Chinese bike sharing will eventually end up as a magical realism
China’s venture capital investment style has went from the entrepreneur-centered Classicism to the investor-centered Medieval style
Investors prevailing over entrepreneurs in the startup world bodes ill
WANG Jing, a Managing Director of Sky9 Capital, said that the Chinese bike sharing will end up as a magical realism story. In his opinion, the astonishing prosperity of bike-sharing industry is a mere reflection of the frustrating reality of China’s venture capital scene.
The bike-sharing indeed benefited the users who can ride the bikes conveniently, instead of buying one. Meanwhile, the VCs will not stop burning money until such invested bike-sharing companies get listed. However, bike-sharing companies are likely to witness a drop in their share price after listing, owing to their weak self-financing ability. In return, venture capital firms will withdraw the investment, leading to the loss of individual stock investors.
Exactly as he has predicted, capital-intensive industries like bike-sharing and new retail suffer a tough winter at the beginning of 2018. In the bike-sharing arena, some investors, in order to recover their capital, made rivals merge, since the capital was the only straw bike-sharing players could grasp at. As for self-service snack shelf, a host of start-ups have been falling apart since January after a half-year’s crazy expansion. The year of 2017 saw the rise and fall of many start-ups which flocked into hotspots one after another.
Wang Jing has been paying close attention to investment in consumption service.
Therefore, he takes these as the proofs that China’s venture capital investment is at the investor-oriented stage of Middle Ages, which is a complete overthrow of entrepreneur-oriented Classicism. He criticized that capital should serve as a catalyst other than a reactant. Put simply, capital should never be vital to the survival of a company, while the fact has been the very reverse since 2013. And from then on, the desire to make profit tipped the balance, resulting in fruits like bike sharing and self-service shelf.
Wang Jing spoke highly of new retail, excluding self-service store and self-service snack shelf which were in the spotlight in 2017, because these two are not in line with the model of classic venture capital investment he promotes.
The year of 2013 is a turning point for China’s venture capital investment. Before that was the Age of Classicism, featuring value investing. At that time, investors relied on their capital and understanding of businesses to assist enterprises and industries, which also brought them wealth. In fact, a better future, instead of wealth, was what investors pursued. It is the law of investment in the Age of Classicism.
After that is the dark Middle Ages. With the expansion of investment market, importance of profit-gaining gets the upper hand over that of entrepreneurship and those who have more capital win a bigger voice in the market. Some investors even claimed that in order to make a profit, they would intentionally create a hotspot. Bike-sharing and self-service shelf are two outstanding examples.
Problem roots in the way that uses venture capital investment to develop bike sharing under China’s current environment, instead of in the industry itself. Now Chinese cities face some big issues like a dearth of a clear right-of-way and a well-laid plan in urban traffic. Therefore, the demerits of beefing up the development of bike-sharing in an out-of-order way outweigh its merits.
Capital should serve as a catalyst other than a reactant. Put simply, capital should never be vital to the survival of a company. The classicism of venture capital investment has stood against numerous tests, with the purpose of positively advancing development of enterprises. Venture capital investment should create real value for society.
Wang Jing hoped that China’s venture capital investment can achieve a rapid transition from the dark Middle Ages to the stage of Renaissance. He called on investors to plough more energy into figuring out how the business model works in the process of investment, making sure they can take the responsibility to benefit society. And he highlighted the importance of putting entrepreneurs at the core.
He encouraged correction of the current leadership of investor to avoid what Shakespeare says:
“These violent delights have violent ends.”