---
title: "Desire Kills Tongcheng Life: The Largest Bankruptcy in Community Group Buying"
description: "Many assumed death was imminent for Tongcheng Life: on the night of July 3, its neon sign was taken down, and the head of South China told staff to halt all purchasing. Founder and CEO He Pengyu refused to believe the company would die until July 7, when he announced bankruptcy under pressure, leaving debts of 1.389 billion yuan."
author: "晚点团队"
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published: "2021-09-20"
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# Desire Kills Tongcheng Life: The Largest Bankruptcy in Community Group Buying

> Many assumed death was imminent for Tongcheng Life: on the night of July 3, its neon sign was taken down, and the head of South China told staff to halt all purchasing. Founder and CEO He Pengyu refused to believe the company would die until July 7, when he announced bankruptcy under pressure, leaving debts of 1.389 billion yuan.

Source: LatePost (ID: postlate)

Many assumed death was imminent for this company: late on the night of July 3, under the dim streetlights in front of Tongcheng Building, the neon sign reading "Tongcheng Life" was taken down; that day, the head of the South China region told his employees to stop all purchasing work.

He said, "Bankruptcy was expected; the sooner it happens, the better." Outsiders had long stopped paying attention to Tongcheng Life. A securities analyst said, "The industry landscape dominated by giants is clear; why waste time paying attention to startups?" But until the last moment, Tongcheng Life founder and CEO He Pengyu did not believe the company would die.

At 3 a.m. on July 6, He Pengyu wrote an internal letter announcing the company would be renamed "Micheng Life" and pivot to wholesale.

At 6 p.m. that day, a supplier who would later be owed 10 million yuan called He, who said it was just a business restructuring. But the next day, under multiple pressures, He finally announced the company would file for bankruptcy.

This is the largest bankruptcy case in the community group buying sector to date, with liabilities of 1.389 billion yuan—previously closed players like Squirrel Pinpin and Shixianghui were smaller than Tongcheng Life. In the last six months, He Pengyu had been seeking investment from Alibaba, Meituan, and ByteDance, saying that if they were willing to take on the company's over 1 billion yuan debt, the company could be sold for $100 million, or even less—just two years after founding, the company reached a $1 billion valuation in 2020.

No institution was willing to take over.

A person close to He said the company was like his child, "His child is about to enter the ICU; is he going to save it or not?" People who experienced the collapse of ofo and the蛋壳 (Danke) incident are familiar with certain plots: the long-awaited "big track," imperfect but imaginative growth stories, investors cheering wildly, CEOs stepping on the gas, regulation arriving late, and brakes failing.

Young entrepreneurs are often similar: they seize opportunities, are full of risk-taking spirit, are unwilling and unable to believe in failure, and never let go until they are at the end of their rope. Fortunately, reality educates them, and business laws take effect. But the absurdity is that sometimes reality is distorted.

In the past decade of rapid growth and abundant capital, one would see that even when a startup clearly had major flaws, some would still choose to gamble, believing that someone would take over later.

In the ofo story, until the last moment, whether entrepreneurs, executives, employees, investors, or suppliers, no one wanted to press the "liquidation" button. When Danke collapsed, one person took risks, and the whole society paid the price. But in Tongcheng Life's bankruptcy story, the environment changed, and the ending changed.

Investors did not hesitate and retreated early; executives no longer lingered and went their separate ways; employees' group chats showed no reluctance, discussing "Can we sell the laptops the company gave us?" The government intervened immediately, requiring the CEO to handle debts quickly to avoid instability.

Everything ended so quickly, hastily, and coldly, with no time for regret, let alone a sad farewell.

A person close to He Pengyu said that He borrowed from many friends and now has personal debts of over 100 million yuan.

He proposed to suppliers and employees that they exchange their claims for shares in his next startup, but no one responded.

The company has now filed for bankruptcy. Of the over 1,000 suppliers owed money, more than 600 have received 50-60% of their payments, and thousands of employees have received July wages but not compensation or overtime pay.

In this story, most people are rational, the market returns to normal, and reality is no longer distorted. The CEO is left behind, burdened with huge debts, and continues forward.

**Growth by Patchwork**

In the first half of the story, He Pengyu looked like a qualified entrepreneur, with management experience and drive, which may be why the company secured 8 rounds of financing in two years and was favored by many investors. Before starting his own business, He Pengyu had just achieved some success at Tongcheng Travel and was sent by the group to Guangzhou to develop offline stores, responsible for the South China region.

