1. To Become the Next National Brand, One Must Venture Offline
Lastly, I want to emphasize offline strategies. The integration of online and offline has been discussed for years, but in the new cycle, it will become a must for champion companies.
Previously, many brands focused on online because of its efficiency. Platforms like JD, Tmall, Tiktok, and Pinduoduo could generate 500 million to 10 billion in revenue in just one channel. By leveraging multiple channels, some even reached 40-50 billion.
However, to become a new national brand, offline presence is essential. Our estimates suggest that if one can achieve 100 million online, they can potentially achieve 200-500 offline. Hence, only by omnichannel presence can a company have the opportunity to become a hundred-billion brand.
In recent years, it has become evident that offline can create more scalable and robust consumer business models.
Previously, people thought community group buying online was rapid. However, the emergence of thousands or tens of thousands of offline stores will become a more familiar commercial form. In the next five years, China might produce 10-20 chains with tens of thousands of stores.
The trajectory for these companies might differ from online businesses. Online businesses might experience rapid growth initially but plateau later. In contrast, establish 1 or ten offline businesses might take years, and even longer to expand to 100 or 1000..
How long it took Mi Xue to expand to 1000 or 10000 stores is still a vague number, but it took only two years to expand 10,000 to nearly 30,000 stores.
Thus, the “slow start, fast later” business model offline can create a new batch of champion companies. Companies overlooked from an online perspective might be the future marathon champions.
2. No One Can Build the Best Company in the Most Challenging Times
In the upcoming cycle, entrepreneurial approaches must evolve. As investors, we also need introspection to elevate our investment capabilities.
Many LPs and investors have remarked that consumer investments seem to have declined significantly, perhaps by 80% compared to the previous boom.
Why the decline? Is it because the consumer business is shrinking? No, the consumer industry remains resilient and vibrant.
The decline can be attributed to the previous wave of consumer investors, most of whom just follow the trend.
The first type transitioned from early-stage venture capital, aiming to invest in younger companies. However, as they realized the barriers to building new brands were relatively low and success rates weren’t as high, they opted out.
The second type favored late-stage investments, hoping to profit from mature consumer companies going public. With policy changes favoring A-shares, many consumer companies chose HKSE as their primary exit route. However, HKSE valuations for consumer companies are often conservative, requiring companies to prove themselves over longer periods. Consequently, such investments have dwindled.
Now, the investors and entrepreneurs that stayed in the game must have a long-term belief in the consumer sector. This is an opportune time for consumer entrepreneurship and investment because only the most dedicated remain.
In conclusion, great companies emerge during challenging or lukewarm times. No one can build the best company during the most challenging periods. In such situations, the remaining investors must elevate their expertise.
Traditional investors preferred grand narratives, like “this is a massive arena where global giants emerged, and China is about to produce the next champion.”
This is what we call “Where To Play” – investing in promising markets, sectors, and companies. But does a good market always birth new companies? Does a great product always lead to a big company?
Could it be that it is precisely because a market is challenging that the companies that emerge from it are of superior quality?
Therefore, whether one is an entrepreneur or an investor, merely employing the aforementioned mindset when considering investments might lead one to exit prematurely when faced with challenges.
To what extent, then, should one be prepared? If you are an entrepreneur, it’s crucial to understand the capabilities required to realize your vision.
Investors, too, must possess this discernment. An investor once asked me, “Why would you choose to invest in traditional Chinese roasted snacks like rice and sunflower seeds instead of the trendy Chinese baked goods?”
The crux of the matter lies in understanding “How To Win.” Why is one business superior to another? Why is one founder’s approach more effective than another’s? Only with accurate insights can one invest in genuinely valuable enterprises.
At GenBridge Capital, we are committed to leveraging our expertise, and this journey is ongoing. Entrepreneurs increasingly seek partners who provide capital, but more importantly, partners that understand and support their long-term vision.
As consumer specialist, we have spent recent years honing our skills to genuinely empower businesses:
Firstly, select the right market. Those familiar with GenBridge will recognize our unparalleled depth of research and insights into various business models. Our firsthand information on business models from Japan, the U.S., and user research within specific Chinese industries positions us at the forefront of the market.
Secondly, capacity building. Drawing from my experience at JD.com, I have acquired tools such as the “Strategic House” that enable us to assist many companies in crafting a growth roadmap for the next 3-5 years. At the beginning of each year, founders have clear objectives, including the “three major battles”: immediate goals, annual objectives, and three-year milestones. We engage in profound discussions with these founders to solidify their strategies.
Lastly, deliver tangible results. Many founders can envision their goals, but executing them is where real impact lies. GenBridge Capital is continuously working to enhance our strategic deployment capabilities, facilitate companies’ capital market financing and IPO processes, and bolster post-IPO merger and acquisition developments.