October 12, 2021, Shanghai, a new tea drinking internet celebrity brand Xicha chain store. Source: Visual China
Author 丨 Ye Hao
Editor 丨 Kang Xiao
Produced by 丨Shenwang Tencent News Xiaoman Studio
"Sequoia China Seed Fund's consumer investors have recently turned the course." At the end of 2021, an investor who did not want to be named told the Deep Web.
New consumer investment has entered the winter, and some investors who invest in consumption have transformed to interview hard technology and chase new outlets. Some investors lamented to the media, "How powerful is the power of capital, last year when new consumption was the hottest, the entire venture capital circle was talking about new consumption, but now they are saying that the new consumption winter has come, and the entire consumption track has been destroyed in a year's time." ”
At the beginning of 2022, several head brands of the new consumption track also started unfavorably. During the Lantern Festival, Wen Heyou was exposed to large-scale layoffs, and just two days ago, Xicha was exposed to 30% layoffs.
Zhang Ye, the founder of Tsingshan Capital, believes that there are three types of people in the market who are concerned about consumption, one is that they have been investing in consumer institutions, and the second type is the wave of institutions that originally invested in TMT, they like to pay attention to the data model, these products brought by this kind of capital on the market, and the third type of investors are focused on a certain entrepreneur, and he will invest in whatever this entrepreneur does.
TMT's wave of investors who switched to new consumption became barbarians at the door of the new consumption track. Most of the entrepreneurs they invest in are good at internet traffic play, but they have also been repeatedly criticized, and various brushing operations have been put under the sun, coupled with the data evidence of the decline in sales of some brands, they have been labeled as "cutting leeks".
Throughout 2021, the new consumption track has indeed turned from hot to cold. According to the incomplete statistics of IT Orange, from January to December 2021, a total of 826 financing transactions (excluding IPOs and private placements) occurred in the domestic new consumer industry, and the total amount of financing transactions disclosed reached 83.1 billion yuan. And August became a watershed for the entire industry from hot to cold.
According to the data of Ene Niu, in July 2021, although the number and total amount of financing events in the new consumer industry have declined compared with June, they still reached a height of more than 100 cases and 13.48 billion yuan. However, since August, the number of monthly financing projects has been less than 100, and the monthly financing amount has not exceeded 10 billion yuan.
Many investors told the "Deep Web" that in fact, the new consumption track is now just the norm, TMT this wave of investment managers is like the barbarians at the door, they brought a short period of "prosperity", but also brought a bubble, now, they withdrew, to chase the new outlet, and the new consumption track returned to the past calm.
First-line investment institutions have entered the consumption track
In the first half of 2021, low-grade wine has also attracted much attention in the capital market. According to data, as of June 2021, new low-grade wine brands such as Sanliang, empty cards, and horsepower tons have been financed, and investors include Jingwei China, Galaxy Venture Capital, AndteDance Investment Department, etc.
Huang Yibing is the founder of Mai Ting Beer. In 2020, Huang Yibing plans to start a business again, he chose a low-grade wine track, intending to develop a juice craft beer. Huang Yibing mortgaged his family's property for 3 million yuan to start a business, he invited industry professionals to be product consultants, and at the same time, he also invited the new media manager of a large food group to be responsible for marketing.
At the beginning of 2021, after the development of Maiting juice beer products, Huang Yibing first focused on offline channels and supplied more than 300 convenience stores and catering bar channels in Henan, but the sales of convenience stores were not good. At first, Huang Yibing thought that the new product was low in popularity, but later, he checked the sales of competitors and found that the sales were similar.
Convenience stores for juice beer, this sales "field" is not right. However, this trial and error is expensive for Huang Yibing, and at the end of April 2021, he decided to raise funds and found a dark matter company in Hangzhou as a financing consultant. In May, Huang Yibing came to Beijing from Zhengzhou, Henan Province, and met with more than a dozen investment institutions.
On May 10, 2018, at the beverage innovation product exhibition site of Nanjing National Exhibition Center, Internet celebrity brands with the characteristics of expressing bottles, quotations, vials of low-grade wine and even "× small ×" caused a follow-up trend. Source: Visual China
In the first half of 2021, the new consumption track is not only hot for wine, but also for tea, pasta, coffee, baking and other subdivisions. According to the incomplete statistics of IT Orange, in the first half of 2021, there were more than 333 investment and financing events in the new consumption field, and the amount of financing was close to 40 billion yuan.