He was the most serious among regional heads in writing weekly reports, "like a short thesis," said a Tongcheng Travel source. At that time, the South China region was considered a top region. But the group changed direction, the offline strategy was not successful, and regional heads were recalled. He Pengyu joined the group's strategy committee, internally called the "retirement committee." The source said He was in low spirits and often asked people, "What do you think of me? Do you think I'm still okay?"

He joined Tongcheng Travel after graduating from university in 2007 and was promoted to group vice president in 2014. After joining the strategy committee, he looked for entrepreneurial directions until he saw the fresh e-commerce track.

Initially, he and a few colleagues set up a fruit stall downstairs at the company building, pre-selling fruit from growing areas, and employees would pick up their orders downstairs. Gradually, the business expanded from the company building to surrounding communities, and Tongcheng Life gained a foothold in Suzhou.

Three people close to He Pengyu said He pursues perfection, is persistent, and even "stubborn." In November 2018, when Tongcheng Yilong went public, He Pengyu resigned from the group the day after the IPO to fully commit to his startup.

The group gave Tongcheng Life seed and angel investments. He Pengyu told group chairman Wu Zhixiang, "I can give up my life, but I must do this thing no matter what." At that time, community group buying was the hottest trend, with dozens of platforms emerging in the second half of 2018, almost every province having several small platforms, and over 4 billion yuan flowing into the track.

Unlike food delivery and ride-hailing platforms, community group buying requires localization in procurement, operations, and transportation, making it difficult to coordinate nationally. Therefore, before giants entered, local platforms could carve out a place. The localization also meant that local platforms like Tongcheng Life could only expand quickly through acquisitions.

He Pengyu first found his old classmate Yin Xiang, who lived upstairs in the dormitory during college, and they occasionally played "Pro Evolution Soccer" together. Yin Xiang started a factory business before graduating. When He Pengyu found him in 2018, his community group buying brand Qianxianhui was already generating over 10 million yuan in daily revenue in Guangdong.

At the end of 2018, Tongcheng Life completed the acquisition of Guangzhou Qianxianhui, and Yin Xiang became the head of the South China region; a year later, Tongcheng Life acquired Hunan's Kaola Selection, with former CEO Tang Guangliang becoming the head of the Hunan region; in August 2020, Tongcheng Life acquired Suzhou's Linlinyi.

Thus, Tongcheng Life expanded from an office building in Suzhou to the South China and Central China regions.

Guangdong Qianxianhui always contributed the most revenue. Yin Xiang said that before the giants entered in mid-2020, Guangdong accounted for three-quarters of the company's total revenue. "At that time, we wanted to be a multi-billion dollar company with big dreams," Yin Xiang said, but only now does he realize he never had the ability to support such big dreams.

Before the giants entered in 2020, Tongcheng Life had daily revenue of over 25 million yuan nationwide, second only to the top player Xingsheng Youxuan. At the company's best times, everyone was sprinting. Two R&D employees said that in 2020, they never had a full holiday, and basically worked until 12 or 1 a.m. every day. "We felt the giants were coming, so we had to rush to meet demands." Tongcheng Yilong founder Wu Zhixiang used the "Zhonggong Iron Army" culture learned from Alibaba to manage travel sales, and He Pengyu copied it to manage the company, establishing morning and evening meeting systems.

Before 6:30 p.m., a small group would form a circle in the office. The team leader would shout "Good evening!" and members would respond "Good! Very good! Very, very good!" Then they would review the day's work. This was not only in sales but even in R&D, with this simple and crude ritual.

A person close to He Pengyu said He worked harder than his employees, often leaving meetings at 2 or 3 a.m., and was so detail-oriented that he would change a button color in the app if it was wrong.

This aggressive pace did bring results. In his year-end letter at the end of 2020, He Pengyu mentioned that 2020 performance nearly quintupled compared to 2019, with gross margins still above 20%. Investors were also willing to believe that startups still had a chance, at least before the giants entered.

Before August 2020, Tongcheng Life had raised over $300 million, with investments from Huya, Junlian Capital, BAI Capital, Xianghe Capital, ZhenFund, and GSR Ventures. Until the giants all entered, Tongcheng Life's fate was changed.

