During October 25-26, 2019, Source Code Capital held its 2019 Code Class Annual Meeting in Beijing, China. This year’s theme was “Venturing Depths, Searching for Essence.” “As a tree needs deep roots to grow and stand tall, so a building needs a solid foundation in order to properly stand.” When uncertainty becomes the new normal, while competition for limited growth is on the rise, essence becomes all the more precious. More than 300 CEOs, top scholars and investors gathered together during this event to discuss the direction of future development in the venture capital industry, and discourse the underlying philosophy of business. Introduction With the gradual disappearance of China’s market expansion bonus, competition in a consolidating economy is greatly intensified, particularly in the second half of China’s Internet economy. Internet companies sounded the horn to enter the era of industrial Internet. This opened up a new competitive arena as companies raced to seize the new market, define it and its ecosystem, and try to gain market share and establish influence. Since 2014, Source Code Capital has been researching and reflecting deeply on the Industrial Internet. From 2014 until now, Source Code Capital has been investing in a number of excelling Industrial Internet enterprises. This includes being the sole investor in Baibu, leading Baibu’s Angel round, A and A+ round , and continued investing in the B and C rounds. Back in 2015, Source Code Capital was the sole lead and led YQNLink’s A round, then continuously increased its investments in the B and C rounds. In 2016, we were the sole lead in Ruigushop’s A round as well as its B round. Similarly, we supported Yimidida since the A round, and extended support in the B, C, and D rounds. We became investors of Yijiupi starting in the B round and continued to extend our support after, all the way from the C round to the latest D round. In 2017, we were the leading investor in XiaoYaoYao’s B round, and increased our investment in its C+ round. In 2019, we led the B round investment for Zhongneng United, and co-led the C1 investment round of Casstime along with Sequoia Capital. Over the years, Industrial Internet companies in Source Code Capital’s portfolio have gradually become star enterprises in their respective subdivisions. We wanted to explore the core driving force underlying their volume growth and figure out the kind of “corporate DNA” that can enable such companies to grow beyond their industry’s limits. For this reason, the Founders of four enterprises, XiaoYaoYao, Yijiupi, Zhongneng United, and YQNLink, were invited to Yanqi Lake to discuss the boundaries and breakthroughs of industrial Internet at Code Class. Founder Quotes: *The biggest difference between the industrial Internet and the consumer Internet is the following: Consumers in the latter are largely homogenous, therefore adding more channels is enough to facilitate growth. But the users of the former, the industrial Internet, are different. It’s useless to diversify channels and expand the old-fashioned way. *To B service providers do business and logistics at the same time, and may as well do finance. *The “data experience” forms the core “customer experience” for the logistics service business. *The key to figuring out how to maintain low costs in distribution, in essence, is to solve the problem of warehouse sharing, distribution sharing, and as much as possible, shorten the end-to-end cycle from the factory to the supply chain. Based on this panel discussion, we can conclude that the first boundary broken in the industrial Internet was the limited capabilities of the industry players. In the past, the number of operation SKUs, the scope of operation coverage, or the index of operation growth indicators, were somehow limited, but has now been greatly expanded. Secondly, the division of labor and positions in the industrial chain have been reintegrated. The industrial Internet has integrated or consolidated multiple businesses for better cooperation, thereby enabling the company to advance to the front of the industrial chain, or to evolve to the downstream. For example, XiaoYaoYao has the best cross-border team to keep maintaining its edge; Yijiupi improves the efficiency of the distribution network for FMCG products; Zhongneng United focuses on gathering data and information in order to improve the efficiency of asset leasing; YQNLink solves and integrates a previously fragmented cross-border shipping and transport system. These are examples of core strengths required for industrial Internet enterprises if they want to stay competitive. Source Code Capital will continue to be committed to explore the boundaries of industrial Internet together with accomplished CEOs, in order to create enduring real value together. Q1: Source Code Capital, Wang Xingshi: We have been investing in the industrial Internet since 2014, and we are honored to have grown together with many industrial Internet partners. Growth is constantly pushing the boundaries further out. But what are those limits of the industrial Internet? Today, we invite four CEOs to share their views. First, let’s ask each CEO to briefly introduce his or her company. XiaoYaoYao, Li Meng: Hello everyone! I’m Li Meng, the founder of XiaoYaoYao. It is the largest independent B2B platform of pharmaceuticals wholesale and distribution in China. We are also the company with the strongest information advantage and have the biggest number of service providers in the pharmaceutical industry. We hope to shorten the circuit of drug (medicine) production and availability, and improve the efficiency of the whole industry through the use of Internet and information technology. Yijiupi, Wang Chaocheng: We are an industrial Internet company in the FMCG industry. Our market scale is the largest in China. Our mission is to use technology to enable cheaper and more efficient access to good products, and shorten the supply chain. Zhongneng United, Yang Tianli: Hello everyone! I’m Yang Tianli, the co-founder of Zhongneng United. We are a digital leasing service platform for engineering equipment. There are about 3 trillion assets available in the service equipment market in China. Those assets represent an annual rental income of about RMB 700 billion, while the...
