启明执行董事周凌霏对互联网消费的理解

English Abstract：The Harbinger recently spoke with Stella Zhou, a Principal at Qiming Venture Partners in Shanghai. Since joining Qiming from GE Capital in 2010, Stella has focused on “Inter-sumer” - Internet and consumer - companies like Musical.ly and Mogujie. This interview discusses major trends within Inter-Sumer, as well as Qiming's structure and investment approach, cross-border investment opportunities, “upgrading” and AI. We hope you enjoy reading!

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Introduction

Adam: Hi everyone, welcome back to the Harbinger VC podcast. Today we have joining us Stella Zhou, a principal at Qiming Venture Partners covering Inter-sumer, which stands for Internet and Consumer. Prior to that she was part of GE Capital's Investment and Risk Management Team, with a MBA from the University of Chicago's Booth School of Business.

We'll start today's episode by first talking a little more about Qiming's investment coverage by geography and by sector. Then we'll tackle some of the major trends within Inter-sumer, including the sharing economy, entertainment, consumer applications of AI, and consumer upgrade. Lastly, we'll cover cross-border investment opportunities, the growth and prevalence of social video, and also have a discussion around how niche social networks and platforms can generate tremendous value, despite the interference of large existing players.

Adam: Hi Stella! Thanks for joining the podcast. Before we dive into your specific investment experience and some of the major trends in Inter-sumer, could you tell us a little a bit more about Qiming Venture Partners and what you guys cover?

Stella: Of course, very happy to be here today. I'm Stella Zhou, I joined Qiming in 2010, so it’s my seventh year here. Right now, we're managing $2.6 billion USD AUM; over the past 10 years we’ve managed five USD funds as well as four RMB funds. That's local currency investment. We're doing investments in mainland China, as well as greater China. That's pretty much the fund coverage.

The industries we're looking over are Internet, consumer - so the traditional TMT sector - high tech, healthcare like pharmaceuticals and healthcare services, as well as devices; the rest is fintech. We're covering several trending factors of the whole venture capital area.

Qiming's Global Coverage

Adam: Thanks a lot Stella for the introduction. So it seems that Qiming has a lot of money under management, you guys do mostly China, but also some US deals as well. Can you talk us through a little more about your global coverage?

Stella: Of course, we actually cover a lot of cross-border deals as well. We're normally looking at trends within the younger generation in TMT, so the consumer as well as the Internet aspects. We have actually done several deals based in the US or China. I'm in the Internet consumer sector, so the deals we have done are Musical.ly and VeeR, which is like VR YouTube - it's an aggregator for videos on VR platforms. In terms of Musical.ly, a lot of people have heard of it, it’s a young generation short video application, social media platform. People are creating user-generated content and sharing 15-second videos on Musical.ly. These are two deals we've done.

We also cover a lot of deals in Southeast Asia, as well as India. India is probably the next trend of the Internet market, so that’s why we're looking at India as well. That include APUS, a goal-launch application and Akulaku, a payday-loan model fin-tech company in Southeast Asia. We’re not just covering greater China, we're doing a lot of cross-border deals, which is actually included in our mandate.

(Source: www.androidred.com/download-musical-ly-for-android)

Adam: Really interesting, so when we look at VCs, some well-known names like Sequoia for example, also has Sequoia China which seems like it’s very independently operated; Matrix Partners has a similar model. Then you see more globally-operated models like DCM or GGV, maybe it’s not a clear demarcation, but in terms of Qiming, how do you compare to those guys in terms of how you’re set up?

Stella: When we started, a lot of people asked me if Qiming is a Chinese local currency fund. It's actually not; we're actually a USD fund. People think [Qiming is a RMB fund] because we have a different name. Not Sequoia, they have a US presence as well as a China presence. We operate as one team, so that's very unique for us. We are based in China, but we oversee all the markets. That's quite unique from other venture capital firms and big names like Sequoia, DCM, GGV; they will probably have teams based in two areas, covering both sides, but we have one team. The reason to do that is not only because we're covering more China versus the other places. It's not because of that; it is because we have the insights from the China market as well as the US market. The partners used to be from the US, they bring the best practices from the US, [have experience with] very mature funds and come into China and build up whole teams. We can cover both sides of the market by using the insights from the US and China.