**Subsidize or Not?**

In August 2020, Pinduoduo, Meituan, and JD.com all sensed the opportunity in community group buying. At that time, Didi had already launched Chengxin Youxuan two months earlier, achieving over a million orders in Chengdu, and Pinduoduo and Meituan were preparing to enter. JD.com found Tongcheng Life, which was seeking financing.

A company executive said that after negotiations with JD.com in September, the board agreed to be acquired by JD.com at a price of $1.2-1.3 billion. The acquisition contract was drafted, shareholders had signed, and even the press release was prepared.

Employees also felt "money was coming."

The company set up a new special team to prepare to integrate community group buying into JD.com's app for traffic; the head of the product department told employees that they would start from Suqian to implement a rural plan, cooperating with a "big cow" company. He asked, "Guess which one?" In December 2020, the secret spread within the company, but employees found that JD.com instead invested $700 million in Xingsheng Youxuan. A JD.com strategic investment source said this was a project personally negotiated by founder Liu Qiangdong, and the investment was completed within three weeks of confirmation.

"I felt played," said an employee. But He Pengyu was calm internally, saying, "Since they didn't choose us, we must have shortcomings. We need to polish our products." A mid-level employee said they thought there would be other opportunities, but later realized it was a turning point that determined the company's survival.

After the giants entered, Tongcheng Life was conflicted: they dared not stop subsidizing, or they would lose even the remaining market share and have no chance of survival; but they also dared not subsidize too much, or losses would be too great and no investor would be interested. In the first month Meituan Youxuan entered Guangdong, Tongcheng Life spent 100 million yuan in that province alone to fight, with most of the money going to user subsidies.

A finance department employee said that in September last year, Guangdong alone spent 2-3 million yuan daily on user subsidies, with an average subsidy of 5-10 yuan per order. The growth department's goal was, "We don't need to worry too much about retention or unit price, but we need tens of thousands of new users daily and to grow the scale." At that time, everyone expected JD.com's money to come soon.

Another part of the spending was on team expansion.

At the beginning of 2020, Tongcheng Life's Guangdong team had only 1,800 people, achieving 10 million yuan in daily revenue; by around September, daily revenue doubled, but the headcount quadrupled to over 8,000.

The office in Guangdong's Kemulang Industrial Zone expanded from the first and second floors to the third. The expanded team opened more warehouses and pickup points. At the end of 2020, Guangdong set a goal of building 200 warehouses.

Unlike giants that rent warehouses, Tongcheng Life leased land and built its own warehouses, with cold storage in many. A warehouse manager said, "Others rent warehouses in a few days, but we build our own, which takes a month." After building fewer than 30 warehouses in Guangdong, the heads realized the cost was too high to continue—in Guangdong, Tongcheng Life's stronghold, logistics and warehousing costs accounted for 12% of total transaction value, while the industry leader Xingsheng Youxuan's fulfillment costs in its stronghold Hunan were only 6%.

Initially, the leaders were confident. A product head said he didn't need to visit the giants' warehouses; just looking at their "1-cent vegetables" told him, "They're garbage, unsellable at the market, far inferior to ours." But within three months, the giants had left Tongcheng Life far behind.

In December 2020, Chengxin Youxuan, Meituan Youxuan, and Duoduo Maicai all peaked at over 10 million orders per day, with an average order value of 5-7 yuan, meaning at least 50 million yuan in daily revenue, while Tongcheng Life, even with heavy subsidies, only exceeded 30 million yuan in daily revenue nationwide by the end of the year.

With frontline losses, He Pengyu began to centralize power at headquarters, focusing on gross margins. Around October 2020, Suzhou headquarters sent people to manage the Guangdong and Hunan regions. At a meeting, the Suzhou head directly questioned the Guangdong head, "(In September) you spent over 100 million yuan and lost over 70 million. How are you controlling gross margins?" A mid-level employee who had long followed the Guangdong head and attended the meeting said, "Everyone felt wronged, and no one wanted to let go." But the Guangdong head responded simply, "You manage it, that's it."

Those on the front lines had already seen the decline, "This money-burning approach won't last for years." The Guangdong head said he had proposed to He Pengyu to sell his shares, but was refused; he also proposed not to fight the giants head-on but to pivot entirely to wholesale, but was also refused.

After centralizing power, He Pengyu proposed raising gross margins from 23% to 25%. Some negative-margin products in Guangdong and Hunan were cut, and headquarters set the goal that after deducting front-end fulfillment costs, the company as a whole would still be profitable.

