In 2022, will Chinese VCs usher in the Minsky inflection point?

Image source @ Visual China

Text | Effervescent VCer, written by |cheche and Janet, and edited by | Xiao Tangerine

In 2021, the track was cleared and the industry disappeared.

The double reduction policy was officially introduced, the market value of education enterprises plummeted by more than 90%, behind which was the fate of tens of thousands of "N+1" people; new consumer brands experienced thunderstorms after the explosion, large-scale Campaign and traffic sales halo was no longer there, "consumption cooling" became a hot word loved by the media; live broadcasting This online sales channel has been shaken, Sydney Via's live broadcast entrance has been closed, and the offline physical industry has also fluctuated with the development route of the epidemic...

However, behind this great turmoil, there is also infinite vitality.

The technology, products and brands brought by the pharmaceutical and technology tracks have become the most popular food for everyone; investors who have been swept up in consumption have used their strength to open up new directions, and the era of "a bag of milk and a bottle of soy sauce must also be invested with full strength" is getting far and wide; terms such as carbon neutrality, environmental protection, and business for goodness continue to break into everyone's sight with the values of the new generation...

At the moment when the post-90s wave of the last wave of Internet dividends, the new investors after the 95s are facing unprecedented pressure and challenges. Of course, chaos and crisis also mean unlimited possibilities and vitality.

To this end, Effervescent has connected dozens of fund partners, corporate strategy leaders and special invited Internet celebrity authors who are fighting in the frontline of various industries to interpret the market variables in 2021 and the emerging opportunities in 2022.

What will happen to your industry in 2022? Let's take a look.

"Embracing change and making decisions in the market cannot be a gambler's mindset"

Partner of Xiangfeng Fund Zhao Nan

The perception of 2021 is: always embrace change, some changes are in the laws of history, and some changes are outside expectations. In the highly volatile market to make decisions can not be full of calculations, this is a kind of gambler thinking, a bet is right is not to win, the next time may lose all the chips, there must be blank thinking, can be in the rhythm of the change of ease.

In terms of specific markets, in 2021, with the repeated repetition of the global epidemic, the overall weakness of the consumer market demand side, the rise of raw materials on the supply side, the lack of growth engines in the world, and the lack of really substantial new sectors in the capital market. I don't think there will be much new change in 2022 under the Fed's continued balance sheet reduction. Therefore, in 2022, under the uncertainty of macro sentiment and the epidemic, controlling the rhythm is still the most important proposition for every entrepreneur.

If you want to look forward to some new changes, then the influx of talent and capital from Web2 to Web3 will become a clear trend; in addition, concepts such as online virtual space, synthetic biology, carbon neutrality, energy storage of new energy, and traditional Chinese medicine health care will also receive more capital attention in 2022.

"The globalization of China's supply chain has become an irreversible trend"

Zhichen Zhang, Partner of Boundless Innovation Capital

In the past few years, I have been deeply cultivating the ecology related to the domestic supply chain, and since the end of 2017, I have been paying attention to the goods in the Chinese supply chain going to sea through overseas e-commerce channels. After the epidemic, the demand for overseas e-commerce soared, and I personally experienced the overseas e-commerce industry from 18 years and 19 years invisible in the capital market to the end of 20 years began to pour in capital, the momentum of investment, until the second half of 21 years began to start the Amazon ban and freight soared, resulting in the growth rate of the industry affected, the upward trend was questioned, the capital market temperature fell. I think the cross-border e-commerce industry is at an inflection point now, and there are more opportunities for our new fund. The big logic behind it is that the globalization of China's supply chain has become an irreversible trend.

In the primary market GP competition is fierce, the new fund in the case of limited resources, choose to specialize in a single track of the fund has a better chance to survive, we chose the general direction of supply chain globalization.

Macroscopically, population and industrial distribution are still a very important factor. The United States has reached the tertiary industry is difficult to return, Southeast Asia, India's secondary industry is not yet perfect, the global light industry is more dependent on China's supply chain, heavy industry, high-tech and other industries are also transferring to China. Although some of the future will be transferred to markets with lower labor costs, such as Southeast Asia, in fact, due to the small size of the country and the small population, it is difficult to form a whole industrial chain analogous to China, and the increase in overseas increases mainly comes from the increase in e-commerce penetration around the world. China's infrastructure and entire service ecology for e-commerce are much ahead of the world, so while we export goods overseas, we can also export the entire e-commerce-related service packages, including logistics, payment, tools, etc.

At the same time, we will also pay attention to the various services needed in the supply chain to go to sea, and the ToB and ToC of our cross-border services will be looked at.

