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The term "capital winter" has been used since 2018. In early 2020, the Internet market reached a freezing point again due to the impact of the epidemic. In difficult times, there are more and more arguments that "startups have no big opportunities", but the voices of all parties are more about describing a feeling, a collective anxiety of practitioners. Both entrepreneurs and investors should think about these questions at the moment:1. How cold is the market? 2. Are there any big opportunities in 2C Internet? 3. If so, where exactly are the big opportunities? In the "Black Swan Revelation" online sharing event organized by us - Investment and Financing Special Session, Matrix China VP Zhuang Minghao provided some ideas in a quantitative way that may help us find the answer.The following is the text: From the Spring Festival in 2020 to now, there have been many changes due to the outbreak of the epidemic. The most direct response to these changes is traffic fluctuations. There have been discussions in the market about which fields are about to become hot spots and that things will not get better in the decade after 2020. I think we can try to look at these changes from a more objective and quantifiable perspective, and find reference bases to analyze the current situation and predict the future. I will take a comprehensive look at the ranking of the Top 200 mobile app growth lists from January to March and the Internet advertising situation from January to March (data sources are Qimai and App Growing). This includes horizontal field comparisons and vertical time comparisons. The purpose is to use research results to help us find entrepreneurial opportunities and make investment decisions. 1. Which apps grew due to the Spring Festival and which ones grew due to the epidemic? 2. Which growth was bought and which came naturally? 3. When the Spring Festival dividends gradually disappear, which industries have grasped the growth dividends and can still hold on, and which industries will not be able to hold on after this wave of traffic? Let me first explain the research background. I use Qimai's Top 200 Mobile Application Growth List for January, February and March 2020 as the basis. The ranking of this list is based on a comprehensive assessment of the download data of the App in the App Store and the domestic Android market (App Store, 360, Baidu, OPPO, vivo, Huawei, Meizu, and Wandoujia). First, we classify the apps in the Top 200 list according to different fields, and we will find that the top 10 categories are life, tools, photography, shopping, social, books, entertainment, games, finance, and education, which account for 80% of the entire list. This is the overall situation of the categories. Then we counted the specific number of apps in the top 200 in January, February, and March, and compared the results together to get the following three groups: 1. Stable group: The number of apps on the Top 200 list in different months does not change significantly, such as Lifestyle, Tools, Photography, Shopping, Social, and Books. These categories are less affected by the so-called changes before, during, and after the epidemic. 2. The Losing Group: The number of apps on the list is decreasing month by month, and the downward trend is obviously in the entertainment and gaming categories. 3. Fluctuating Group: The remaining ones are finance and education. The number of apps on the list in different months has increased and decreased significantly, and the performance is fluctuating. Education is more prominent. It grew rapidly in February and then dropped in March, but the drop was not particularly large, so some companies in the education category have benefited from this wave of growth. Let’s take a closer look at the three categories of social networking, shopping, and books. Compared with other categories that are mainly occupied by large companies, there are still some new companies and new changes in these three categories. First, let’s look at the category that I personally think is the most interesting: social networking. For an early-stage investor, there are still many companies worth exploring in this category. The overall situation is a big fight between giants and startups. In the past period, especially during the Spring Festival, interactive social products have been rising strongly, such as Wanba, Huiwan, Werewolf, etc. Among them, Wanba was ranked first in the Chinese list at that time, and the server crashed directly, and it was also on the hot search on Weibo that day. At the same time, there are some other types of social products, such as Yidui and Diyidan, which were very popular last year. I would like to talk more about Diyidan. This company was originally a two-dimensional picture and text community, but it was not doing very well. Last year, they transformed into a Thai drama and Korean drama platform, a bit like Korean drama TV. This wave got the growth dividend, but they did not change the classification, so it is still in the social section. The choice or modification of classification is also a reflection of the operating strategy of different companies. Then there is shopping, or e-commerce. We can see that the top 10 of the list are basically stable, and they are all well-known large companies. Among them, there are several startups that are worth paying attention to, such as Zhaoliangji, which has performed very well. It has grown very rapidly in the past year. Zhaoliangji started out as a second-hand transaction for 2C products. Its approach is different from that of traditional second-hand transaction platforms. It is a direct sales model, that is, it collects second-hand mobile phones and operates them by itself, and then sells them in the name of the official, which is different from pure matching transactions. There are also Mengtui and Qutoutiao, which are incubated by social sharing coupons. Yangmatou is a social e-commerce company. During the Spring Festival, it received a round of financing from a big account on Douyin called Niurouge, which caused a wave of hype. There is also a big account on Douyin called Dongbeijiang, who has 12 million fans and is a Northeasterner living in Los Angeles. They have a small group with about 5 or 6 IDs, and together they have more than 30 million fans. These ID users basically promote Yangmatou once every 1-2 months, and Yangmatou has also grown very well in the past year. The top of the e-commerce sector has basically been occupied by platforms with a scale of over 10 billion, while the middle part has been occupied by the so-called private domain and social traffic companies in the past year. This is the current situation. Finally, we have books. Although they are called books, many of the apps on the list are free reading apps. Free reading has gone from rising to exploding in the past year, and the top 5 or 6 apps have received a lot of money. However, there is basically a traffic giant behind the top free reading products, whether it is Toutiao, Baidu, or the original large reading companies, such as Yuewen and iReader. Among them, several companies, such as Himalaya, Kuaikan, Fan Deng Reading, Kuaidian, and Dedao, are basically worth more than 1 billion US dollars. So from another perspective, the