But with the emergence of a new investor, the company's strategy shifted again, and operations became a performance aimed at investors.

**"Which to Choose: Tsinghua or Peking University?"**

When Didi, Meituan, Pinduoduo, JD.com, and Alibaba all entered, ByteDance, with its massive traffic, could not resist. Two people close to the deal told LatePost that ByteDance bought $30 million in convertible bonds from Tongcheng Life at the end of 2020.

This meant that if ByteDance was optimistic about Tongcheng Life, it could convert the bonds into equity within a certain period and become a shareholder; if not, it could demand repayment of principal and interest when the bonds matured.

The sources said ByteDance recognized the team but was concerned that policy had tightened and whether additional investment was appropriate.

ByteDance responded that it had provided debt investment to Tongcheng Life but ultimately did not add more investment or convert the debt into equity.

In December 2020, the State Administration for Market Regulation imposed "nine prohibitions" on community group buying companies, restricting low-price dumping and price fraud, and twice penalized Shihuituan for low-price dumping.

For Tongcheng Life, the cooperation with ByteDance became the biggest hope at the time and also the final fatal blow. In April this year, ByteDance's Douyin opened a local life entrance for Tongcheng Life. Users opening "Douyin Local" would enter Tongcheng Life's page and could buy vegetables and daily necessities for one cent.

To fully support the Douyin project, Tongcheng Life put its main promotions on Douyin, and WeChat mini-programs no longer offered coupons.

An employee involved in the project said that after Suzhou and Nantong, more cities in Jiangsu and Guangdong were opened. After two months of operation, spending over 100 million yuan, orders only increased by a few hundred thousand.

Moreover, many were 1-cent orders, and the conversion rate of new users to paying users was only about 1.3%. "Maybe it didn't meet ByteDance's ideal data, so there was no further cooperation later."

Starting in June this year, the State Administration for Market Regulation imposed stricter restrictions on subsidies like "1-cent purchases" and coupons.

Meituan Youxuan, Duoduo Maicai, and others gradually removed "1-cent purchase" items from June and stopped issuing large coupons, causing their order volumes to drop by about a third. Tongcheng Life also suspended "1-cent purchases" at that time, and order volumes quickly declined. At the end of 2020, Tongcheng Life had about 2.2 million orders a day, but by early July when it filed for bankruptcy, orders had fallen to about 200,000.

Things started going wrong in June, but a stream of financing news kept people going before the collapse. A Guangdong department head noticed that from June, Suzhou headquarters stopped holding meetings, whereas previously there were two cadre meetings weekly.

On June 25, when the department needed to set next month's targets, this Guangdong head called headquarters and was told, "The company is in the process of being acquired by Alibaba; this is certain."

Many suppliers heard similar claims. A supplier ultimately owed 1 million yuan said that from May to June, Tongcheng Life suddenly increased supply requirements, doubling previous amounts, but delayed payment. Purchasing told suppliers that the company was negotiating financing with Alibaba, so they needed to boost sales to show the company's books were healthy and suppliers were supportive. "Maybe we'll go public in the future, and you can make more money with us." By July, the "savior" in purchasing's words had become Meituan. The day before the company announced its name change and abandoned its original business, a Guangdong supplier received a call from purchasing, saying, "The leaders are negotiating with Meituan; an announcement may come tomorrow. Wait a bit."

The Guangdong department head also heard that while the company was negotiating with Alibaba, Meituan also made an offer. "We thought, 'Which to choose: Tsinghua or Peking University?' Later we found out we didn't even get into college." LatePost learned from multiple Alibaba employees and Tongcheng Life executives that Tongcheng Life did negotiate with Alibaba and Meituan for acquisition, with prices starting at $100 million and dropping to tens of millions, as long as they would take on the over 1 billion yuan debt, but ultimately no one made a move.

"80% is internal problems; external competition affects at most 20%. Even without the giants, we might have lasted longer, but we would still die," said a mid-level employee. The team was too confident, expanded too fast, and raised money too slowly.

When a founder's desire for expansion exceeds his ability, the consequences will also exceed his capacity to bear.

**Perhaps an Ending No One Mourns**

Like a tight rope suddenly snapping, neither the founder nor employees expected the company to die so quickly.

At around 3 p.m. on July 5, Suzhou employees were told that some floors would be closed and they needed to work from home. Many thought it was temporary, and some personal items are still locked in the office. Some employees filled out attendance sheets before leaving, fearing their performance would be deducted when they returned.

