Chen Feng of Richu Capital: Searching for the Long-Term and the Future Amidst the Changes of the Times丨36Kr 2024 Industrial Future Conference

From September 11th to 12th, the two-day 36Kr 2024 Industrial Future Conference was grandly held in Shenzhen. Over a hundred big shots from "state-owned capital, government-guided funds, industrial investment institutions, financial investment funds, and corporate CVCs" gathered together. This is a grand event for China's industrial investors.

In 2024, US dollar funds bid farewell to the stage of China's venture capital, and policy-driven capital stepped into the center of China's industrial investment field. This industrial upgrading led by state-owned capital has opened a new prelude to venture capital. Standing at the beginning of venture capital entering the "China Time Zone", 36Kr continues to ride the waves with the participants in the venture capital industry, grasping the direction of the tide and exploring the trend of high-quality industrial development.

In this 36Kr Industrial Future Conference, hundreds of China's first-line industrial investors attended. They carried out high-energy collisions around the hot topics of concern in the primary market such as "mergers and acquisitions", "investing early, investing in small projects, and investing in technology", "industrial empowerment", and "investment promotion", and jointly discussed the challenges and opportunities of industrial investment in the current situation.

At the conference, Chen Feng, the founding and managing partner of Riches Capital, gave a keynote speech on "Seeking the Long-Term and the Future in the Changes of the Times". In his opinion, "The opportunity for China in the future lies in industrial investment. The core capability of industrial investment is not only the judgment of opportunities, the understanding and research of the industry, but more importantly, the supplementation of the industrial value capacity."

Furthermore, he also made a prediction about the changes in China's industry in the future. "From 2020 to the future, I personally believe that it will develop based on the changes in the material end, technological development, the further improvement of the production efficiency of the upstream and downstream of the industry, and the leap of content traffic." For every entrepreneur, maintaining a stable mentality is extremely important. "In the current situation where there are many changes in the macro environment and the external world is difficult to grasp, my heart is the world, and the world is my heart. The great power of the heart is like this. Only by concentrating our minds can we achieve our goals."

The following is the speech record of Mr. Chen Feng, edited and sorted out by 36Kr:

Before coming, the organizer asked me to speak more passionately. Let me first express a core point: Whether it is an industry, a company, or an individual, there is often such a rule that it is in the most difficult times of the industry that one can truly obtain the most valuable growth process in life. Take me as an example. I was originally a serial entrepreneur and now I am an investor. In summary, in fact, the time when I paid the most tuition fees was when the industry was at its best. Today, the theme of my sharing is "Seeking the Long-Term and the Future in the Changes of the Times". First of all, I think our three generations are very lucky. We are in China and have experienced huge changes that are rarely seen in world history. From the early days of reform and opening up to now, China has experienced several iterations, from trade, manufacturing and export, to joining the WTO, to the Internetization and urbanization. In these changes, whether we are entrepreneurs or investors, we may have gained the greatest non-linear cultivation of the entire era. In the past, you might think that institutions or startups were good, but they are only the foundation. The biggest variable still comes from this era.

Today, whether it is the demographic dividend, the process of urbanization, or the degree of improvement of the Internet infrastructure, in fact, they have reached a bottleneck period, or there is too little space for shortage. In 2016, there were many categories missing in the entire new consumption. Up to now, almost all categories have been filled, and many have begun to iterate from regional to national, and from single category to multiple categories. The opportunities left for us are getting fewer and fewer. But at the same time, we have also seen some new changes, and this change comes from technology-driven and boundary expansion. In terms of technology-driven, some time ago, we invested in an unmanned agricultural machinery company that does agricultural sowing in Xinjiang. In fact, in Israel, Germany, the United States, etc., there are agricultural machinery companies worth more than tens of billions of US dollars. Today, we see that the opportunities in China are just beginning. The added value of the cotton industry in Xinjiang is very high, and the standardized operation is very strong. It is a standardized cultivated land. The core pain points are in its sowing, spraying, and pest control. Through the lidar of new energy vehicles, autonomous driving, and energy systems, there is a very significant efficiency improvement for the industry. This company has only been established for 3 years, from the small sample to the current mass production. It should enter a large-scale mass production by the end of this year and will be put into the market next year. In fact, this industry was very traditional and purely mechanized 10 years ago, but what is happening in this industry 10 years later? This is a new opportunity for industrial efficiency reconstruction generated from new technologies. We see unmanned driving, sensors, algorithms, including the improvement of engineering capabilities, and the entire new energy industry, which have improved the efficiency of the entire industry supply chain and reconstructed several technical bottom-level modules, allowing us to see new opportunities in this industry.

