In the past, it took entrepreneurs decades to make a public company; now, this time is multiplied, from start-up to listing may only take two or three years; before looking at the quality of a company will ask whether it is profitable or not, now ask whether it is worth it; before, people felt that it was a myth that the rich were invincible, and now, the market value of a business giant is far behind more than a hundred countries.
In just a few decades, our business environment has changed dramatically. All entrepreneurs are talking about one word: capital.
In the past few years, capital has been like a tiger for enterprises, unicorns have emerged, there are many outlets, track generation, and the business world is surging up.
How to let enterprises use the capital market to break through the bottleneck of growth? How to systematically establish righteous mindfulness towards capital? How to make a business valuable while making money?
Zeng Qiao, partner of Hejun Capital and founding partner of Junwei Capital, combined with his more than ten years of capital and strategic consulting experience, systematically sorted out nearly 150 listed companies, proposed listed companies and new technology companies he tutored, summarized the new pattern and new logic of enterprise growth and capital management, and wrote the book "Capital Growth Theory: Enterprise Growth and Capital Management".
Behind those fast-growing enterprises, what are the common laws to follow? What are the significance of these laws for the daily business activities and strategic layout of entrepreneurial enterprises? In the book, the author uses years of experience and systematic analysis of the capital market to summarize the six common laws.
Rule 1: To ensure that this is a good business, there are "long slopes, thick snow"
The biggest commonality of all high-cap companies is that they are all running a good business. From the perspective of capital, what is suitable for investment must be a good business, but a good business is not necessarily suitable for investment.
According to the author's summary, the good business in his eyes has five characteristics.
(1) Precise market segmentation.
In the more than 40 years of China's reform and opening up, the industry you can see has basically matured and has a stable supply and marketing system, but there are few opportunities left for entrepreneurs in these mature tracks. Looking at the emerging business models in recent years, those companies that have risen rapidly have all focused on more subdivided tracks.
In this author, the author takes "knowledge payment" as an example, the knowledge payment model is one of the models that have emerged in recent years, although the time is not long, but it has formed a scale of tens of billions of yuan.
Especially under the impact of the epidemic, many industries are facing huge challenges, with frequent layoffs and increased employment pressure, and the frequency with which people use fragmented time to learn various knowledge and skills online will increase.
According to Ai Media Consulting data, since 2017, the market size of China's knowledge payment industry has expanded rapidly, reaching 39.2 billion yuan in 2020 and is expected to reach 67.5 billion yuan by 2021.
(2) The gross profit margin is much higher than the cost of customer acquisition.
Many people think that an industry with high gross margins is a good industry, but this view ignores the important point of customer acquisition costs, such as the skincare industry.
The gross profit margin of the skincare industry is very high, even reaching 80%, but its marketing promotion costs are also very high. Before the listing of a certain Internet celebrity beauty brand last year, it was questioned because of the marketing accounted for 60%, and the achievement of less than one investment in research and development was questioned. To determine whether it is a good business, the cost of customer acquisition is a key consideration.
Of course, in the new technology environment, many traditional industries can significantly reduce the cost of customer acquisition through the blessing of technology, and a number of small giants in the industry have emerged. This is also the reason why the phrase "many of China's traditional industries deserve to be re-do by the Internet industry" has been widely circulated in recent years.
(3) Strong category
The so-called category strength means that users have no room for bargaining for products, and products meet the needs of users to really implement a certain aspect of pain points. The author divides the category strength into two situations: first, the industry itself is unbalanced between supply and demand, the supply is far less than the demand, is a typical seller's market, such as the medical industry to treat a certain disease of irreplaceable special drugs; second, the product is a strong brand in the industry, such as Apple mobile phone.
(4) It has a very high "moat" and is difficult for laymen to enter.
This mainly refers to the extremely high barrier to entry, one is that there is a specific resource or a specific business license behind it. For example, Moutai, such as the license of financial institutions, etc.; the other is the ability to enter, the industry that requires ultra-high core technology as the threshold, and the specific resource behind them is the knowledge, experience or patents of practitioners.
(5) The capacity release does not depend on specific resources.