most important thing for investors at this point in time is: 2. Know how big a startup can grow in a certain category. The ceiling is very important. The ceiling in this sector may be 1 billion US dollars. After looking at the specific rankings, let’s take a look at the advertising behind it. In January, only the last two weeks were affected by the epidemic. The first 20 days were regular campaigns, which means that these companies had already prepared all relevant marketing budgets and promotion strategies before the Spring Festival. The table next to it shows the top 13 companies that placed the most ads on the mobile Internet during the Spring Festival, such as Toutiao, Kuaishou, Baidu, Pinduoduo, and Bilibili. Their marketing budgets during the Spring Festival must be hundreds of millions or even billions. The epidemic was already underway in February, and there were both passive and active factors. We pulled out all the rankings and found that the same few companies were still on the list, such as Kuaishou, Douyin, etc., and then there was fierce competition in the gaming field. The second place in the game is a company in Shanghai. It is quite special that a game made in Chinese can be pushed to this position. The third place is "Sword and Expedition", a company that has been discussed a lot in the game industry in the past two months. It was made by Lilith, the developer of Dota Legend. "Sword and Expedition" was launched overseas in 2018 and 2019 and made a lot of money. From the end of 2019 to the beginning of 2020, it was basically promoted in all channels in China. In the past two months, it has basically achieved a monthly turnover of more than 300-400 million yuan. The publisher behind "Three Kingdoms Strategy Edition" is Alibaba. Gao Xiaosong's advertisements for it are often seen on TikTok. Jack Ma once said that he would never make games, but now this game has ranked in the top 10. The development of Alibaba's game business in the past two years has been better than many people expected. I think the core reason is that they found the right person in charge (acquired Jianyue Games founded by former NetEase COO Dingdang). In the e-commerce field, apart from the big platforms, you can pay attention to the fifth place, Duizhuang, which is the representative company in the field of live treasure appraisal or jade live broadcast. Then, in the fields of content, social networking, entertainment, and reading, basically all of them are the companies mentioned above that continue to invest heavily in January. At this time, there are only three types of companies that can still invest so heavily: 1. Large companies that are not short of money, such as Toutiao, Kuaishou, and Bilibili. 2. New businesses incubated by large companies with plenty of money, such as Sunshine Pig Farm, Bilibili Comics, Midu, and Shuabao. 3. Companies whose ROI can be converted within a certain range and whose revenue scale is guaranteed, such as Mosheng and Yidui, which are engaged in stranger social networking. In the above analysis, we have mentioned large companies and startups many times, and the conclusion has already emerged, that is, most of the growth is from large companies, and a small part is from startups. So how can we quantify or look at it in more detail? I did another statistics and pulled out the top 5 growths in the 10 categories. The conclusion is a very cruel fact, that is, 85% of the growth of the Top 200 is occupied by giants, including listed companies, leading unlisted companies and leading incubation projects. If we calculate it based on the number of users and the length of time spent on the app, it could be 90%:10%, or even 95%:5%, because there is also an incremental issue in growth. However, if we simply compare absolute values such as the number of users and the length of time spent on the app, the top users will account for a larger share. Let's look at the top 5 apps in the top 10 categories. There are only 6 companies that have not yet been listed, including WI-FI Master Key, Xiaohongshu, Zhihu, Zuoyebang, Yuantiku and Ximalaya. All of these companies have a market value of more than 3 billion US dollars, or even more than 5 billion US dollars, which means that only those who have reached this level are qualified to be on the list. For Internet startups doing 2C at this point in time, especially those who want to become big, they must think about whether they can achieve this level, or whether they want to be the top. Of course, in some subcategories, it may be possible, and 1 billion US dollars is enough. But if you want to go further, it is a huge threshold. Finally, here are some of my personal opinions. First of all, from the perspective of VC, the VC industry has been short of money since 2018, and it has been three years now. There were various reasons at that time, such as the policy reasons of the Chinese RMB market, which led to 70% to 80% of LPs being unable to invest in RMB funds. The capital winter situation became more serious from 2019 to 2020. Although there are some policy preferences and advantages for RMB early-stage venture capital funds, in the current economic environment, from the perspective of central government fiscal expenditure, the money invested in venture capital funds is definitely not a top priority. In addition, looking at US dollar fundraising, especially the recent Luckin Coffee incident, some US dollar LPs and investors will doubt Chinese VCs and Chinese startups, and suspicion will affect many things. It is a question of degree, not a question of 0 or 1. What’s even scarier is that we don’t see any signs of improvement in the short term. For startups, the most urgent task is to see whether the epidemic has a big impact on their company and business. If the impact is not big, financing requires milestone events. Entrepreneurs must be able to prove that the company has the strength to enter a new stage of development to convince investors to invest new money in you. Otherwise, everyone must be in a wait-and-see state, because waiting and seeing is the most stable strategy at the moment. On the other hand, those companies that have been severely affected by the epidemic can only try their best to survive. No matter what means they use, such as borrowing money, laying off employees, optimizing, etc., only by surviving can there be hope. Of course, there are also some projects that have been positively impacted by the epidemic. You must take advantage of good data and not care too much about valuations. Try to get as much money as possible. This is a very realistic thing. Today, when investors look at any new project, in addition to the usual look at the company's team, background, industry, competitive landscape, development path, and how much money it has raised, they will also look at how the team has dealt with the epidemic and what measures it has taken. This will become a normal practice. I have always believed in one thing: do your best and leave the rest to fate. Many people would make this matter seem superstitious, but the most important part of this sentence is the first half: do your best, which means that only after you have done your best can you be qualified to leave the rest to fate. via Chapter 42 by Zhuang Minghao |
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