, geopolitics, and underlying investment logic during the year. Many U.S. dollar fund LPs (funders) are worried about whether China's internet model is coming to an end.

Zhou Wei, founding partner of Genesis Partners CCV, said that in the past china's Internet era, every domestic platform company is staring at the domestic market to compete, Tik Tok outbound development is only an accidental event, but at present, There are a large number of hard technology companies in China, such as robot companies, AI companies, autonomous driving companies, and technology and medical companies, all of which are set to build world-class enterprises.

Of course, the changes are indeed happening in China's domestic PEVC market. Zhou Wei said that from 2016 to 2020, many institutions predicted that China's venture capital market will usher in a big wave, but in fact it did not happen. However, from 2021 onwards, the stage of the venture capital industry has arrived. Secondly, the investment logic of venture capital institutions has also appeared an inflection point, between 2000 and 2010, many domestic entrepreneurs have been imitating the American model, from 2010 to 2015, Chinese startups began to have their own strategic innovation, 2015 to 2020 More and more Chinese startups have opened technological innovation, but from 2020 onwards, how Chinese startups will innovate is another problem that venture capital institutions need to think about.

As for the inflection point ushered in by the current venture capital industry, Zhou Wei said that it mainly comes from the trade-off between US dollar funds and RMB funds. The initial development of the domestic venture capital market was mainly dominated by US dollar funds, but with the changes in the international policy environment, the contribution of US dollar funds may have a rapid contraction in the future. In contrast, in the next decade, the entrepreneurial innovation fund support of Chinese enterprises will shift from relying on overseas capital in the past to dominating with domestic RMB capital.

Another recent change in the domestic investment industry is that Internet giants are more cautious about investing abroad. Not long ago, the relevant person in charge of ByteDance responded that the company decided to strengthen business focus, reduce investment with low synergy, and disperse the employees of the strategic investment department into various business lines.

According to the data of Tianyancha, In recent years, ByteDance has invested more than 100 projects (including domestic and overseas markets), and more than 400 foreign investment companies have been involved in various fields, including hardware, medical health, auto transportation, finance, e-commerce, catering, advanced manufacturing, social communities, artificial intelligence, tools and software, games, etc. Earlier, Byte announced that it would spend 9 billion yuan to acquire a VR equipment company, Pico, triggering the rise of meta-universe concept stocks in the secondary market.

A person from an early domestic investment institution told the first financial reporter that the byte investment map has little significance for its own business. Compared with the more decentralized business ecology of Tencent and Alibaba themselves, the byte business is more concentrated - with information classification as the core, it lacks the surrounding ecology, and it is unique. For this format characteristic, the return rate of focusing on its main business is the highest, and the Tik Tok increment of Byte's overseas business is still there.

In addition to Byte War Investment, how the investment departments of Tencent and Ali will move is also the focus of market attention. At the beginning of 2011, Tencent announced the establishment of a 5 billion yuan industry win-win fund, and then invested in representative cases such as eLong Travel, Huayi Brothers, Sogou, Didi, JD.com, and Station B in many fields. As of the end of 2020, Alibaba had invested in 433 companies, initiated or participated in 529 investment events, and the total disclosed investment amount reached 827.69 billion yuan. Among them, Alibaba participated in 360 investment events, Ant Financial participated in 128 cases, and the rest were contributed by Alibaba Pictures, Ali Health, Cainiao Network and other investment entities.

Wang Jing, a partner at Yunjiu Capital, told the first financial reporter that the trend of CVC shrinkage in the Internet industry under the policy has been very clear. To prevent the disorderly expansion of capital, it is necessary to guide the industrial parties with capital to assume social responsibility and carry out value investment that benefits the country and the people.