On July 6, the company announced the name change. That day, the purchasing staff who had told suppliers, "The leaders are negotiating with Meituan; an announcement is imminent," saw the bankruptcy news the next day and could only say to suppliers, "It's over; I didn't expect this either."

Suppliers drove overnight from all over the country to Suzhou Tongcheng Building's report hall, pointing fingers at He Pengyu on stage. He stood with his hands behind his back, frowning, and cried several times, saying, "As long as I, He Pengyu, am alive, I will find a way to pay everyone back!"

Employees surrounded the HR director and legal counsel, demanding solutions. Some asked tearfully, "Didn't you say we were brothers? Family? Why are you ignoring us now?"

These employees had witnessed the company's rise from 0 to a $1 billion valuation in two years, but now they could only look for jobs while waiting for compensation and overtime pay. Compared to whether the company could make a comeback, they discussed more in their rights protection group, "Can we sell the laptops the company gave us? Anyone want them? Selling cheap."

Emotions came and went quickly, ultimately dissolved by more practical issues.

On July 9, at Guangzhou's Kemulang Industrial Park, a reporter saw suppliers who had come to assert their rights. They sat in the emptied office, queuing in small groups to sign repayment agreements, occasionally turning to complain, "It's more trouble than it's worth; I'd rather do other business." There were five or six employees maintaining order and a few police officers squatting at the door. A young man stood in the middle of the empty office, holding a stack of A4 papers, calling out supplier names in a hoarse voice, urging them to sign quickly, "Sign now and get 60%; if you don't, you might get nothing."

Some small suppliers, to chase their debts, took photos of themselves on rooftops or showed cancer diagnoses to attract attention. But when a reporter met several suppliers owed over 10 million yuan at a dinner in Guangzhou, they were chatting and laughing with the former South China head.

This head said lightly, pointing to the people in front, "These are my brothers; if not for my face, they would have caused trouble long ago." These brothers would also participate in his next startup.

Executives had also found their exits. On the bankruptcy application agreement, one executive was reluctant to sign, saying, "I have a seat on the board; I must first protect myself and my brothers." He insisted that headquarters first handle the debts to suppliers in his region. He planned to continue fresh food entrepreneurship locally, "I have plenty of resources and people; I don't even need financing, and I can quickly set up a new venture."

At the end of 2020, when Tongcheng Life first showed signs of decline, former Hunan head Tang Guangliang founded the community snack convenience store chain "Ai Lingshi," which is currently seeking tens of millions of dollars in financing.

He Pengyu had tried to get executives to pool 25 million yuan to fill some funding gaps. An executive involved said that even the most powerful people in the company were not necessarily willing to contribute, so he had no responsibility to do so.

In the end, the money was not raised, and some suppliers received only 50% of their original payments instead of 60%.

A Tongcheng Life investor could not understand the farce. In his view, any business transaction involves bad debts, which is a risk of doing business. "If I lose money in stocks, should I ask the company for compensation?"

There were also new investors who proactively asked the reporter for He Pengyu's contact information, hoping for an introduction. "If he starts a new business now, his original intention may not be pure." But he still wanted to talk, "What if all assumptions are wrong? People who have experienced huge upheavals may be more mature."

Employees were also tired of collective rights protection. In mid-August, some wanted to go to the company building to "demand an explanation" and started a group sign-up, but in the 500-person group, only one person signed up.

Among the more than a dozen employees and several executives interviewed by LatePost, some felt regret for He Pengyu, "It's not his fault; Old He did his best." But few mourned or sighed over the company's death. Everyone had been rushing forward in the past two years, too busy to think about where they were going.

On July 9, at the Suzhou Arbitration Bureau, He Pengyu stood between two police officers, trying to explain the hardships of entrepreneurship to dozens of employees, but no one had the patience to listen. People kept interrupting, demanding solutions.

He paused, said helplessly, "Those willing to resign and follow me to start a new business will get 20% of the shares for free. That's all I can do now, nothing else." After speaking, he clasped his hands and bowed deeply to the crowd. Before he could fully rise, a police officer pulled him away. He tried to turn back, saying tearfully, "I'm sorry, brothers, I'm really sorry!" Before he could finish, he was pulled away again. A few sparse claps sounded in the room.

**Are you "watching" me?**


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