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Article/Aoyama Capital
Source: Aoyama Capital (ID: cyanhillvc)
The product suddenly stopped selling. Consumers are no longer swarming in and the products are still available, but the income figures are not rising every day. The efficiency of delivery has plummeted. Although the industry and competitors have many problems, this does not make you feel a little better.
The plan to launch a new product with complacency was broken. When the supplier wants to increase the price or cannot deliver the goods, the logistics stops, and the vendor of materials and contents urges for payment. We are ready to rely on new products to fight a turnaround battle to solve the problem of unsalable goods in the last stage, but we cannot see the hope of going online.
There is no place to sell the inventory. Sacrificed brand positioning, gave up gross profit and premium, just wanted to sell goods, but found that live broadcast or private domain was delayed in receiving payment.
The capital will wait and see or even withdraw. A few months ago, there was no reception. There were a dozen highly valued TSs, and they even reached the late stage of the investment process. But now the capital is no longer talked about, and we don't know how to reduce the valuation if we want to. The previous plan based on high-speed growth has been put into practice. People have recruited and advertisements have been put into practice. Now the bullets cannot be renewed.
Each link was carried, but the chain was broken. From production to delivery to sales to distribution, it is still running. However, shipments are always returned because of epidemic control; After sales, the dealer or e-commerce platform's payment collection slows down; The upstream can deliver goods but the price has risen and the goods are distributed in batches; Consumers have been unable to get the products for a long time, and refunds, complaints and negative comments have gradually emerged; The bank's short-term borrowings have been postponed several times but need to be repaid. Only a sum of money can be turned over, but this money is nowhere to be found.
I've raised a lot of money but I'm running out of money. In the past two years, we have obtained several investments from well-known institutions, and our brand is well-known. At the peak, our monthly sales reached nearly 100 million yuan. However, better teams, more extensive investment, and more downstream channels have not brought about growth. With limited profits and cash, we will soon be unable to pay rent, wages, and social security. Even a large number of orders have been placed because there is no revenue to turnover, suppliers have come to ask for accounts, and some company accounts have been frozen.
I have been seeking for change, but I have no way out. Half of the employees planned to be laid off, but people were so worried that 80% of them left soon, and many departments could not carry out the work that was already in a state of anxiety. The number of explosive products has stopped growing. Considering new categories, the ability and resources that can be reused are few.
I can live frugally, but I feel sad. Just yesterday, he suddenly became a complete loser. What he did right in front of consumers, media, employees and investors turned into what he did wrong. The support of the only trustors was nothing in the face of disappointment and abuse.
"Give up fantasy and accept reality." Since the first half of 2020, this sentence has been constantly flooding the ears of entrepreneurs. After the control of the epidemic and economic recovery, many people gradually forget this sentence. But now, consumer entrepreneurs need to do this. After nearly two years of fermentation, the situation of the whole social economy and various industries is grim after the epidemic. Tensions in international relations, uncertainty brought about by the war, the overall contraction of China's stock market value, the disappearance of trillions of dollars, and the capital market in chaos. Intermittent stoppage of supply chain and logistics, fluctuation of public opinion Accepting reality is the first step and necessary condition for entrepreneurial enterprises to survive in the short term, develop in the medium term and realize value in the long term. Aoyama Capital is still firmly investing in consumer projects, but compared with icing on the cake, what we need to do now is to provide timely help, and the attitude towards reality is the key to whether it is worth re igniting.
Face the reality, recognize the reality and accept the reality. But what is not optimistic is that, as an early stage investment institution facing different start-ups every day, most of the entrepreneurs we have met have only managed to face the reality, not yet recognize the reality, let alone accept the reality and make correct decisions.
What is the reality that needs to be recognized?
There will be no flow dividend in the short term
From the first day of consumption, the word "flow dividend" has appeared frequently. From the earliest Taobao to Xiaohongshu, then to dithering and fast hand, to the Tik tok time window that most overseas brands want to target today. In recent projects, most brands will mention one channel - private domain. The market forces start-ups to retreat again and again, and finally retreat to the only territory they can still control.
Why? The so-called low-lying land and bonus are the benefits of the pioneers. The pioneers will have certain advantages, but after a large number of practitioners and capital are gathered in a short time, the low-lying land will be filled up quickly. As long as it is a dividend, it will disappear. It's just that this day has come too fast.