If a company is in a track with massive market demand, but no matter how hard you try to keep up with the production capacity, this can not be called a good business. Such industries such as the orthopedic industry. Orthopedics rely too much on the experience accumulation of the master, not a few months of simple training can be batch rapid, it is understood that the training of a real orthopedic doctor who can deal with the complex problems of cervical spine and shoulder and neck generally takes 10 years. It is precisely because of this problem that although the industry has just demand, it is not easy to develop and grow. Because remember, the amount of capacity can not be too dependent on specific resources.
(6) The leader can maintain a continuous lead.
If you are a pioneer in an industry, but are overtaken by imitators on the way to development, you can only be eliminated. In recent years, relying on the Internet model, an outlet has come, and those who grab the cake have flocked to it, and everyone is fighting for scale, speed, and user volume.
For example, in the case of the shared bicycle industry, Mobike and Ofo were once leading, but where are their shadows now?
In addition, the author also mentions four misunderstandings that are easy to enter when considering a good business:
First, the head is used as the criterion and the overall situation of the industry is ignored.
For example, Haidilao, many people have seen the success of Haidilao as a hot pot category, so they plunged into it. But it is likely to encounter a different scene: because the average life of the entire hot pot industry is only 1.5 years, most hot pot shops are on the verge of closure. Haidilao's profitability is not only because of the hot pot category, but more importantly, the operating system behind it, knowing it, not knowing why, is not feasible.
Second, ignore hidden costs and risks. For example, the medical beauty industry looks promising and the profitability is very strong, but this industry is more affected by policies and has higher risks. Another example is the education and training industry, a paper policy, a chicken feather. When judging whether an industry is a good business, we must first have macro policy acumen.
Third, ignore the limitations of capital leverage. In a word, capital is not a panacea. The role of capital in promoting different businesses is different, and some businesses cannot accelerate development even if they obtain financing.
Fourth, ignore the sunny cost of business.
In the past, many businesses had a state of non-sunshine, irregularity and irregular operation, such as in the fields of taxation and social security. If enterprises want to realize capitalization, the premise is to accept supervision, and if they want to go to the capital market, the cost of sunshine needs to be taken into account.
Rule two: not only the "ceiling" should be high, but also the speed should be fast
When many people look at the growth of enterprises, they often talk about tens of billions and hundreds of billions of tracks, in fact, the consideration is whether the market size is large enough, and the "ceiling" is not high enough, which is related to the growth space of enterprises.
In fact, when talking about the growth of enterprises, we must not only look at "high or not", but also look at "fast or not", that is, the speed of growth.
In recent years, many emerging business models have competed for speed, speed means the number of users, means scale, which is the weight of corporate financing and expansion.
As the authors say, running a business is like riding a bicycle, you have to maintain a certain speed to maintain stability, and sometimes it is better to ride faster than to ride slowly, because once you run, inertia helps the bicycle to maintain balance.
It took only three years from its establishment to listing, and qutoutiao took only 27 months from its establishment to listing, constantly refreshing the record of the listing speed of Chinese Internet companies. Looking at those star companies, from forming teams, developing products, raising funds quickly... Finally ushered in the highlight of the listing bell, all of them are running fast.
Rule three: Can redefine industrial efficiency with a new methodology
The evolution of business is largely about the improvement of efficiency, and looking back at such a fast-growing enterprise, they are all using new methodologies to promote efficiency improvement.
What is the new methodology? As I understand it, it revolves around three dimensions: time, space, and information. Just change any one or two of the three dimensions, and the efficiency will increase exponentially.
For example, online education has changed the situation of lack of high-quality educational resources due to geographical restrictions; the invention of high-speed rail has effectively compressed time; and the transmission of information, from the traditional PGC to the current UGC, has effectively changed the marketing model.
In essence, the changes in these industries are all due to changes in production factors and business opportunities brought about by the restructuring of new models.
There are many traditional industries in China, but with the changes in capital, technology, elements, and business methodologies, the process of the industry can be reconstructed, and the efficiency of the industry will be subversively improved.