At the same time, industrial efficiency is being reconstructed along with the upgrade of infrastructure. Today, there are huge opportunities in the upgrade of infrastructure efficiency, the upgrade of the supply chain, and the upgrade of materials at the front end of the supply chain that are taking place in China. If you were to do the sports industry 5 years ago, its foaming materials, carbon plates, etc. had a very high threshold. But today, all these material ends and manufacturing ends have been flattened very much, that is to say, the entry threshold between each company brand has become very low. The spillover of this dividend at the traffic end is very large, and the professional segmentation at the category end is also taking shape. So we have seen that in the past 5 years, whether it is Haoka, On, or Salomon, these brands are all doing segmented categories. This is also based on the industrial efficiency accompanied by the upgrade of infrastructure, which brings some category segmentation or industrial reconstruction opportunities.

The category dividends left for us are getting fewer and fewer, the entire supply and demand relationship will become more and more saturated, and the flow changes brought about by the large infrastructure will also become less and less. The opportunity for China in the future lies in industrial investment. The core capability of industrial investment is not only the judgment of opportunities, the understanding and research of the industry, but more importantly, the supplementation of the industrial value capacity. For example, in the integration of the entire upstream and downstream of the industry and the understanding of the material end, our fund has recently been discussing some industrial joint incubations with many listed companies to help the industry side create a second growth curve. One example is the jewelry industry. We will find that most of China's gold and jewelry have not been given a cultural attribute other than the scarcity based on the product itself, a new brand based on the spiritual content and traffic that can be constructed based on culture, and the combination of new channels. We believe that an important role in the future transformation direction of institutions is industrial investment. The industrial concentration in China has just begun, and the category globalization has just begun. There will definitely be many asymmetric trading opportunities and industry integration opportunities in the middle, which is what many of our institutions can seize in the future.

Another focus of ours is going global. The great voyage of the Chinese has just begun. In the 40 years of China's reform and opening up, our entire boundary is in the region, in China, in the category, and in a certain link of the industrial chain. After going from a single link to the entire industrial chain to the national concentration, the growth soil where various elements are combined will definitely enable Chinese enterprises to go global in the future. That is to say, in the past 50 or 60 years, it may have been Western brands coming from the world to China, and in the future, it will be Chinese brands going to the world. Globalization is an inevitable option for the development of outstanding Chinese enterprises in the future. Globalization is not that the Chinese are doing business globally. This is the first point that I personally think needs to be established before doing globalization. We should look at the world and do global business with the eyes of the people of the world. This is something that foreign brands have been adapting to for a hundred years.

Let's review what the globalization stages of China in different periods are like: From 1980 to 2010 was the first climax of China's reform and opening up. The main growth paradigm was the superposition of the demographic dividend, the geographical dividend, urbanization, the beginning of globalization, and the Internetization. At that time, our core advantage was cost, factories, raw materials, local procurement, and trade. At that time, there were not many so-called brands, nor were there local operating entities and substantive businesses. The key is the demographic dividend, the Internet, the beginning of globalization, and China's urbanization. From 2010 to 2020, under the pull of domestic demand, during the period of consumption upgrade and the Internet era, at this time, we saw that because of the upgrade of the Internet, our manufacturing production cost has truly changed from labor cost to production efficiency, and has become intelligent manufacturing. Regarding the matter of the supply chain returning to the United States, in fact, today there are many enterprises in China that have experienced ten or twenty years of development. In addition to the mobile phone industry represented by vivo, OPPO, and Xiaomi, the fastest-growing Midea's overseas income has exceeded 50%. Based on the supply chain, brand, and the expansion of the global market, it is based on the local channels, local brand operations, and the establishment of local organizations. This is the biggest change we have seen.

From 2020 to the future, I personally believe that it will develop based on the changes in the material end, technological development, the further improvement of the production efficiency of the upstream and downstream of the industry, and the leap of content traffic. Chinese enterprises are very good at doing online business, especially when the previous sellers transform to do brand premium and brand landing. A company we invested in the direction of going global is called Hesheng Innovation. It first started to create a brand from the online Amazon, to building its own independent website, and now it has started to expand offline. The offline business has accounted for 40%, and it has grown from zero to more than one billion yuan last year. It only took this company three years. What kind of rules do such companies have? First, it is based on technology. This technology is the industrial supporting and talents that have been driven by the supply chain in China's home appliance industry, automotive industry, and 3C industry for many years. The executives of this enterprise started their business under our encouragement and support. One of the founders lives overseas and has a very clear understanding of this market. In the future, we believe that in this context, there will be more brand premiums based on truly globalized, new technologies, and more global-localized brand companies that rely on the Chinese supply chain. There will also be some more attractive vertical companies. We are very convinced that in an asymmetric market, Chinese companies and talents will be more competitive in going global in the future.

Finally, to summarize with a sentence, this sentence is also for myself. In the current situation where there are many changes in the macro environment and the external world is difficult to grasp, my heart is the world, and the world is my heart. The great power of the heart is like this. Only by concentrating our minds can we achieve our goals. Thank you!