The era of Taobao brand led by three squirrels, Handu Yishe and Qigege ended around 13 years ago, when a large number of traditional brands began to settle in Tmall, and Taobao brand's weight in Tmall was getting lower and lower; At that time, there was a media article: "The era of lying down to make money is over". After the tide recedes, only a handful of brands still stand up.
Looking back on the gold rush in recent years, if we draw a thread from it, we can see the most obvious change in ROI.
Every time a pioneer sets a benchmark, there are countless followers going forward. At the beginning of the birth of the Perfect Diary in 17 years, we chose Little Red Book, which is guided by massive kol and koc; When talking about projects at that time, many projects were channeled to Tmall Taobao through planting grass in Little Red Book. Taking the beauty industry as an example, the ROI was basically above 5; After 18 years of great fire in Ditto, it quickly entered the process of commercialization. Many projects were channeled through Ditto, and the ROI was outrageous, with more than 10% everywhere. Even many times, people don't know where the traffic comes from, and they sell a lot of traffic for no reason. This high input-output ratio lasted until the end of the 20th century. Since Q1 of the 21st year, many founders have begun to feel that the ROI has begun to decline significantly. Recently, when talking about projects, the ROI of 1:1.5-1:2 seems to be quite satisfactory.
In this process, we followed the flow dividend and told stories of "shaking" the brand, fast hand brand and Pinduo brand under the continuation of Taobao brand; However, it seems that the flow dividend has disappeared. Not only the content platforms such as Xiaohongshu, Tiaoyin, and Fasthand, but also the big platforms such as Taobao, Pinduoduo, and Jingdong, entrepreneurs can't afford to invest directly.
Many new brands have taken the "Little Red Book planting grass+Zhihu endorsement+shaking fast delivery+Tmall receiving traffic" as the standard formula and plunged into the "investment flow". However, it is 2022, and this formula is no longer easy to use. What awaits new brands are the peak of the flow dividend, the inner volume and the red sea, as well as a group of sober consumers - beautiful design, exquisite packaging, and good words, which are no longer the key factors in consumers' purchase decisions.
Excerpted from some entrepreneurs' statements:
"It's a good time to talk with capital and peers recently, but it's a good time to think about it. Now that Diaoyin has opened an e-commerce business, everyone thinks it's OK. It will take two or three years to steadily play the offline matrix, and only four or five months for Diaoyin. Now, the bonus of Diaoyin has disappeared by 40-50%. If the starting point is what we really want to do and how to build a brand, we should really think about how to build a three-dimensional brand. From last year to this year, all brands have said that the target of this year's dithering is 50 million yuan, next year's 100 million yuan, and the next year's offline closed-loop. We need to break the illusion of the current financial model. Is there any brand that can be called Taobao brand? JD has also produced a number of brands. Is there any brand that can be called? All people pursue ROI, but Coca Cola certainly does not need to shout and buy traffic on the street. It has achieved the goal of being within reach, value for money and making people love it. "
"Now, the phenomenon of dithering sounds is similar to that when the sophomores in the category of Taos started to start their own businesses and brands. Who became the brand of that group of people? Do businesses and enterprises that have done well in offline closed-loop have Taos experience? No. In those years, the bartenders came out to start businesses collectively. One by one, I wanted to be a brand. Next year, there will be 300 million yuan of water. These people can only be CMOs, not CEOs. We believe in how much they can do, but this volume is not necessarily called a brand, it must not be called a brand. Now people are still confused by the boom of traffic, but there are dividend periods and recession periods in the category. At this time, there is a lot of water flowing, but you will be stupid when you turn to the next bonus category. "
"XX, the person who claims to be the most capable of making traffic in China, can make more than ten brands in Tmall, and Tmall ranks first in category, but he has no ability of brand closed-loop. He can only" eat one platform ". How can he become a brand after having sales? As a result, the title of "the most leading brand of female sex toys" disappeared, causing serious losses. There is a shortage of people who can complete the online and offline closed-loop. Online people are easy to find. There are many people who can do this offline. There are many drawbacks in the Taoxi system. Many categories have flowing dividends on the platform. If the top head is unable to break the circle, you can't make money. "
"XX Audio has 100000 offline points, less than 100 million yuan a year, and less than 1000 yuan a year. The front line is half open online and half open offline. The offline responsible person goes offline and directly drops offline. The IPO is cool, and the completed system can also fall like this within a year. This shows the importance of offline closed-loop. Its brand power is actually good, but its brand closed-loop capability is not good. "
"Adult products, China's third largest Jasbon. The brand power does not need to be questioned. Everyone knows that it is condoms, but Jasbon's offline is bad, so we can imagine the level of offline requirements. The ability to demand offline is much higher than the ability to understand the flow of online play, and the understanding of brand positioning, crowd consumption habits, and regional differences cannot be done without understanding."