The other reason is because we know the trends of the Chinese market. There are a lot of entrepreneurs in China. People used to say that Chinese companies were copycats, but now I would say we have a lot of commercial innovation in China. Some of the companies have similar ideas to the US. For example, one of the portfolio companies we have is called Mogujie (蘑菇街), an e-commerce website. When they started, they really looked like Pinterest. Consumers share photos, but their photos are more apparel, accessories by girls. It's possible for people to buy through their shared pictures. I would say it's similar looking, but it's one step further. So in terms of monetization, commercialization, Chinese companies have their own way of doing that. It's more specific in China, but I would say the possibilities go broader. Going to India, or Southeast Asia, [Mogujie] could be a possible similar model to mirror there.

Adam: That's really interesting; I think there are increasingly such examples. We can dive deeper and share more examples later in the podcast. Just to close out the understanding of Qiming’s position, you mentioned the unique operating model; having essentially one investment committee across the world must make for some late nights and odd hours. Is this increasingly a trend for VCs as well? As globalization occurs and more innovation comes from China and there is a lot of learning on both sides, is this happening more and will more VCs do this? If so, why are other companies like Sequoia still so separate?

Stella: I would say different ventures have different ways of operating. I won’t say which is better or which is worse, but for us we have a very unique thing which is an equal partnership method in Qiming. Which means that in our investment committee, we have equal voting rights, so every investment committee member gets to vote on each deal. They vary broadly because maybe healthcare partners have to vote on [Inter-sumer] deals and we have to vote on theirs. I would say a very good thing for this [method] is that people only know their territory best, however, from the commercial or common sense or from another angle, you could probably raise a lot of good questions which is something the deal partner might forget. We always say that we're afraid of people falling in love with the deal when they're doing an investment, so this method is a very good way to avoid that.

And on the other side, as people will see other areas there will be a lot of co-working possibilities. For example, in the deals we had in the Internet plus healthcare sector, there's a good trend. This was seen with a deal we recently had, Tuixiang they're doing AI in the healthcare. They're utilizing AI methodology and techniques to read diagnoses like ultrasound results. This eliminates the need for a person to read the results. Machines can learn and guess and give a percentage of possibilities of the patient getting diseases. That’s a very good technology within the healthcare and the TMT sector. It’s very unique; we do a lot of cross-border as well as cross-industry deals. The reason is to enlarge the power of each of the sectors.

Internet Consumer

Adam: Thanks for the explanation of Qiming and how you approach investment and the venture business. Now to talk a little bit more about your experience, you mentioned you're part of the inter-sumer (Internet consumer) team.

Stella: Wes, we actually made our own name - so it’s supposed to be "Internet consumer" and we combined the words to be "Inter-sumer."

Adam: So for those of us who are not at Qiming, can you explain what that means and what you guys cover?

Stella: We separate into teams so we can be industry specific or industry experts in each of the sectors. So our sector focuses on the Internet and the consumer, which a B2C business. We are looking at deals in which the end users, the customers, have to be individuals. It could be online, it could be offline, that's the reason why we have the Internet, which is online, and the consumer, which is offline. I would say 80% are focusing on the online, that's our expertise, and we believe there is a network effect, online individual industries. That's the key thing we're looking at.

There are a lot of areas in terms of "Internet." We broadly cover all of them, for example e-commerce, healthcare, fintech, social network, entertainment, consumer operating. There are quite a lot of areas we're looking into. I think we have like 200 portfolio companies we have invested in over the past 10 years, that’s quite a lot of deals as well.

Adam: For every deal you've invested in, you probably looked at like 10 times that number overall?