Law four: to achieve the elastic supply and effective integration of organizational capabilities with "organizational generalization"
With the improvement of industrial efficiency, there is a trend in the development of the company - generalization of organizations. The author's definition of the phenomenon of "organizational generalization" is the process of changing the traditional rigid employment system of companies in the past within an industry, reconnecting producers in the industry through new industrial relations, and forming a more effective productivity supply network.
In this network of "organizational generalization", these producers may be both users of the platform, service providers of the platform, and even "super fans" of the platform. They work together to build a service network with different circle roles to help the platform achieve higher value and larger-scale organizational capacity supply.
Here, the author gives the example of meituan.
In our public understanding, Meituan's riders are Meituan's employees, who provide delivery services to thousands of consumers. However, there is also an understanding that the rider is the real user of the US group. Meituan only needs to rely on the system to serve the riders well, and it can serve the end users well.
How does Meituan serve riders? First, set up a set of assessment and incentive mechanisms. For example, the rider can earn 5 to 10 yuan per order completed, of which the end user pays 5 yuan, the platform subsidy is 0 to 5 yuan, the delivery fee reduction part is borne by the merchant, and the rider will be fined 100 yuan if he receives a complaint. Through the interest assessment, Meituan encourages riders to make more money only by better serving end users.
The total number of Meituan takeaway riders has reached 3.99 million. These 3.99 million not only provide services for Meituan, but also are super users of Meituan, need to buy equipment (clothes, knight vests, helmets, gloves, knee pads), rent equipment, buy incubators, and need to receive training and insurance from Meituan.
As the author said, most people only see the industrial layout, growth rate and market value growth of Meituan, and few people see the real strength of Meituan - its organizational thinking. Meituan has made a lot of innovations in the organizational model, organizing the riders in the industry through the organization generalization of industrial logic. These riders are not the assets of meituan, not owned by it, but used by it.
Riders, not only employees of the US group, are salesmen, are a business card, but also users, the definition of identity is becoming more and more blurred, and even many times can be switched at will.
Moreover, once the riders are effectively organized, a more far-reaching change will appear - Meituan will become the largest express delivery company in China to provide same-city delivery services in the future, which can not only deliver food takeaways, but also deliver fresh food, medicines, documents, and help run errands, that is, complete all offline logistics services in the city that need to be completed by people. It can be said that the same city delivery is almost always the market of the US group. It may be difficult for people to imagine that Meituan, which is born in group buying, will one day become a courier company.
This is the impact of the organization of Pan-China, an organization is no longer a company as the boundary, but to an industrial chain as the boundary; no longer to the company's net profit margin as the core boundary, but to the upgrading of the efficiency of the entire industry as the core boundary.
Law five: strong capital traders and strong trading ability
Looking at the fast-growing high-market capitalization companies, the leadership has the ability to operate in a systematic capital market. Their understanding of the industry is more three-dimensional, and they have a professional business thinking.
The growth of Didi is also a typical representative of capital operation.
It has grown from a struggling startup to a capital operation step by step, got huge financing, merged quickly, Uber, and grown into an industry unicorn, and all of this is inseparable from one person - Liu Qing, co-CEO of Didi.
Qing Liu graduated from the Department of Computer Science of Peking University and the Master of Harvard University, and after graduation, she worked at Goldman Sachs and began to engage in investment banking. After 3 years in investment banking, she went to Goldman Sachs' equity investment department to do a buyer's business, and 5 years later, she became the youngest managing director in Goldman Sachs history.
In the second half of 2014, Goldman Sachs contacted Didi and talked about two rounds of investment still did not land. As a result, Liu Qing ended her 12-year Goldman Sachs career and joined Didi. After joining Didi, she was mainly responsible for 3 sectors, one is public relations (PR), the other is government relations (GR), the third is investor relations (IR), and the car sector.
It is said that after Liu Qing entered Didi, within a week, he met with the heads of all the investment institutions in the world who were interested in investing in the travel field; in less than 1 month, he completed a record financing of $700 million for Didi; 6 months later, Liu Qing became the co-CEO of Didi, promoted the merger of Didi and Kuaidi Taxi, completed the cross-shareholding with Uber (China), and introduced Apple as a strategic investor of Didi.