Where did the traffic go?
Incentives for barbaric growth: competition between platforms
When a platform is born, the platform itself will be motivated to give some benefits to the pioneers. Because of the imperfect mechanism, there are many loopholes that can be drilled in the middle.
Therefore, the traffic characteristics of the platform (such as video content of fast hand dithering, and high cost performance labels of Pinduoduo)+the benefits the platform gives to the pioneers+the platform mechanism loopholes constitute the "traffic dividend". When the growth of the platform itself peaked, the number of merchants had already settled in enough, and the mechanism of the platform became more and more perfect, there was not much arbitrage space left.
Capital, enterprises and consumers together accelerated the ebb of the tide.
After the epidemic started, capital accelerated to join the consumption battlefield, and a large amount of hot money poured into the consumer industry. How was this money spent? Most of the big spenders are on the launch and recruitment. Where did the money go? Generally, it is a complete set of pieces: most of the expenses are spent on the content laying of Little Red Books, quick audio streaming, Ali Mama's toolbox, various live video tapes and celebrity endorsements. Self broadcasting and private domains are all done according to the budget.
Last year, I chatted with the boss of a MCN agency in Hangzhou, and he joked that the money invested by 20-21 in the past two years has made many anchors rich. On the contrary, his own organization only made meager profits. At the peak of the market, in general, in addition to the normal pit fee+promotion, the live studio of the head anchor will also send some gifts privately. At the beginning, everyone gave brand-name bags. At the craziest time, two competing brands directly transferred 1 million yuan in order to occupy the spot of an anchor. By the time of the 618 and the Double 11, each brand had even more breakthrough, and began to prepare six months in advance. The requirements of the head anchors are very high. The new brand has not established brand advantages. There are only two general ways: more money+lower price.
To be honest, 17 years ago, the word "GMV" was rarely heard in the consumer industry. Even now, "GMV" is not an element of communication in the industry. Everyone talks about "revenue". The influx of a large amount of capital brought the term originally used in the Internet industry to the consumer goods industry. When talking about GMV in each project, the caliber will be different, some will include discounts, and some will include returns. However, there is still a lot of capital that only recognizes GMV.
Therefore, in the context of GMV supremacy, a variety of market chaos appeared. Plagiarism, IQ tax, crazy discounts and promotions are all for a beautiful GMV figure at the end. It doesn't matter how much you spend to catch up with the traffic peak of the Double 11 and 618, but the important thing is that after this impulse, you will have a higher valuation in the financing of the next stage.
Under this carnival, there are many consumers who have benefited, and of course, many consumers who have suffered. We observed the repurchasing data of many enterprises, and found that the repurchases of many enterprises were unusually high. Finally, we found that most of the repurchases occurred in the rush, and even many consumers only repurchased the brand with promotions. There are also many "bad coins" in the industry, and the products of plagiarism, forgery, and IQ tax are sold at low prices. The market is more mixed than ever before The flow mechanism of thousands of people and thousands of faces does not seem to reduce the decision-making risk of consumers.
The channel side and the brand side are game relations in essence. Although they are game games for many times, the self correction and repair ability of the Internet platform in the game is far greater than the brand side, so Any dividend on the flow is short-term, just the east wind of the brand, do not have the illusion that it is the company's ability.
Only when the company attracts consumers to the same camp as itself can it not lose the game.
Capital dividend will not happen again in the short term
In the post Internet era, the fields that can be invested in in the early days have narrowed, and a GAP period has emerged. Since the epidemic began at the end of 19, online consumption began to grow rapidly, and online penetration of many categories reached new highs. During this period, many fast-growing consumer brands emerged. In the past two years, many star enterprises have also sought to be listed, and their valuation is no less than that of high-tech enterprises. This allowed a lot of capital to see the opportunity of consumption and investment, and they entered the market one after another, and reached the peak at the end of the 20th year.