There was a massive influx of capital, and some head brands experienced multiple rounds of financing in the first half of last year, and valuations rose sharply. Some investors pointed out that the valuation of consumer projects in the first half of 2021 was about 3 times more expensive on average, and star projects were even more than 5 times higher. Even if it is expensive, investment institutions are still scrambling to submit letters of intent to invest, hoping to get a piece of the pie.
Li Xing, an investment manager of a leading institution investing in the consumption track, told the "Deep Web": "An entrepreneur of a star project, he has a list of questions, investors need to answer the questions and send them to him, and the entrepreneurs will choose three investment institutions to interview him." Finally, a 1:1 allocation is required to invest. ”
In Li Xing's view, the process of investors seeing this entrepreneur is comparable to "choosing a concubine", and he feels strange. But such stories circulate frequently in the venture capital circle.
In April 2021, Guo Zhenwei, an investor in Sequoia, knocked on the door of Hong Lei, the founder of Ma Jiyong Beef Noodles, with a bottle of wine, and the two talked until the early morning of the next day, when Guo Zhenwei finally got the TS (Letter of Intent to Invest) and went to a roadside stall with Hong Lei for breakfast. Previously, Hong Lei has seen no less than 15 investment institutions, and Sequoia has given a valuation of 1 billion yuan.
In the same month, Ma Jiyong's competitor Chen Xianggui beef noodles also won the angel round with a valuation of nearly 1 billion yuan, and another competitor, Zhang Lala beef noodles, took over the "olive branch" thrown by GSR Venture Capital and Shunwei Capital. After 3 months, I met Small Noodles, Wafu Noodles, Ando Noodles, and Wuye Noodles... They have also received financing.
It's not just the pasta track that's hot, it's the baking track as well. Mo Mo Dim Sum Bureau, born in June 2020. It was born in 5 rounds of financing in one year, and the valuation reached 2 to 3 billion yuan. Liu Bo, vice president of Qingliu Capital Investment, invested in the A round of the Mo mo dim sum bureau, when the mo mo dim sum bureau only had two stores, but it was already a situation where several first-line institutions rushed to invest.
Under the squeeze of the head investment institutions, VCs focusing on consumption are obviously anxious.
A song of ice and fire for the new consumer track
"There were just a few people in the original consumption track," Pan Pan, managing partner of Tiantu Capital, said frankly in an interview with Shenzhen.com in April 2021. As we all know, Tiantu Capital has been focusing on the consumption track, from Zhou Black Duck and Jiang Xiaobai more than a decade ago to today's Nai Xue, Cha Yan Yue, Three and a Half Meals and so on.
Pan Pan, a native of Changsha, Hunan Province, joined Tiantu in 2014 and is currently the managing partner of Tiantu VC Fund. He first discovered Naixue's tea, and Zhao Lin, the founder of Naixue's tea, told Pan Pan: "In the future, milk tea will become a way of life, drinking more than one cup a day, drinking three or four cups a week." Pan Pan told this story to his colleagues, but few people believed Zhao Lin, but Pan Pan believed it.
Source: Visual China
"He's doing this, not telling a story. Why can't we do this with him, in case it happens? Pan Pan persuaded the investment committee of Tiantu, and Pan Pan's Tiantu investment became Naixue's A round, A+ round, and continued to lead the investment in the B round, which was the earliest and largest institutional shareholder of Naixue's tea.
In Pan Pan's view, entrepreneurs are lonely, especially before a track is proven. Investing in consumption, Pan Pan also sat on the cold bench for many years. In the past few years, the stories of the venture capital circle are all about Internet investment, most of which are related to the wind outlet.
"At the end of the 1990s, investment was made from the perspective of information symmetry; from 2003 to 2005, it was all commercial platforms; in 2010 and 2011, it was the mobile Internet, which lasted for about 3 years; in 2014, the entire venture capital industry as a whole was looking for direction." Zhang Suyang, the founder of Volcanic Stone Capital, once told the Deep Web.
In Zhang Suyang's view, "2015 and 2016 really can't find the direction, so there is enough money to create a situation, such examples are many in China, but relatively few abroad." So the whole venture capital circle in 2016, 2017 looks like there are only two bike stories. ”
The era of mobile Internet is roaring and whistling away.
"Financial practitioners are on average ten years older in the first four months of 2018, mainly because they stayed up late for a short time to learn hard-core knowledge such as blockchain, option pricing, Middle East geopolitics, international law, WTO, trade wars, regional planning, and integrated circuits, but obviously did not make any money." This is a passage handwritten to ridicule the financial practitioners in 2018.