Stella: From my personal experiences, I probably meet like 200 entrepreneurs and I would do 2-3 deals; it’s actually 1% of the deals.

Adam: Okay, wow, it’s not easy to be a venture investor and find good opportunities. In terms of inter-sumer, it seems pretty broad; you cover a lot of different areas. Maybe we don't need to cover every sector today, but are there a few that you're particularly interested in, and are there any key and unique trends coming from China that a global audience could benefit from learning from?

Stella: I think for us, we've identified several things to focus on in the next couple of years. One thing is AI application to different aspects, like different industries. There’s AI in healthcare, in fin-tech, in big data utilization in different areas; the other thing is probably consumer operating. I would say consumer operating is actually a very broad topic. We all know that GDP growth for China is not as high as it was a couple years earlier - like double-digit growth. Right now it’s more flat, but we would say there's still a huge opportunity, which is upgrading. So [the opportunity] in China from the consumer perspective is upgrading on historical ones. Supply exceeds demand, so how we increase the demand is by upgrading the supply to stimulate the demand for the current market.

For example, there is a lot of automobile after-sell industry, but we are upgrading the whole business of 4S stores to online portion. There’s a good example of a company called Tuhu(途虎养车) doing that online plus offline. The third one is the sharing economy, O2O, but it is more focused on how to utilize offline to benefit online to enlarge the network effect. It’s not the traditional O2O companies that were burning money, subsidizing the users, this is one step away. Other things we are looking into are the entertainment, media sectors. So when we say entertainment, this is based on the IPs, content, as well as social networks. I would say AI, consumer upgrading, the O2O part of the sharing economy, as well as entertainment, are the four areas we would like to focus on in the next one or two years.

Consumer Upgrade

Adam: That's really helpful - we can dig around in each of those. Let's start with consumer upgrade; I'd like to better understand the mentality of the consumers in China now. You mentioned you try to stimulate the demand by having more supply, better supply and higher quality products and experiences. Where are we at right now? Twenty years ago, the gap between the really wealthy folks and everyone else was probably really big; these days the middle class has higher consumption and higher purchasing power; it’s definitely getting better. To help us further understand, having invested in a lot of these companies and been in China for such a long time, where are we at right now?

Stella: I think it's like you just mentioned, the middle class is actually booming. The whole basis of the middle class is increasing and consumption power is increasing as well. A simple way to look at it is, after we gave up the one child policy, a lot of parents started to stimulate their purchasing power, not only for their kids, as well as for the family. We were seeing it in first-tier cities like Beijing, Shanghai - these big city monopolies. However, now we are seeing Chengdu, Hangzhou, a lot of other cities with similar consumption power. From an e-commerce view, our pool, the average purchasing power per person, is very close for Beijing, Shanghai as well as other cities like Chengdu, Hangzhou. A very easy way to tell if people have similar consumption power is their requirement on their life quality. That's the reason I would say the historical way of people mass-marketing and gathering traffic into a single advertisement method has become a pathway. Right now we're focusing more on the result-driven, the efficacy-driven. For example, a recruiting website used to focus on advertising to recruiters online. However, these days what we're doing is focusing on the success rate, focusing on the people who are on board eventually with the recruiter, so we use that to calculate back the monetization. I would say that the mentality for each sector nowadays is upgrading. People are not using easy ways to get money; it's become more sophisticated, more efficient.

Adam: Regarding other examples of consumption of information, you mentioned entertainment earlier. But I think just in general, for information consumption, a lot more people are willing to pay for good content. This may be as driven as back in the day, but now people actually pay for Dedao (得到) to access someone's class. There's a lot of things people are willing to pay for, so I certainly see that. What are some other areas where people need an upgrade? I haven't been here for that long, but it seems like food's pretty good here in Shanghai, there's already stuff that's pretty good, what are the areas that are lacking? One that came to mind for me was that there's not as many gyms, in the US there's lots of gyms like Equinox, there's cheaper chains like Blink Fitness. In China, there doesn't seem to be as many gyms, and the gyms that are here seem to be very expensive, are there any examples that are up and coming?