The dividend of ToC lies in the opportunity of F2C, and the construction of overseas platforms can allow Chinese factories to connect directly to overseas consumers. After the infrastructure is perfected, many categories overseas are worth doing again, similar to the outbreak of new brands in the domestic consumer market in the past two years, and there are also opportunities for new brands to be formed overseas, that is, to spend a little time. The clothing, fashion, furniture, home and other categories we see have some brands that can continue to do product innovation and continue to track consumers, and there will be opportunities for new brands to exert strength.

ToB's opportunities lie more in the opportunities to serve the sea. The maturity of e-commerce and brand ecology is inseparable from distribution, logistics and payment services. Distribution, logistics, payment services and other pieces in the domestic market have been innovative for many years, related services are complete, far ahead of overseas, we believe that there are opportunities for globalization. In the middle of this, we must pay attention to the issue of localization, the culture, religion, and consumers of each country's market are different, and more deep interaction with the local area is needed, which is also a challenge for new entrepreneurs.

"The nature of the tech industry will not change, but the inflow of talent, resources and capital will accelerate"

Zhongwei Capital Partner Yu Xiaolu

In 2021, one of the feelings of the science and technology track is "expensive", which means that a large amount of funds have entered and favorable policies have continued to develop, everyone has invested more wholeheartedly, and the country is also constantly opening up the research and development and industrialization of its own technology, providing a great boost for the development of the industry. But at the same time, there are some projects that do not have the industrialization foundation and ability to rush to the market, and at the same time, good projects are expensive enough to take off, so the whole is not cheap.

However, the attitude between the primary and secondary markets is not consistent, the primary market is obviously more high, and the secondary market is more calm and cautious, which leads to the project being prone to inversion in the end. I think that the attention to the industry depends more on the fundamentals of the company, not only at the level of premium listing, but more importantly, respect the big cycle, do a good job in the early layout, choose a good team, and conform to the natural cycle of science and technology to see the project.

With the continuous increase in everyone's attention to the direction of science and technology, the subtle changes in the industry in recent years have been seen more, but I think the essential characteristics of the technology track have not changed. The future changes are mainly reflected in three aspects, one is the change of talent flow, more and more high-end talents will return to China to start a business, and excellent resources will continue to be injected, which will also help the breakthrough of domestic underlying technology to a certain extent. Second, the changes in the education system, colleges and universities quickly responded to the trend and trend of scientific and technological development, constantly opened new majors, and carried out research and development and linkage with the industry. The third is the changes in the capital market, such as the A-share preference for science and technology projects in the past, which is very consistent, that is, for-profit, but with the emergence of the Beijing Stock Exchange, the science and technology innovation board, and the registration system, everyone is acknowledging that technology itself, especially the technology TOB, should also need to be given some time to develop well, even if the current profitability is not strong.

Next year, I will definitely continue to look at the technology track, from the general direction, mainly carbon neutrality, car-related peripherals (core components, automatic driving, etc.), AI robots, industrial manufacturing, semiconductor industry chain, etc.

"No one can stop consumers from yearning for a better life"

Founding partner of a consumer fund Okawa

For 21 years, he has been deeply engaged in the field of consumption, witnessing the investment in the consumption track from hot to silent. The sentiment of capital is similar to any wind outlet track in the past, the difference is that many wind outlet tracks in history have disappeared, but the consumption field will continue to have opportunities for future generations. Because no one can stop consumers from yearning for a better life, but the capital boom has retreated, so that the industry has returned to rationality and health.

In 22 years, we will also firmly invest in the field of consumption, and in our hearts, we must accept that consumer brands are not as good as the volume and speed of byteDance; it takes time to accept brand building; we must accept that the field is difficult to monopolize and the brand is pluralistic. In fact, it has always been a free ride of capital to hitch a ride on a good brand, rather than a rocket for brands to hitch a ride on capital.

"The pandemic is a lasting catalyst that will propel the world into a rapid 10-year process of going online."

Yingdong Investment Partner Jiang Shun

We have been deeply involved in cross-border related fields for the past two years, and after the epidemic, our doubts about cross-border have been dispelled. The pandemic is a lasting catalyst that will propel the world into a rapid 10-year process of going online. The short-term imbalance between market supply and demand will undoubtedly bring dividends to enterprises in China, where the advantages of supply chain, talents and manpower are prominent. At the same time that Chinese factories are producing at full capacity, international logistics prices have changed greatly, and overseas platforms have different attitudes towards Chinese sellers.

In 2021, players in the cross-border industry are not having a good time. Whether it is the growth rate of the head players who have taken a lot of money, or the survival status of some cross-border sellers we surveyed, it is not ideal. But short-term cross-border investment depressions make it easier for us to tap into high-quality companies.

We are more self-styled about the industry itself, only to participate in the industry in the form of investment, but also hope to provide more empowerment for players in the industry in addition to funds. It is true that the cross-border track is a very small direction, the project base is relatively small, and most of them are still basic sellers and a small number of service providers in the ecosystem. But we still hope to find the differences between different companies and find investment opportunities from an industrial perspective.

