Entrepreneurs are "sick", and winter is the best medicine

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"The space for O2O is huge, and there are still opportunities to stand out." At the O2O Yuelu Summit last week, Cai Wensheng, an angel investor of 58.com and chairman of Meitu, cheered on O2O entrepreneurs in a thick Minnan accent.

Meanwhile, Liu Hua, founder of the wedding O2O company "Xishi Guanjia", was complaining to his neighbor with a sad face because the 15 million yuan Pre-A round of financing he had finalized in June had fallen through. The reason was just as everyone expected - due to the cold winter.

Liu Hua's Xishi Guanjia is a platform that connects photographers and other personal craftsmen with users. Currently, there are more than a dozen orders per day, with an average customer price of more than 1,000 yuan. In his opinion, this is a good result, but he failed to get investment in time. "As long as 8 million or 10 million is enough, as long as it can be given."

However, he waited from the hot summer to the cold winter of capital. As early as the beginning of June, investors expressed their investment intention to him. At that time, investors hoped to run data again to reach a million in turnover. But Liu Hua did not expect that two months later, investors said it was difficult and asked him to wait until the end of next year.

On the same day, Liu Hua called the investor again. He hoped to impress the other party by lowering the financing amount, but it was indeed difficult.

True or False Winter

Liu Hua's dilemma has begun to spread in the venture capital circle. On September 2, the home massage platform "Kung Fu Bear" was exposed to have its B round of financing blocked. On September 11, Koala Shuttle announced the end of operations. The reason given by CEO Zhang Min was: financing was not smooth, and Koala Shuttle's business would be completely handed over to Didi Bus. On September 26, the tutoring O2O platform "Teacher is Coming" announced that it would be closed soon. The direct reason was the failure of the B round of financing and the broken capital chain.

"Many investors have been looking at projects, but they just don't invest." An entrepreneur complained to iHeima. Zang Zhongtang, vice president of China Auto Rental, pointed out more directly that the entire capital market has actually entered a downward range and it is the beginning of the trough. The optimistic estimate is two to three years, and the pessimistic estimate is three to five years.

Investors' fears are not groundless. The A-share market continues to be sluggish, and Chinese stocks have almost been cut in half. The fluctuations in the secondary market will inevitably be transmitted to the primary market, affecting investors' confidence and the flow of funds. "After the C round, basically no one made a move. The B round was very cautious, and the A round was sporadic." Wu Shichun, founding partner of Meihua Angel Venture Capital, talked about the change in investment rhythm after the stock market crash.

Even unlisted unicorns are troubled by the topic of capital. Ele.me and Meituan have been criticized for financing recently. The former has fraudulent financing, and the latter has failed to raise funds. Although both Ele.me and Meituan have responded positively, it is not difficult to find that at this critical moment, both parties are extremely sensitive and cautious about funds.

The cold winter argument has spread in the market, but not everyone feels the same fear of capital.

"I don't think there is any cold winter. You won't worry about it if you are creating value. Investors are also smart. They can only find good companies in the cold winter." Wang Jianhong, deputy secretary-general of the Black Horse Education and Training Industry Branch and founder of Aixuetang, has the same feeling as many online education entrepreneurs. He doesn't have much perception of the cold winter. In his opinion, it was the Internet bubble around 2000 that gave birth to the most powerful companies today. Today's BAT are all products of the Internet bubble back then.

In fact, contrary to people’s feelings about the cold winter, investment and financing events have not decreased. Statistics show that in the past month, 50 companies have announced that they have received investments of more than 100 million yuan, of which 11 are in the O2O field, with the highest financing amount reaching 4.019 billion yuan, and most of them are in Series A and later.

Huaxing Capital's Du Yongbo explained this phenomenon by saying that the most promising companies do not lack capital, but they absorb funds from both ends, while the funds absorbed in the middle are limited.

Wan Jianjun, executive president of the Education Branch of the Black Horse Club and vice chairman of Quantong Education, also stated in an interview with iBlack Horse that they are still actively investing in projects that can generate positive cash flow.

Back to basics

The debate over the capital winter has made people start to think about the business model itself.

O2O, especially door-to-door O2O, has always been controversial, and there are many people who think that door-to-door O2O is a false proposition. Meng Xing (Diaoye), the founder of Helijia, mentioned at the O2O Summit of Yiou.com that O2O is essentially a luxury service, a one-to-one service, and it is unrealistic to target all classes. It can only serve the middle class and above, and the radius effect is a false proposition in many industries.

In the view of Zhang Tao, CEO of Dianping, the current home delivery service relies on burning investors' money to fight price wars. It is cheaper than going to the store and has not really improved the efficiency of the industry. Take door-to-door haircuts as an example. The barber spends a lot of time on the road and also needs to clean the hair of the user. This demand is not only not rigid, but also does not solve the problem of improving the efficiency of O2O. A store can serve three customers, but a home delivery can only serve one. This approach is obviously not advisable.