Stella: There are actually a lot of gym investments in China these days. I would say that's part of consumer upgrading, as well as the sharing economy. There are some people-less gyms. You can go to the gym without anyone controlling it, there are only classes and you can just step in as a subscriber and it becomes a 24-hour gym - there are actually a lot of deals in the gym sector. As well as the online application, like Keep, that’s an application to help people learn how to practice and workout. I would say just like you say, people in China right now care more about health, how to live a better quality of life versus just living a life. That's the reason why they're starting to workout, to care about their bodies…there's a lot of deals for this reason. Maybe if you would like to try, I could introduce you to some.

(Source: Google Play Store – Keep App)

Adam: That’s really interesting, you mentioned there are self-service gyms,and other apps; I should look into those. In the US, I don't see as many of those, it could be the case that some of these applications are even more advanced than those in the US, and it could be valuable for people back home to better understand this.

Stella: Of course, that's a potential opportunity because people in the US care more about their figure, their status, and they go to the gym more often than people in China. I would say that's a big opportunity. What they're doing right now is content. They're recording content to help people practice; in the meanwhile, they have offline stores. They open gyms five blocks away; so it’s a self-service, 24-hour gym – you practice whatever is online. It's a good combination of online and offline.

Artificial Intelligence

Adam: Also, you got me thinking, maybe we can save this for another podcast, but the concept of new retail – you mentioned self-service gyms – but there are also self-service convenient stores and such. The other point you mentioned is AI. So AI is obviously a hot buzz term that everyone around the world uses, and I think what people find really difficult is finding practical applications of AI. Where it can actually be used; where it can create value. I'm sure you see a lot of entrepreneurs who use AI, but maybe they don't use it the right way or have it be compelling. Based on what you've seen here, what are some clear and useful applications of artificial intelligence?

Stella: There are a lot of companies that say they're doing AI or big data, to be honest, I think AI and big data have the potential to be broad functions for all companies in the future. It won’t be one company doing all the AI for everyone, it's possible that every company will have an AI department or have their own way of using algorithms to predict human, consumer behavior. It's more a question of whether AI will really benefit the users on your platform. Do you think it’s actually a real utilization requirement to use AI which is the better solution? Will AI be more cost-effective versus just being a massive way to do a certain task? As long as the answer is yes, then it should be a very good way to use AI.

The potential examples or areas that we have seen AI applied to includes healthcare; we just mentioned using AI to read big data behind CT scans and ultrasound results. We all know for those kinds of results, there's a huge amount of data behind it, sometimes a couple gigs of data. It’s very hard to for people to read it because it’s really based on their experiences. There could be a high rate of making mistakes, because it’s based on human experiences and feelings. So using computers and AI will increase potential success-rate, increase the accuracy of the results. Without big data as a base and as a backup, without algorithms, it is impossible to tell what the possibility range is. Also, the more patients we have, the more accurate the method becomes. AI in healthcare is very important.

Adam: That's a really good example. For these companies that leverage AI, is it usually one of their core-capabilities? Or are there cases where they try to leverage AI capabilities from other companies that might be offering it? For example, they might have a lot of images that they can use and that’s really their core value proposition and they have some expertise in the health area, but they don’t have great AI engineers. Are these companies incentivized to become AI companies, brand their own top AI scientists and such, or can they also be successful by not having AI as their core proposition?

Stella: I would say they have to have both; they need to have AI engineers, technology-driven people, as well as industry insights. For the company we have invested in, they are actually 50/50. Half of the team has an engineering background, the other half has a healthcare devices background. Very specifically, there has to be a combination of the two industries. I would say that in AI, engineers are really important. It's more the algorithms. To give a simple example, healthcare background people will give the drivers, like saying what’s the trigger and what’s the result to link with that - they will tell you the cause and effect. However, the people with technology backgrounds, they are the people who really link them. The people who use big data calculations to tell if there's any possibility and make predictions, or if it’s actually the people who, based on their healthcare experience, see a relationship between this data and the result, if there is any possibility that these two effects could be linked it's very helpful to use AI.