This side illustrates the fact of a venture capital circle, that time period for TMT investors, the outlet disappeared. A year later, they found a new track. 2020 is known as the first year of the "new consumption era", and trillions of capital are pouring in to create a feast for new consumer brands.
"The original investment in TMT has shifted to consumption, and they have also given new consumer companies a relatively high valuation." Pan Pan elaborated. It is also true that, take the tea drinking track, Hillhouse, Sequoia, GGV, Qiming, Wuyuan Capital, GSR... All killed.
In addition to the logic of the outlet, what is the underlying logic of the new consumer investment boom?
In Pan Pan's view, "it is related to the awakening of consumer consciousness in China." China's supply chain ecology is very complete, coupled with the underlying innovation, traffic changes, business model changes, and changes brought about by multiple factors. Consumption is originally a long-term field, which can be done for many years, ten or twenty years. ”
A chicken feather after the traffic pattern rushes
Zhang Ye, the founder of Tsingshan Capital, said: "There are three types of people in the market who are concerned about consumption, one is that they have been investing in consumer institutions, and the second type is the wave of institutions that originally invested in TMT, they like to pay attention to the data model, these products brought by this kind of capital on the market, and the third type of investors are focused on a certain entrepreneur, and he will invest in what this entrepreneur does." ”
As Zhang Ye said, TMT Nabo institutions pay more attention to the data model. Therefore, some people attribute the rise of some new consumer brands to the traffic play and the logic of explosion. Some people even summed up a fixed formula for building a new consumer brand: 5,000 little red books + 2,000 Zhihu Q&A + super head anchor with goods.
There is also a kind of To VC-style entrepreneurship - some people in the entrepreneurial team understand financing, some people understand marketing, some people have industrial resources, and a new brand is born. If you add Tmall or Douyin growth data is considerable, this project is naturally more popular in the capital market.
From this point of view, it is inevitable that serial entrepreneur Huang Yibing will be frustrated in financing. Huang Yibing spent two weeks in Beijing, and the investment managers of the institution gave him feedback: the first was that he had no relevant FMCG experience and no experience in large factories; the second was that he did not have a good sales data at that time, and the third was that the sales channels had not yet been set up.
Huang Yibing graduated from Beijing Jiaotong University, and after graduating from university in 2010, he returned to his hometown in Luohe, Henan Province, to start a business. Huang Yibing joined a milk tea brand chain store, at that time there were only four shopping malls in Luohe City, he opened a milk tea shop in the mall. The operation was nice. Subsequently, Huang Yibing opened two more branches, opened two catering theme restaurants, and had nearly 50 employees.
Everything is also going smoothly, next, Huang Yibing suffered a huge setback, a theme restaurant because of the wrong location, the capital chain is broken, helpless, Huang Yibing closed three stores, and finally only one milk tea shop remained. Overnight back to before liberation. Prior to founding Mating, he had been starting a business in the retail sector.
But compared with the low-alcohol entrepreneurs who raised funds in 2021, even if Huang Yibing is a serial entrepreneur, he is indeed not the entrepreneur that TMT investment managers like.
According to media reports: Chen Yicheng, co-founder of Xuejia e-cigarette, Liu Shuo, former head of national pipeline sales of Xuejia e-cigarette, Liu Zhe, former executive of Fluke e-cigarette, and Zheng Bohan, former partner of YOOZ e-cigarette products, etc., they respectively founded low-alcohol liquor brands horsepower tons, go to Qingjiu, 10 o'clock, Lanzhou, and all obtained financing.
In the first quarter of 2021, there were 2449 liquor brands with sales growth rate of 100% or more, of which as many as 1415 were low-grade liquor brands, accounting for 57.8%. In terms of specific marketing methods, low-grade wine brands are inseparable from the three keywords of planting grass, live broadcasting and endorsement.
Everything seemed perfect, Huang Yibing ran a lap around Beijing, very frustrated, and he returned to Zhengzhou. The first thing the product manager cares about can't be changed, but the second data of Mai Ting craft beer, he can still figure it out. New consumer goods must also return to the essence, and find the corresponding consumption scenarios - restaurants and bars. Online, he experimented with new brands' play and sales models.
Soon, Huang Yibing found that several craft beer brands that were very active in the early stage suddenly became quiet, "After some brands have been raised, the way I know is to ask for endorsements first, live broadcasting, and what if the money is burned and the goods cannot be sold?" They will brush a single brush to talk to investors about a sales GMV, if the next round of money can not come in, it is easy to die, because the sales are fake, the user is also fake. ”
Indeed, the repurchase rate is a touchstone for new consumer brands. 36Kr has reported that the repurchase rate of almost all brands of low-grade liquor in 3 months is negligible; last year, the convenience brand that sold 600 million yuan, the sales in recent months were only 20 to 30 million; a food brand once claimed to have "300 million yuan in online sales in a few months", but the real data has fallen below 20 million yuan.
