By Chen Jing
From the ten million financing get by web celebrity Papi Sauce to the merger of DiDi with Uber China; from the billions dollars of financing gained by ofo and Mobike, the leaders of public bicycle, successively to the Meitu Xiuxiu being listed in Hong Kong Stock Exchange which opened the sixth wave of Internet enterprises' IPO, the capital strength catches people's eyes as usual. But seeing from the opposite, the talk about "winter of capital" also can be heard without end.
Capital is all long one of the most important fulcrums leveraging the Internet industry.
For a long time, the activity of capital has supported the Internet innovation and prosperity, but no matter how people are willing to admit, the "winter of capital" has become a new normal that the Internet industry must face today. As the world's second largest gathering place of venture capital only next to the U.S., China has almost 3000 angel funds and VC institutions in total, but data from market research firm, Analysys, show that in 2016 the increased number of start-up companies in Internet industry was 2677, down 77 percent year-on-year; the number of Internet enterprises obtained investment was 5644, down 26 percent year-on-year.
Dong Xu, general manager of Analysys' analyzing group, said: "this year, the investment institutions lowered their investment frequentness, improved the degree of caution. A startup company can no longer gain the favor of capital only with its network flow. But the quality enterprises can still get a good amount of financing. It is not so much the 'winter of capital', it is better to say that the capital tends to be rational. The investment institutions are more concerned about the operation of enterprises and sustainable profitability."
The end of "flow bonus"
Changes in the attitude of the capital are from the end of the "flow bonus".
Founder of GrowingIO, a data service provider, Zhang Ximeng said: "the Matthew Effect is more obvious in this year, the weak weaker and the strong stronger. The head flow concentrated in 3 companies, i.e. Baidu, Alibaba and Tencent, leaving fewer opportunities to others and with the flow price being more expensive."
Cao Sheng, CEO of WeShare, a Mak-er financial service provider, also said: "the growth in the number of Internet users has entered the bottleneck stage, and the supply of entrepreneurial product is too much, so the attention of consumers is very easy to be dispersed. Many projects are difficult to obtain the attention and the corresponding income."
This "combination blow" going through without hindrance in the "first half", namely "gaining customers by cash burning and subsidies, obtaining investment by increasing flow and selling advertising", began to lose the previous function.
Li Jinhua, chairman of the capital investment agency Captain Finance, said that the Internet enterprises have paid attention to the "eyeball economy". Companies including Alibaba and Didi have all engaged brand marketing and even cash burning to gain the users first. "More page views mean more possibility to monopolize the market. As for the money, it should be after that."
But now, the attention of the investors begin to shift to the profitability and the time of becoming breakeven from the indicators like orders volume and transactions amount, which means that the market has bid farewell to the extensive stage characterized by paying out of investors' own pocket for the market scale.
Huang Yuanpu, founder of iyiou.com, a market research firm, analyzed the changes in the industry taking the O2O as an example, "in the past, the existence of flow bonus and demographic dividend made it relatively affordable to obtain users with subsidies, but now the market has changed from incremental one to the stock one, the huge subsidies will appear diminishing marginal effect as the users have significantly reduced, the blind subsidies have lost the practical significance".
So, where would the Internet market in the "second half" turn to? Retaining customers, enhancing viscosity, meeting rigid needs and profiting solidly, this is an obvious way that everyone can find. Who can achieve this, who can get the favor of capital. An entrepreneur told the reporter frankly that hyping concepts and ecology have been a backward way, only providing services that can solve the practical problems with technology and the model is the killer-x helping enterprises getting over the "winter of capital".
Trend-based change of Internet
The Internet is therefore becoming "heavy". Resting only on the model of online business is not enough to attract the attention of capital.
Leoao.com has recently announced that it will open 5000 intelligent gyms nationwide. It is a staggering figure, because the corresponding data is the number of gyms of Anytime Fitness, the most famous small gym chain in U.S. was only about 3000. So Leoao.com received a B-round financing of RMB 100 million yuan lead-invested by Toutou Shidao Fund and Hua Sheng Capital in July 2016. CEO of Leoao.com Han Wei said that the competitive advantage of Leoao.com is: the offline mini gyms with lumped functions can maximize the level ground effect, while the online platform can provide services for the coaches. "The revenue of private coaches in Leoao.com can be increased by 50 percent to 100 percent, which are achieved through the transformation with the digital Internet. In essence, Leoao.com is a data company," said Han Wei.
The Internet is changing to "thin" as well. The vertical change of content in the live broadcast industry is a vivid portrayal of it.
"Since the third quarter 2016, the bandwidth of network live broadcast has grown obviously, which includes the vertical fields live broadcasts like tourism live broadcast and e-commerce live broadcast recently raised," said He Wei, director of Policy and Economic Research Institute of China Academy of Information and Communications Technology.
Live broadcast platforms also realized that in the industry reshuffle, quality content is the fundamental for attracting large traffic and ensuring the platform to win. Those live broadcast platforms once taking gift-granting as their main source of income began to enter into the various formats through the entrance of flow, in order to improve the cash ability of the industry. Viewing from the sub field of "live broadcast + e-commerce", in June 2016, the live platforms of Taobao, mogujie.com and jumei.com went online and Tuniu Video and huajiao.com reached a strategic cooperation; in July, Suning Live went online and yizhibo.com launched a e-commerce window function recently, selling goods at the same time of live broadcast.
The core competence of technology is getting more recognition. Ma Haibang, founder of incubators liuheqiao.cn and Unicorn, said: "the Internet venture projects which can gain the favor of capital in the future must be those who have products and also the technical barriers, must be those who are based on the core competitiveness of science and technology, and must be those who have the ability to subvert the upstream industry. Seeing from 2016, the entrepreneurial projects that have only the Internet business model are not popular. On the contrary, the projects that only taking the Internet as a tool in the fields like biomedical, mechanical and electrical integration and robotics all have won the favor of PF and VCs."