Adam: That makes sense. Perhaps, myself included, a lot of people don't realize that there's no master algorithm, people say that AI will be the next type of electricity, it'll be everywhere, which could be true, but these days there still needs to be use of the right data sets, proper algorithms, and very specific integrated solutions and products. You can't just leverage AI, pay for it and use it for everything you want; maybe we'll get there one day. You were saying you had other examples that use AI?

Stella: The other thing that we have invested in is AI in fin-tech. We all know that there are several areas for AI in fin-tech, one is attracting savings, others are lending and transfer. There is also another, technology in the fin-tech area. Although fin-tech is, from the name itself, financial technology, the technology part is very critical. For example, how do you detect fraud in online lending? It's big data and AI technologies that do so; the result is very easy. How to make lending decisions, how big the loss rate of lending to an individual is, and what’s our lending interest rate? There are surveys and because of AI technology, there are results. We can better calculate which specific individuals we would like to lend to, and how much we want to lend to them, and what the interest rate is. It's actually a very good utilization of AI in fin-tech.

Adam: Really cool. Increasingly it seems that AI is best applied when it makes a process more efficient or improves the user experience in a very specific way. It's not like this over-arching “it'll solve every single problem for you" idea but rather, when applied the right way, AI can really make things a lot better, more useful.

Stella: That's my point; it has to be a very specific benefit to the business, a very specific improvement in the consumer experience or the company’s P&L. It has to be a very specific way to help. It also has to balance cost-efficiency, otherwise AI is just a concept, and it has to help the business.

Cross-border Opportunites

Adam: It seems like there are more cross-border opportunities. This is an area that Qiming is well-positioned for, given your coverage in both markets. Could you talk a bit more on your views on this and some examples of companies you’ve invested in and also players in the area?

Stella: I would say we actually focus on the industry moreso than on the location. For example, we have invested in Musical.ly. The reason we invested was because firstly, I see a good trend of the younger generation. The good thing there is that they're the people who are willing to try new things and who serve as challengers for social network platforms in the US. We need those types of users to be our first target users or seed users. Because they're willing to try new things, we just have to find a way to retain these users. The second reason we looked at that deal is because I’m seeing a really good trend in videos. User generated content, the social network; those are buzzwords, as well a good trend of investment. I would say that’s the same logic of why we invested in VeeR, because both focus on video. So when we're talking about Facebook 1.0, when people are doing text messaging, social networking, they're based on text. Then Instagram is more pictures, photo-based social network, and thus there has to be a trend of video-social networks. I'm not sure if it’s going be Musical.ly, VeeR or any other, but I would say it’s a very big trend of videos. I would say audio is the other way, that’s also the reason we're doing a podcast.

(Source: Veer VR)

There's also Dedao (得到) and other audio-based content. Different forms of social networks have to be much more fruitful, or sufficient in the future. It doesn't have to be only text-message, but also includepicture, audio, video, that's all kinds of social network formalities. I think the young generation needs that,because when they started, they're weren’t based desktops like we used to be in the 80's. But now, the first screen young people ever see is a mobile screen, so when they start using the Internet, all of their interactions will be mobile. That's very unique, and because of mobile and the data sufficiency we have now, because of the traffic, it’s also become much cheaper, so the user is willing try to different ways of contacting people. That’s the reason I love the video area and the reason why we look into that. There are several combinations. Cross-border is a very big word; as long as a company fits into our investment philosophy and the areas we're looking into, we will be interested in looking at it.

Adam: Couple of thoughts: totally understand what you're saying about the importance of video and social video, there are examples from the US, Houseparty for example, back in my day it was Chat Roulette, but now those apps are getting wildly popular. In China you have Momo?

