- 1 With the country's full opening of the second and third births, it has affected the fertility concept of the Chinese people, and driven the domestic 0-3-year-old infant and young child care service market to usher in a broader space and opportunities for development.
- 2 The essence of childcare is offline labor-intensive, with high site, manpower, sales and operating costs, and low profit margins. Despite the support of a series of favorable policies of the state, in the context of the continuous recurrence of the epidemic, in the face of these hard cost expenditures that cannot be reduced, childcare institutions without sufficient cash flow reserves are still unable to survive the cruel commercial competition.
- 3 Wang Ronghui's tragic experience also warns us that in the face of the treacherous business competition, we must have a strong sense of risk control, especially in industries with high rigid costs offline, we must delineate risk red lines and reasonably estimate the operating conditions of enterprises, so as not to be overwhelmed by water and difficult to harvest.
A entrepreneurship failure with more than 100 million debts has made us start to re-examine the domestic childcare industry.
Author/Barbara, Grapes
Edit/sub rain
Produced/Newly Excerpted Business Review
Today, a female entrepreneurial self-statement titled "Sold 4 apartments, started a business for 12 years, and now has 100 million debts and is homeless" swept the screen.
The author is Wang Ronghui, the founder of Nunuo Education, who is engaged in the early education of infants and young children, who details her 12 years of entrepreneurial experience in the article, and bluntly says that she is a failed entrepreneur, a debt-laden Loser, and a liar who is scolded for donating money and running away.
In the article, Wang Ronghui said that he has given everything in this venture and is still sticking to his post. And her experience of failing to start a business with a debt of 100 million yuan has also aroused heated discussion on the Internet, especially resonating with many entrepreneurs.
With the country's full opening up of the second and third children, it has affected the fertility concept of the Chinese people, driving the domestic 0-3 year old infant and child care service market to usher in a broader space and opportunities for development. The China Commercial Industry Research Institute predicts that the size of the mainland infant and young child care market will reach 223.1 billion yuan in 2021.
But Wang Ronghui's experience has opened up a real corner of the childcare market for us. The essence of childcare is offline labor-intensive, with high costs of venue, manpower, sales and operation, and low profit margins. Despite the support of a series of favorable policies of the state, in the context of the continuous recurrence of the epidemic, in the face of these hard cost expenditures that cannot be reduced, childcare institutions without sufficient cash flow reserves are still unable to survive the cruel commercial competition.
First, the "100 million debt heroine" Wang Ronghui and his people
Before founding Nunuo Education, Wang Ronghui worked for a foreign financial company as a human resources director. After having a daughter, she came up with the idea of starting an early education business, and initially opened an Australian brand early education institution in the form of joining.
Later, after much thought, I decided to start my own business. In 2009, he sold his first house as a start-up capital for entrepreneurship, and in 2011, he opened a second and third early education institution. In 2013, she sold her third home and opened her first nursery.
In September 2015, Wang Ronghui launched the brand of Nuno Education, and established Guangzhou Nuno Education Technology Co., Ltd. in January of the following year, and began large-scale expansion.
Between 2013 and 2016, Wang Ronghui began to do self-media in his own research and development of related courses, and also held national lectures.
2017 was a turning point in her career, and in March she received a 10 million yuan Pre-A round of financing from WenTou Ventures Factory and Yicong Capital.
In the next two years, Newt has completed the 65 million yuan A round led by Anzhi Capital and Weichuang Shares, and tens of millions of yuan B round financing led by GF DXN and co-invested by Guangzhou SME Development Fund, and Newt has also become the first childcare brand in China to complete a B round of financing.
After the financing, Newt Education entered a period of rapid development, and Wang Ronghui himself also stood on the peak of entrepreneurship. The number of parks in the Pearl River Delta region has suddenly expanded to 40. She said in the letter that at that time, the company had become the largest direct childcare chain brand in the country, with a valuation of more than 500 million yuan.
Unexpectedly, the outbreak of the epidemic, Newt Education closed the kindergarten for 6 months, and more than 500 teachers and more than 3,000 children in the institution were affected.
When the epidemic first broke out, Wang Ronghui was still confident, and in March 2020, she did an online live broadcast, in which she predicted that after the end of the epidemic, 30% of childcare companies would face a crisis of closure.
Unexpectedly, all the highlights came to an abrupt end in 2021. Due to the suspension of classes due to the epidemic, Newt's cash flow was empty, a large number of teachers ran away, investment institutions sued, and parents chased and blocked for refunds. Even if Wang Ronghui hollowed out his family's savings and borrowed more than 10 million yuan from the bank, he could not save the decline.
At present, Wang Ronghui's company has a number of legal litigation records, her own shares have been pledged, and 2.1 million shares have been frozen.
In Wang Ronghui's self-statement, she stressed that she would not run away or avoid, and she also said that as long as she lived, she would assume all responsibilities and strive to repay all debts.
But unexpectedly, soon there was an article on the Internet that the whistleblower who called himself Wang Ronghui's "early partner" revealed the other side of the truth.
The whistleblower said that in the early days of incubating Newt's education project, she had taken Wang Ronghui to meet with all the investors and investment institutions in the circle of friends, help Wang Ronghui re-find commercial positioning, sort out the product system and curriculum system, and help her build a core team from BAT.