Before Liu Qing joined Didi, Didi's cumulative financing amount was $100 million, and after Liu Qing joined Didi, Didi's cumulative financing amount exceeded $20 billion. It can be said that the financing amount promoted by Liu Qing after joining Didi exceeded 99% of the entire company's financing amount. Since then, Didi has completely transformed from a start-up company into an international high-tech Internet giant.
Didi's growth process is a model for the growth of Chinese Internet companies. The entrepreneurial team must not only have resilience, determination, grounding gas, understand business, and be able to implement the original ecological play of Chinese business, but also need to deeply combine international vision, industrial resources, and capital capabilities.
Looking at the world, the greatest wealth-making myth of this era, Amazon, has a return of more than 1,000 times in more than 20 years, and it also depends on Bezos, who came from an investment bank.
Good CEOs are great investors, and in a 2012 letter to shareholder Chinese s, Buffett recommended the book for great CEOs: The Outsiders. Taking the shareholder returns created during his tenure as the core indicator, the authors selected 8 CEOs who have long surpassed the broader market to study. These CEOs have a wide variety of career experiences: FMCG product managers, McKinsey consultants, mathematicians, NASA astronauts, family business successors, and more.
But they have one thing in common, that is, they will delegate the power to hand over business management to specific COOs and GMs, while their main energy is spent on capital management. That is, positioning yourself as an investor, not a manager.
Law Six: Thinking and Pattern: Entrepreneurs' "Underlying Business Assumption System"
In the business world, we will see that some entrepreneurs play a bad hand with a good hand, and some entrepreneurs can turn things around. This is all related to the entrepreneur's own mental level and ability to operate the industry.
In the book "On the Growth of Capital", the author makes this ability the "underlying business assumption system" of the entrepreneur, pointing out that when the underlying assumption system of the entrepreneur of a company has a problem, the short-term fundamentals of the enterprise are good, and it is difficult to develop and grow in the long run. But if the entrepreneur's underlying assumption system is sufficiently complete or has a high enough interest position, the enterprise is likely to take off over time.
The author said that the new market environment puts forward higher requirements for the thinking ability of entrepreneurs, so the entrepreneur's business philosophy should have nine key thinking: maximizing the scale of market value (there is a set of methodology for understanding market value), professional division of labor (suitable for application, professionals do professional things), top-level design (everything is pre-established, do a good job of top-level design), growth model (the focus is on distinguishing whether it is project-based or cash-flow-oriented), Resource integration (integrating resources is one of the most important growth paths for enterprises in addition to cash flow recovery growth), Wind Outlet (only the outlet industry can gather first-class resources), growth cycle (grasp the main contradictions and do the right thing at the right stage), deep thinking ability (with long-term cycle strategy, big pattern), seeking truth from facts (based on objective facts, figure out the ins and outs of things).
In addition, entrepreneurs also need to have a very human spirit and pattern, for example, in the 2021 Xiaomi new product conference, in the face of xiaomi with a valuation of more than 100 billion US dollars, Lei Jun chose to start again, he said: "I am willing to bet on all the achievements and reputation accumulated in my life to fight for Xiaomi cars." "Entrepreneurs are the people who can constantly lead the organization forward, and perhaps the height of the career and the ideal of the industry will be their only spiritual pursuit." Musk also said that true entrepreneurs do not need comfort. Entrepreneurship is the spirit of achieving ideals and goals, not fearing difficulties, daring to break through restrictions, and practicing tirelessly.
This book disassembles more than ten cases such as Amazon, Tesla, 3G Capital, Didi Chuxing, Xiaomi, and Nongfu Spring, discusses the relationship between enterprise growth and capitalization, the mechanism and law of capital growth, the current situation and prospect of the domestic capital market, summarizes and puts forward the three key indicators of enterprise growth, the three models of capital operation, the six common laws of large market capitalization companies, etc., and looks forward to the five major trends of the capital market under the domestic registration system.
Using capital means to promote the development of enterprises and enhance the pricing power of enterprises is a compulsory course for the new generation of enterprise operators. Even if you don't want to go to the capital market, you can upgrade your cognition and reshape the business landscape.
For the average reader, it is also a good book to help us understand the world, understand the business around us, and improve our thinking ability.