For the main direction of attack in the past 22 years, the theme will not change much, mainly focusing on three directions, 1) for cross-border sellers/brands, will maintain a very high enthusiasm, cautious shots; 2) strategic mergers and acquisitions of overseas traffic, is an important strategic layout for the globalization of Chinese enterprises. Therefore, companies with stable business models related to traffic will continue to pay attention. 3) Strong focus on service providers, including all data, logistics fulfillment, SaaS-level services, service providers (such as plug-in ecology).

The market continues to change, one more geographical dimension, many opportunities will come out.

"Whether it is hard technology, high-tech manufacturing, or digital China, meta-universe, the bottom layer is the cultivation of talents"

Yao Yufei, partner of Duo Whale Capital

Education has undoubtedly been hit hard in 21 years.

After the epidemic, before the double reduction, we had an online roadshow, and 140 institutions signed up to participate; after the double reduction, less than 40 educational investors participated in the roadshow, 90% of which came from the war investment.

In the face of great changes in the industry, we began to adjust and transform, decided not to touch K12 and focus on human resources and vocational education. In the face of the new consumption concept of Z era and the cognition of lying flat, the mismatch between supply and demand of talents is serious. We believe that a number of vocational education companies in Hong Kong stocks are mainly traditional academic education institutions, and with the demand for high-quality development of modern vocational education, as well as the development and penetration of technology, it will continue to change the way of teaching and learning in the field of education. The co-construction of schools and enterprises and the integration of industry and education will usher in major opportunities, and various new vocational education enterprises will continue to be produced in the future that are more in line with social development and enterprise needs.

Message to education investors: whether it is hard technology, high-tech manufacturing, or digital China, metaverse. The bottom layer is the cultivation of talents. Before 2017, the annual population of more than 17 million new students corresponds to more than 10 million higher education graduates per year in the next fifteen years, and the stock demographic dividend continues to exist. Although there is no opportunity for K12 investment, there are still opportunities to provide K12 upstream and downstream services, education informatization, and hardware upgrades. And we have exhausted our lives, and we have never been able to do without education, whether it is study, career planning, children's education, family learning, or university for the elderly.

"Catering industry entrepreneurship "low threshold", more brands, fewer high-quality projects"

Ge Xiantong, head of The War Investment Business of Aunt Shanghai

In recent years, due to the fierce competition in the entire tea drinking track, the entire industry has begun to face restructuring and integration, as one of the representative new fresh fruit tea brands, we have set up a special war investment platform relatively early to operate. In less than half a year, around the industrial chain, we have shot twice, namely an upstream fruit processing enterprise and a catering automation equipment company.

After the "big bubble" of the catering track in the first half of 21 years, some brand founders still have unreasonable valuation expectations. The threshold for entrepreneurship in the catering industry looks low, and although there are many so-called brands, it is difficult to find real high-quality projects. The project has seen a lot, but the shot is relatively cautious.

I hope that in 22 years, we can tap more high-quality companies that are innovative in supply chain products and brand content, and through our real and effective empowerment in supply chain, organizational operation, etc., and the large amount of "tuition fees" that have been paid, so that cooperative enterprises can take fewer "detours".

"From the top-down perspective, the ceiling of the maternal and infant market segment is relatively low"

Mother and baby strategic investor Little naughty boy

21 years of deep ploughing in the maternal and infant industry, the biggest feeling is: the volume of single projects are small, and it is very difficult to find companies with revenues of more than 1 billion. Judging from the financing situation throughout the year, there are obvious differences in the first and second half of the year. In the first half of the year, the momentum of the maternal and infant field was good, the primary market financing events emerged in an endless stream, and many head companies got tens of millions and nearly 100 million yuan of financing; and in the second half of the year, the obvious shortage of funds and the bad consumption industry made it more difficult in the maternal and infant field.

Last year, in the mother and baby industry, more vertical companies appeared. For example, children's clothing will cut a lot of subdivision scenes and specific groups of people. This style of play is easier to reach users, but doing it on a large scale will be challenging. If the top-down perspective is used, the ceiling is too low and it is difficult to advance investment.

In the new year, in the existing mother and baby track, it will still maintain a relatively active position, but it will further reduce the proportion of early projects. Focus on the head growth period of enterprises, as well as teams and brands with industrial integration opportunities.

The strategy in the industry will extend from mother and baby to new families, focusing on family consumption needs, from crowds to categories to find high-quality targets. Take Bao Mama as the tipping point, pay attention to assisted reproduction, confinement services, and maternity health forward, and pay attention to the needs of children's growth and new middle age.

"With the gradual maturity of several major technology stacks, the seemingly "dead end" industry of the Internet has brought huge opportunities to the outside world."