But after the funds invested in the capital arrived, "Wang Ronghui's attitude immediately changed, and the shares promised to me and the terms of cooperation negotiated when he came to me to help incubate the project and financing were all not honored for various reasons, and he used despicable means that I can never forget to get me out of this project." "It is actually a real-life version of Zhen Huan's biography."
Tonight, Wang Ronghui is selling lessons through the live broadcast of the video number, and the slogan "Make money and refund" is also hung in the live broadcast room. Some netizens in the interaction supported her, and many netizens questioned whether it was personal hype.
Whether Wang Ronghui and the whistleblower are true or false remains to be determined, but the childcare market involved in the failure of this 100 million entrepreneurial enterprise is more worthy of our deep consideration.
Second, the childcare industry "waste to be rebuilt"
In the golden period of 2019, the childcare industry completed 15 related investment and financing, with a cumulative financing amount of about 450 million yuan, and the market predicted the volume of childcare as high as 400 billion.
The scale of 100 billion yuan seems huge, but the focus on specific enterprises is actually not optimistic. Looking at the entire domestic childcare industry, so far there has not been a household name chain brand, nor has there been a unicorn with a valuation of 100 billion. Although Singapore, Japan and South Korea and other countries have very mature childcare experience to learn from, but can not fully adapt to China's national conditions, many Chinese childcare enterprises are growing in exploration, but also face many difficulties.
The cost is the "sword of Damocles" hanging over the head of childcare institutions, childcare is labor-intensive, and labor costs account for 40% of operating costs, but the lack of talents is serious, and the gap in domestic preschool teachers in 2021 exceeds one million.
For example, the average rent of childcare parks in Shenzhen is 200,000 yuan / month, and the cost of commercial land can account for 20-30%. Coupled with sales costs and operating costs, the combined profit margin is only about 10%, and before the epidemic, 70% of childcare enterprises could not make money.
Cost is addressed, but also consumer awareness and safety quality are addressed. Although the population base of infants and young children in China is huge, most parents do not have childcare awareness, and some parents who have childcare awareness have concerns about the safety norms and teaching quality of childcare institutions.
In lower-tier cities, the penetration rate of childcare institutions is not enough, and the concept of childcare is not popular enough, and 60% of childcare institutions are only concentrated in economically developed areas such as Beijing, Shanghai and Guangdong.
The most critical thing is that many childcare institutions have not found a scientific profit model, resulting in "the collapse of the middle road before the start-up is half".
(Data from Guangzheng Hang Seng Research Report)
Macro policy has sprinkled a "timely rain" on childcare institutions. In order to solve the general dilemma of the industry, many favorable policies have been released during the epidemic. For example, the Ministry of Education requires at least 1 undergraduate in each province to efficiently open childcare service related majors, and use policy means to solve the talent dilemma of the childcare industry. In addition, all localities have taken "inclusive childcare" as a key project for people's livelihood, set a "hard target" for the number of new inclusive childcare points, and supported the rent-free, decoration subsidies and operation subsidies of the site.
Driven by favorable policies, the childcare industry has indeed ushered in a wave of "small outbreaks". In the whole year of 2020, there were 13,502 new childcare institutions in China, an increase of 4 times over the number of growth in 2019.
However, the increase in the number of institutions has not led to the sustained prosperity of the entire industry. The reasons are manifold. The first is capital investment, contrary to the general expectation of capital's enthusiasm for chasing policies, the national favorable policies have not ignited capital's enthusiasm for childcare institutions.
This is because childcare involves education, and the policy has always been reserved for capital to penetrate the education industry, and there will be policy changes in the future. As a result, the financing situation of childcare institutions is not ideal.
Not only is it difficult to make a profit, but the talent gap in the industry is also very large. Although the policy encourages universities to set up childcare majors, there is still a long way to go from cultivating talents to holding certificates. Foreign childcare talents pursue high education and high cognition, taking undergraduate as the starting point, while the domestic cognition of childcare teachers is only similar to "nanny", the social evaluation is low, how to attract more talents into this industry, is also a problem in the future.
Although the three-child is now open to encourage fertility, people are still "unwilling to have children", and the upper limit of the future market size of the childcare industry may be difficult to reach the predicted height.
Young parents both have to make money, and letting their parents take care of them involves issues such as living and living expenses. According to the data of the seventh census, there are about 42 million infants and young children aged 0-3 in the mainland, of which one-third of the survey shows that there is a strong demand for childcare, but the current size of the childcare market is only about 5.5%, facing a very large market gap.
Although the market gap is large, the current situation of childcare institutions is not ideal. On the one hand, the epidemic situation is repeated, and the offline stores of some childcare institutions are difficult to sustain.
According to Zhongxin Jingwei, it takes about 2 million yuan to start a childcare institution in Beijing, and the second-tier cities are around 1.5 million to 1.8 million, which takes about a year and a half to recover the cost.
3. Conclusion
The childcare industry is far from being an outlet, let alone an industry with high profit margins and strong capital attraction, and even has some meaning of "waste to be revitalized". Whether it is an institutional founder or an investment institution, it is almost impossible to create a national childcare chain brand in a short period of time like Luckin in the new consumption field.
And Wang Ronghui's tragic experience also warns us that in the face of the treacherous business competition, we must have a strong sense of risk control, especially in industries with high offline rigid costs, and we must delineate risk red lines and reasonably estimate the operating conditions of enterprises, so as not to be overwhelmed by water and difficult to harvest.