Media, venture capital institutions, e-commerce and content platforms are blowing the air. At the busiest time in 20-21 years, there were too many projects to see. At the end of 2017, the valuation of most consumer seed projects ranged from 5 million to 20 million yuan. In the past two years, the admission ticket for many projects was 100 million yuan, and some even 300 million yuan or 500 million yuan. At the craziest time, the price was even set directly according to the original rank of the founder. As long as the executives and CEOs of consumer enterprises, Alibaba P8 and P9, were out to start a business and get 10 or 20 million yuan, the basic problem was not serious. Organizations have been keeping an eye on the employees who want to come out of the big factory. One founder was surrounded by seven or eight organizations one day, and had to go back to the hotel to rest after a tiring night. They found that another organization had been watching him in the lobby of the hotel for almost a day since the afternoon. In this way, the valuation of early consumer items has been lifted to a level that is difficult to understand.
By the end of 2021:
"BP has sent more than 100 agencies that have been watching consumption in the past six months, and 70 of them said they would not watch it and directly rejected it. The remaining 30 companies met and praised the products, but there was no later."
"In the first half of last year, I just came out of a big factory to start a consumer business. I don't know where the news spread. A lot of investors added WeChat to ask for a meeting, and the angel round financing was quickly completed. But when the second half came out for refinancing, the market changed dramatically. Fortunately, the data was good, and finally the money was raised according to half of the expected valuation."
"According to the plan of last year, more new products will be launched this year to cover more channels, and the marketing will also do some broken things. The corresponding team has also been configured in advance. But when we communicated with the institutions that have been chasing us in the last round, we found that they have transformed to look at hard technology and medical care."
"Last year we finished the second largest number of financing cases at the consumer track, but this year we will all in web3."
The above words come from the entrepreneurs and FA of the consumer track, and many consumer investors around have begun to consider new career directions. These conditions reflect the dramatic changes in the capital environment of the track consumption over the past six months.
When the wave of consumption and investment comes in 2020, many friends, including entrepreneurs and investors, will end up doing FA. There are too many projects and too much money, so we don't worry about deal and deal; Since the middle of 2021, the trading market has begun to change. The number of consumption cases that people started to receive has dropped to 50%, and then to 10-20% by the end of the year. By this year, there are few FA still receiving consumption cases. Even when talking about many projects, I have asked me to recommend FA that they do better in consumption. This is very realistic, because the consumption cases cannot be sold. A friend of FA who specializes in the field of consumption has only completed one early consumption project since the second half of last year, which took nearly a year. For FA, the efficiency is too low, and many FAs are turning to the direction of ARVR, metauniverse, and biotechnology.
The pessimism of the market began to spread. How to adjust the attitude and mentality, and how to face the "consensus" of most investors to obtain sustained financial support will be a great challenge for future consumer entrepreneurs.
The obvious reason is that the performance of the first batch of new consumption listed companies in the secondary market was disappointing, the valuation system began to adjust, and pessimism was transmitted to the primary market. When the "air vent" blew, the market shouted "all categories can be redone", all kinds of capital entered the market, entrepreneurs with various backgrounds and motivations entered the market, the market blew an irrational bubble, and capital assets were mismatched. Speculative entrepreneurs and investors have disrupted the market. In the past six months, the market has begun to clear the two.
The underlying reason is the structure and cost of capital.
The US dollar fund and the RMB fund constitute the capital of the primary market. Let's first look at RMB funds. Today, 80% of RMB funds in the market have shifted their focus to technology and carbon neutrality. Local governments, as the main source of funds for RMB venture capital funds, regard venture capital as an important means of attracting investment. Today's RMB VC funds can be said to have almost no pure market-oriented funds, which are more or less composed of government guidance funds, The guiding fund orientation of the government is science and technology and carbon neutrality.
Looking at US dollar funds, since July last year, the listing of Chinese concept stocks in the United States has been suspended for nearly eight months, and the listing in the United States is the main exit mode of US dollar funds. The closure of this door has led to the rapid tightening of US dollar funds since July last year, with a sharp decline in investment speed.