Stella: I would say that you know a lot about the China market. Social network is the next trend of synchronized and non-synchronized. Live is a very synchronized way to see that, whatever I'm looking at or talking about, people will listen to that or watch it in real-time. Synchronized interactions between users as well as the broadcaster.

The other things we used to have, including Instagram, Facebook, Twitter, all are non-synchronized. It’s actually a new way to look at the social network market. With Monkey and Houseparty, they're part of the new trend of synchronized social networks. It’s the same thing in China, we have a couple of live applications. That’s part of the reason why some of our portfolios are doing live broadcasting. I would say that’s a formality, no matter if it’s synchronized or non-synchronized. It's just a formality of the new trend of social networks. People were saying that it’s potentially just a trend, it’s going to come back in one day. I say that it’s a very diversified formality for different social networks. People were asking if it is possible for Facebook or Snapchat to do the same thing. Facebook is using live now, so how would you tell the differences between Houseparty and Monkey.

Unicorns are coming into the same market doing the same product. It's a very tough question to answer. For unicorns, they have the data, they have the social network, they have the relationships on their websites already. So they can easily utilize them and they are utilizing whatever they have - existing social networks and relationships on their platforms - to do live broadcasting. New challengers should try different ways, different formalitie, new features to get users. The reason we're invested in Musical.ly isbecause the new generation is never tired of trying new stuff, they are always willing to try new features. Will the feature last? That’s the tough question; it’s for entrepreneurs to answer. I would say that’s the only way, add new challengers.

Adam: All great points. People say that there's usually a few winners, Facebook is obviously a big one, they also acquired other winners: WhatsApp and Instagram. So people tend to think that in the consumer network space it’s usually winner takes all, you don't have 10 or 20 players in the space. But, I'm curious because at this point when these networks are so big and so all-encompassing, is this is a case that they're almost like infrastructure? And as a result, you could have more specific niche networks that build up that address very specific requirements and use cases. For example, LinkedIn is a huge recruitment platform, but it might even be way too big. In the US you have themuse.com and WayUp.com that service millennials and college students so there are some examples of more niche platforms that are able to survive despite much larger ones, is that going to be a trend moving forward, and how do you look at that?

Stella: I would say a lot of people are asking the question of winner takes all in social networks and other niche markets. It's potentially winner takes all in the same market in the same industry; however, it's going to be hard across niches and geography. For example, for LinkedIn and YouTube, would it be possible to do social networks, I would say yes. For LinkedIn, it’s a professional social network, but a lot of other companies survive successfully in the US and China. We have a portfolio company doing recruiting called Lagou (拉勾), they're focusing on the niche of the technology. They're recruiting users, the talent, focusing on the Internet and the technology side. There is a similar company in the US calledDice.com. They're doing the same thing; although it’s probably not a big sector, remember the frequency of people changing jobs in the Internet sector. Remember the income in the whole sector; it’s a very good specific market to target. Would that be successful? Of course it is. Recently in the news, strategic companies invested in them.

People see the unique possibilities of success and once you build up very high entry barriers in a niche market, a giant company needs a lot of effort to get in. For example, LinkedIn does a very good job in the whole broader network in the professional sector, however, how many people in Internet sector are on LinkedIn? That's a very good question. As long as you can convince people in the specific area that you're focusing on, moreso than the big players, you will increase density versus broadness. As long as you have the density, you will create a network effect in the niche market and that will create a possibility to be successful.

Adam: That's really helpful feedback Stella and great news for us. Harbinger started as a content platform but is looking to enhance cross-border job search opportunities. We'll see where things go there. Thanks so much Stella, that’s all we have time for today, really appreciate your insights and views, super valuable to me and our audience.

Stella: Thank you, happy to be here, and I hope I come back someday!

Adam: Hopefully soon. Cheers!

The opinions expressed in this article are Stella's own and do not reflect the views of Qiming Venture Partners

文字：Yamini Bhandari

编辑：司马乔丹 陈凯琳