A return to rationality in 2022
On October 29, 2021, the vice president of Qingliu Capital Investment appeared at the recording scene of Chaos University of the Party School of the Ministry of Railways, saying that new consumer investment has cooled down.
And it is. Correspondingly, according to statistics, in August 2021, there were a total of 127 investment and financing incidents in the domestic new consumption sector, down 17% from July 153. Among them, a total of 93 projects have announced the financing amount, and 27 100 million yuan financing projects, down 35% from 42 in July.
As the consumer track cools, people begin to question whether the business model of some new consumer brands is really established. The traffic playing method of the new Internet brand has been repeatedly criticized, various brushing operations have been put under the sun, coupled with the data evidence of the decline in sales of some brands, the new consumption has been labeled as "bubble" or even "cutting leeks".
"In the past 20 years, there have been very few consumer brands that have really run out in China, and those brands that have climbed the threshold of 1 billion yuan are rare, because they are locked by traffic logic." If the brand can't escape the traffic inflection point, it will never become a winning player. It's like a squid game where everyone fights, the last person wins the prize, and the others are all cannon fodder. "Canaph Capital Song elaborated forward.
Jiahua Capital, founded by Song Xiangqian, has focused on consumer investment for more than ten years, and has invested in enterprises such as Actually Home, Aimer Group, Dongpeng Beverage, and Qiaqia Food.
In Song Xiangqian's view, among the new consumer entrepreneurs now, there are many traffic brands. After entrepreneurs enter the new consumption track, they actually buy traffic, either choosing e-commerce platforms such as Taobao, JD.com, and Pinduoduo, or choosing social attribute platforms such as Douyin, Kuaishou, and B station. They are essentially a channel-driven company that is prone to falling into the trap of traffic logic.
"Playing with traffic is actually playing with algorithms, and algorithms are stuck by the platform." The platform is the bookmaker, and it is impossible to stick money to the entrepreneur, so the ROI cannot exceed it. Many people say that offline is a traffic depression, and it is easy to start a business, but in fact, it is getting more and more difficult. Because the brand consumes the traffic of commercial real estate, it must pay rent. In the traffic game with platforms or commercial real estate, it is difficult for brands to win. ”
In general, new consumer investment brands work for Internet platforms, either for commercial real estate or for head anchors, and the repurchase rate is not good. To make matters worse: Several new consumer companies in the secondary market are not doing well.
Known as the "Light of Domestic Goods", its parent company Yixian E-commerce was listed on November 20, 2020, with an opening price of $17.61, after which the stock price reached a peak of $25.47 in February last year, but as of February 16, 2022, its stock price was only $1.58.
Nai Xue's tea, listed in Hong Kong on 30 June 2021, opened at HK$18.86, but the listing was the peak, and as of 17 February 2022, its share price was only HK$7.230. The share price of the "blind box first stock", Bubble Mart, was also "cut from the waist", and the stock price rushed to HK$107.337 at its highest price, and as of February 17, 2022, its stock price was HK$41.7.
Haidilao announced that it would gradually close 300 stores by December 31, 2021, the new elements went bankrupt, and a number of consumer brands such as Tea Face and Yuanqi Forest suffered "marketing overturning"... The roof leaks coincided with overnight rain, and new consumer brands encountered many difficulties and obstacles in the second half of 2021.
The departure of investment managers has become the norm, and in the media reports, investment managers who invest in consumption have gone to interview hard technology. There are also many TMT agencies that turn away. Since the second quarter of 2021, many head funds have declared internally: no longer invest in any consumer projects, but turn to hard technology.
"The new consumption track is still quite heavy, it is difficult to appear in the model of Internet investment in the hundreds of growth myth, so the original TMT wave of people gone, because the new outlet is coming, this outlet is hard technology." One investor told The Deep Web. There are also investors who invest in consumption and tell the "Deep Net" that the investment in the consumption track will return to rationality in 2022.
When the investment sentiment of the new consumer industry declined, the discourse power of investors and entrepreneurs began to be reversed, the valuation of new consumer brand projects declined, and the market returned to normal. Wang Weiwei, the managing partner of Huaying Capital, told ShenzhenNet that he is firmly optimistic about the consumer track and also believes in long-termism.
(Li Xing is a pseudonym in the text)
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