The tension brought about by the situation in Russia and Ukraine spread to the listed China Concept stocks, which cut off the market value of almost all Chinese companies listed in the United States. A huge amount of finance was wiped out. The companies invested by the past US dollar funds could exit in the future. Last year, the fund had five times the return, and now even lost money.
In this environment, the RMB fund USD fund will not have the same enthusiasm for consumption for different reasons.
Please note that there is not no enthusiasm now, nor just this year. Entrepreneurs must recognize the reality.
If the past achievements are bubbles, overheating, dividends and luck, why insist on entrepreneurship and investment in the consumer industry?
The key things have not changed in the past two years and will not change in the future.
"What is unchangeable?"
Economic growth driven by consumption will not change
The growth of a country should be focused on. Promoting internal circulation and stimulating consumption are the most practical means to promote economic growth of our country. Common prosperity and increasing national happiness are also the most important ways to catalyze consumption. Among the three main economic engines of export, investment (infrastructure) and consumption, both export and investment are slowing down. It is not an option but a necessity to rely on consumption to drive economic growth.
Stimulating consumption is a big topic, including population structure, value orientation, supply chain reform, etc. For entrepreneurs, it is the general trend to provide better products, innovative products, and products with value proposition.
Technology will not change through consumption transformation
Don't think that the focus of the times is technology, not consumption. No matter how good semiconductors are, they also need consumer electronics to be realized. No matter how clean energy is, it needs to be a consumable power source. In addition to major country projects, most technologies are ultimately the supply chain of consumer enterprises.
Just as the transformation from amino acids to condiments, from semiconductors to computers, and from technology to consumer goods requires more entrepreneurs with market sensitivity, innovation awareness, and brand philosophy.
There is always a new mind left for the brand to occupy
Consumers have grown up from generation to generation. Each generation has its own language and values. No matter how big a brand is, it is always anxious about how to acquire a new generation of young people. Do a solid job in product and service innovation to provide new consumers with better consumption experience, which is always in demand and market.
How to adjust the mentality, face, recognize and accept the reality, and still insist on doing the right thing?
Think about why you started your business. If the long-term goal is still there, strengthen your heart and start again. Otherwise, stop entrepreneurship, there will be no wind to ride for a period of time, and only one step at a time. Entrepreneurship is never brilliant. If you like halos and bubbles, now they have disappeared, you can also go
Adjust expectations, adjust expectations, adjust expectations. Don't let expectations overwhelm cash flow and deplete capital reserves. Now it is not a trough, a fall, a fall, but a return to zero. What we need to do is not a linear extension of our work in the past year, nor a solution to various specific problems at hand, but a return to our original aspiration, Back to the first day of entrepreneurship, work hard on products and communicate with consumers.
Forget the success and growth of the past two years, the overvaluation and the rolling money, and remember what has really accumulated. Maybe it's the team running in, maybe it's the industry cognition, maybe it's the brand idea, maybe it's the recognition of upstream and downstream resources. Every decision in the future is a new start. We will stick to the right thing, that is, the things that can be accumulated and have no contribution.
Re evaluate, re formulate the overall strategy, and re connect all the resources you can cooperate with. Clean up inventory, tighten delivery, manage accounts payable and receivable, and streamline the team. When all aspects are shrinking, find one or two things that still need to be wagered or even heavily wagered. They should be your core competitiveness in the eyes of consumers, the key buying points, and the foundation of your survival. Keep the people who can fight with you. They are the seeds of today and the elders of the future.
Man is the root of everything. Pigs can fly in the wind, but in adversity, the right people are needed, and people who can lead the team to create achievements and lay a good foundation are needed to practice "man can conquer nature". As an angel investment institution that has been persisting in investing in China's consumer market for seven years since its establishment, what we have been doing is to find the right young people and help and support their growth, including but not limited to funds. Youth is not age, it is mentality. Angel investment is not about the company's founding year, but about the business to be developed and the founder of keeping the original intention.
With the presence of cognitive, emotional and resilient founders, teams and businesses, we still have enough ammunition to play the role of timely help and nurture great consumer brands in the next decade and century.
Yes, in the deepest predicament, we still want to talk about greatness and the future. The quality that leads us out of the predicament has the most realistic means, the most pressure resistant heart, and the most long-term vision and the most ambitious ideal.
(Statement: This article only represents the author's view, not Sina.com's position.)
