4 Lessons Learned from Building an Industry Internet Company
COVID-19 and China
WIM Salon. Image Credit: EqualOcean

Last Sunday, EqualOcean organized a salon talking about Industry Internet, which brought together with investors and entrepreneurs discussing the challenges of building an Industry Internet company.

Here are a couple of key takeaways from the event:

KA customers or Small ones?

When starting a SaaS company or a B2B marketplace, it is critical to understand who your ideal customers are and to build your product accordingly. One intuition is that most B2B marketplaces are fragmented, which means there are full of small players. When it comes to SaaS company's clients, things are tricky because big company is more prone to stay with their local servers.

Many B2B marketplaces and SaaS often start selling into small customers and move to upmarket. When serving a large client, it is inevitable for Industry Internet players to get closer with CXO (COO, CEO, CTO) of the client company and learn the real pain points. Trying tackling with KA clients and upselling them is a core strategy, though it often takes more time and energy to settle deals. On the other hand, selling into small- and medium-sized clients may result in the high cost of acquisitions that cannot compensate the LTV (Lifetime value). But we can always drive GMV growth by selling to more ‘little’ clients.

What does the US-China trade war mean to China’s Industry Internet companies?

We did see a diminishing investment in America from Chinese capitals for past few months, due to the escalated trade tensions. It pushes China’s industries to transform and change, not only from the aspect of technology, but also from capitals, education, and governments. More domestic companies are choosing China-born companies’ products, because of data safety concerns.

What’s BAT (Baidu, Tencent and Alibaba)’s practice in the era?

They invest. E-commerce service SaaS provider Youzan (08083:HK) has got strategic investments from both Tencent and Baidu. Baidu invested CNY 550 million (USD 77.7 million) into ERP company HAND Enterprise Solutions (300170:SZ). Alibaba bought U.S. e-commerce services provider Vendio in 2010. Alibaba also invested CNY 3.6 billion (USD 520 million) in China TransInfo (002373:SZ) - a public transport software provider. They signed a cooperation framework to work in V2X (Vehicle-to-everything) technology.

BAT’s capital investment divisions are seeking opportunities in the private market continuously for the past few years. Some prominent targets are e-contract company fadada (Tencent, Series C, CNY 398 million) and FMCG B2B platform Yijiupi (Tencent, USD 89 million)

Where is the green battlefield?

It is imperative to look at the industry’s data infrastructure when you want to start your businesses. Enterprise also needs to consider fully the extent to which digitalization can fit into the supply chain. Financial services, government affair, retail are among sectors that have a good data base and IT systems; 3C (computers, communications and consumer electronics), manufacturing, and chip are less digitalized due to the complicated production processes. On the other hand, China’s CRM industry has already saturated while RPA is the capital’s new darling. Enterprise needs to analyze the pros and cons of different industries, as well as investors.

A big thank to all the speakers that made this salon happen and shared their valuable thoughts to everyone. 

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