Effervescent Internet celebrity author Zhuang Minghao

As meta OG (and not), looking back 21 years, it was not at all expected that the keyword metavalce could have such a profound impact on the industry.

After five years of the so-called second half, under the premise of anti-monopoly, when the growth strategy/business model/user time and other dimensions have basically reached the marginal utility of 0, the Internet industry suddenly recalls that the biggest development engine of this industry for so many years is actually technological innovation.

The gradual maturity of several major technology stacks such as AI, graphics and computer vision (VR/AR/MR, etc.), cloud (transmission, rendering, cloud gaming, etc.) and blockchain (NFT, Web3, gamefi) will bring huge new opportunities to this industry that seems to have entered a "dead end".

No matter how impetuous and noisy the discussion about meta is, the underlying technological innovation to the landing of the scene, and then the formation of a new business ecology, it seems that a consensus has been formed.

"2022 will be a year of turbulence for global SaaS companies"

Effervescent Guest Author Shi Dangdang

The theme storm of the 2021 venture capital circle rolled up from the Clubhouse at the beginning of the year to the end of web3 at the end of the year, full of idealistic smells. The brief clamor of the former and the fierce controversy of the latter, accompanied by the antitrust crisis of the global Internet giant, and the digital services law just passed in early 2022, all declare the collective wandering and anxiety of the post-Internet era.

In the past 2-3 years, SaaS-based ToB 2.0 (compared to 2015 ToB 1.0) investment relative to the thinning ToC has been given the historical responsibility of supporting the second half of the Internet boom by the industry. Under the dual role of the consensus speed and pocket depth of investment institutions, investors temporarily put aside the value interpretation controversy of 10 times PS, and through the investment cases of 20 times, 40 times, or even 100 times PS, use subversive book returns to stimulate the nerves of all stakeholders, so that the subversive valuation logic of SaaS implies the self-evident domination of the oracle power.

However, a sudden cooling of the secondary markets of US stocks and Hong Kong stocks, which began in the second half of 2021 at the latest, was more violent than all practitioners expected. Well-known SaaS companies in the United States have fallen by an average of 50% compared with the highest market capitalization in 2021, and Hong Kong stocks have reached 80%. The potential decoupling of the capital markets of the two countries brought about by the increasingly anxious Sino-US relationship makes the explanation of simply comforting investors through the cyclical nature of capital markets pale and weak. In particular, the introduction of a series of Chinese stock events and related restrictive policies in the second half of 2021 has accelerated the realization and continuation of this pessimistic expectation.

2022 will be a year of global SaaS companies in the turmoil, and recent articles and short videos on SaaS company growth methodologies and investment values have emerged in an endless stream, reminiscent of the market atmosphere before ToB 1.0 entered the cold ice period in 2018-2019. However, unlike the first round of cold ice, there were still very few companies that reached a certain scale in various sub-tracks at that time, and the market pattern did not have a clear stage. Therefore, 2022 is also likely to be the best window period for mergers and acquisitions in the primary and secondary markets between 10 years before and after. As the proverb goes, when God closes a door, a window always opens.

"The autonomous driving industry has experienced a cyclical trough, and the investment heat is gradually increasing"

Effervescent's new author Xu Jiawen

I have been paying close attention to the early stage of technological innovation and technology innovation, closely tracking the emerging growth points related to information technology in various industries. In 22 years, I will focus on 3 main directions:

The autonomous driving industry has experienced a cyclical trough, and the investment enthusiasm is gradually increasing. The paradigm shift involving automobiles and surrounding industries in the autonomous driving industry in the medium and long term will fundamentally change the format of travel; the resulting market space for autonomous driving sensors, including millimeter-wave radar and lidar, will open up synchronously.

The valuation of the upstream chip enterprises of vehicle-mounted millimeter-wave radar is high, such as the current valuation of Gatland, which is the only one in China that has passed the vehicle regulation level verification, which has reached tens of billions. As millimeter-wave radar moves in the direction of 4D point cloud imaging, many startups at home and abroad are increasing their investment in the field. With the disruption of new car-making forces and the acceleration of the arms race between military enterprises, this cycle is gradually shortening. Mainland millimeter wave chips are expected to give birth to a number of global leading companies.

There are a large number of lidar module companies, which can be mainly divided into three categories: start-up enterprises, Tier1, and cross-border technology enterprises. On the one hand, from a technical point of view, the technical route of the lidar industry coexists in many ways at this stage, and will experience a path from mechanical to semi-solid-solid. The direction of integration has gradually developed from the current discrete devices to the direction of high integration and chipping. On the other hand, for module companies, business capabilities are crucial, and a good lidar product must be closely integrated with downstream applications and iterated together. Therefore, enterprises and industries should target downstream applications at the beginning of development.