The night before the O2O Yuelu Summit, Wu Xiaoguang took an interesting photo. Chen Xiaohua, the founder of 58 Daojia, was slumped in the right passenger seat, drunk. The driver on the left was Yang Jiajun, CEO of eDaijia. Yang Jiajun did not drink a drop of alcohol that night for his first designated driver. The two O2O players, one acted as a user and the other as a service provider. The demand for designated drivers is considered a rigid demand. eDaijia has never subsidized users before. In Yang Jiajun's view, users have this demand and are not overly sensitive to prices. What the platform needs to do is not to attract users with low prices, but to provide good services after users come.

"Financing has become more difficult, but user growth is not affected by fluctuations in the capital market. My users, your users, do they know that the stock market has fallen?" Yao Jinbo said that the cold winter has given people space to think calmly. Entrepreneurs should return to the business itself and provide good user services, rather than worrying blindly about the impact of the cold winter.

"Starting a business now has become a matter of burning money, which is wrong. The fundamental purpose is to make money and seek returns for shareholders. This is the right way." Long Wei, co-founder of Dianping, has a clear-headed view of the capital cold wave. Good products and good companies are not worried about the so-called cold wave. Instead, the cold wave allows entrepreneurs to calm down and focus on what is really important.

Yao Zongchang, the founder of Taidi Laundry, regards capital as a tool to add icing on the cake. "Capital is an additive to entrepreneurship and cannot change the essence of things."

Survive the Spring

The companies invited to the O2O Yuelu Summit cover all aspects of food, clothing, housing and transportation, and these companies have been established for a long time. Dianping has been in business for 12 years, Tubatu has been in business for 7 years, Ele.me has been in business for 6 years, eDaijia and Fangduoduo have been in business for 4 years, Shenzhou Rent-A-Car has been in business for 8 years, and 58.com has been in business for 10 years. Compared with the latter two companies that have been listed, the former companies have raised funds in multiple rounds, but are still struggling. Dianping has to face Meituan, Ele.me has to face Meituan Waimai and Baidu Waimai, and eDaijia has to face the new rival Didi Daijia. Whether it is a cold winter or not, everything is far from over.

However, almost all of their practices and opinions in the face of a real or so-called cold winter can be summed up in one word: endure.

2015 is the 10th anniversary of 58. Yao Jinbo said that 58 spent the first eight or nine years "surviving". And the survival is a tormenting growth history, from a classified information website to a local life service platform, experiencing the grievances and hatreds with competitors, and finally going public in the United States, finally becoming relatives with enemies.

"Surviving is a process. Many startups have gone through this process. Everyone must have confidence in their direction and goals to survive." Long Wei, co-founder of Dianping.com, said that the cooling of the capital market means that competition will be more relaxed, which will make it relatively easy to survive the cold winter.

The specific methods used by all parties to "survive" the winter focus on increasing revenue and reducing expenditure.

58 is a representative of cost-cutting. Before 58 went public, there was a rule that all expenses above RMB 10,000 must be confirmed by all VPs (vice presidents) before they can be spent. “It allows you to do more accurate things and lets the team know how to collect money and how to save money.” Zhang Chuan, vice president of 58.com, said that in 2012, when 58 was also facing difficulties, it cut off its group buying business and focused on its main business.

In addition to cutting costs, 58 Daojia is also actively exploring sources of capital. On the one hand, it comes from its "real father" 58.com. Yao Jinbo revealed that he will continue to expand investment in 58 Daojia, "whether it is 500 million or 1 billion US dollars, we firmly support it." On the other hand, there is also news that Alibaba will invest in it. Regarding this matter, iHeima confirmed it with Yao Jinbo and Chen Xiaohua. Yao Jinbo asked in confusion: How is it possible? Although the parties involved denied it, according to industry insiders, this news is most likely true.

However, for start-ups like Xishiguanjia, the options are relatively limited. "The investor asked me if I could hold out until the end of next year, and I said yes, and the investor said that's fine." After receiving a vague answer from the investor, Liu Hua also planned to reduce expenses, continue to run data, meet with investors, and strive to usher in spring by the end of next year.

The capital market does not seem to be so optimistic. Du Yongbo, partner of Huaxing Capital, believes that 2016 will be a life-and-death test for O2O companies, especially those with low-frequency and low-price services, because overall, there may not be many platform-level opportunities in the O2O field.

Regardless of whether it is a cold winter or not, as Yao Jinbo said, more energy should be focused on the service itself. "After all, even a capital winter is not without benefits. Just like the natural winter eliminates pests and diseases, the capital winter also plays the same role."