---
title: "Internet+, + Your Head! Why Did These Awesome Internet Companies Die in 2016?"
description: "Capital is like an aphrodisiac: too much can kill, too little makes life worse than death. For startups, the most direct way to survive the winter is to secure the next round of funding, but statistics show only about a quarter of projects will get Series B funding this year, and most may die before that. 2015 saw a wave of traditional enterprise closures; 2016 saw a wave of 'Internet+' enterprise closures. As the year ends, capital has gone home, and startups that relied on it are exposed, dying before the new year."
author: "今日毕"
publisher: "New Distribution"
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published: "2016-12-01"
language: "en"
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---

# Internet+, + Your Head! Why Did These Awesome Internet Companies Die in 2016?

> Capital is like an aphrodisiac: too much can kill, too little makes life worse than death. For startups, the most direct way to survive the winter is to secure the next round of funding, but statistics show only about a quarter of projects will get Series B funding this year, and most may die before that. 2015 saw a wave of traditional enterprise closures; 2016 saw a wave of 'Internet+' enterprise closures. As the year ends, capital has gone home, and startups that relied on it are exposed, dying before the new year.

**Capital is like an aphrodisiac: too much can kill, too little makes life worse than death.**
For startups, the most direct way to survive the winter is to secure the next round of funding. But the results are not satisfactory. Statistics show that only about a quarter of startup projects will get Series B funding this year, and the vast majority may die before Series B.
2015 was a wave of traditional enterprise closures; 2016 is a wave of 'Internet+' enterprise closures. As the year ends, capital has gone home, and startups that relied on capital to survive are exposed, dying in the heavy smog before the new year.
**Classic cases of 'Internet+' closures in 2016**
Once too close to money, no one can accept their current fate. This annual review selects typical cases from six major sectors: automotive aftermarket, online travel, cross-border online shopping, fresh food e-commerce, food delivery, and community retail (all had previously received large-scale financing or achieved notable results, and then had clear closure or contraction behavior), attempting to analyze the reasons behind the noise and silence, in order to give entrepreneurs warnings and thoughts.
One
**Automotive Aftermarket**
Representative case: Bopai Car Care
Closure time: April 2016
As the largest O2O car wash and maintenance platform in China, Bopai Car Care was valued at up to 200 million yuan, completing two rounds of financing: in September 2014, it received a Series A round of 10 million yuan from Innovation Works; in March 2015, it received a Series B round of 110 million yuan from JD.com, Yiche, and others. JD.com's investment brought not only capital but also social influence.
After securing Series B, Bopai Car Care intended to capture the entire automotive aftermarket service market, expanding to 22 cities nationwide in less than half a year, with monthly orders exceeding 150,000 and 1,400 employees.
Bopai Car Care launched '1 yuan door-to-door maintenance' and free '45-item vehicle inspection' activities, trying to build its own 'fan base' through heavy spending. The direct consequence of this model was losing money on every order, turning into an unsustainable mess.
To make matters worse, the previously agreed $100 million financing was reneged upon, and Bopai Car Care eventually came to an end.
Comprehensive comment:
Tempted by the trillion-yuan market, the automotive aftermarket fell into a state of burning money quickly (the market is mainly focused on repair, maintenance, car wash, and used cars). But once you overdo it, there will be consequences, especially since automotive aftermarket O2O relies more heavily on capital than other industries.
Moreover, automotive aftermarket O2O is a heavy industry. Users have diverse needs for products and services, and it is precisely these complex needs that make the industry heavy. Startups in this fragmented era undoubtedly need to adopt a refined approach.
Any business model needs market testing. Whoever can break through the industry bottleneck and complete the model layout first will find the shortcut to spring faster. Only automotive O2O projects that are truly valuable and respect normal business logic can stand out and go further.
Two
**Online Travel**
Representative case: Tao Zai Lu Shang
Closure time: June 2016
At the end of June this year, Tao Zai Lu Shang finally announced internal liquidation, with debts exceeding 100 million yuan.
Tao Zai Lu Shang was a commercial product created by the original 'Zai Lu Shang' team. It had received a Series A round of several million dollars from Redpoint Ventures and a Series A+ investment of several million dollars from Alibaba. At the end of 2014, Tao Zai Lu Shang received a new round of financing of ten million dollars led by New Horizon Capital.
The most notable feature of Tao Zai Lu Shang's route was burning money: attracting users through promotions, increasing transaction volume, then using the good-looking data to raise funds, and using the raised funds to continue promotions, repeating the cycle. In fact, it did not establish a healthy business model and basically relied on VC blood transfusions to survive.
On the product side, there was no control; on the sales side, users could not be retained. The biggest competitive advantage was price, which basically meant no competitive barrier. To compete for market share, they had to sell at thin margins or even at a loss, resulting in extremely low gross margins and inability to profit, so they could only rely on VC investment to survive. Once investment could not be smoothly connected, the crisis immediately came. With the capital chain broken, Tao Zai Lu Shang could only declare bankruptcy.
Comprehensive comment:
On the one hand, industry giants are 'joining forces': Ctrip and Qunar announced a merger. Wanda Group and other companies invested 6 billion yuan in Tongcheng Tourism, making it more difficult to break through under the pressure of giants.
On the other hand, blindly pursuing transaction volume, ignoring the construction of business models, and relying on capital transfusion have led to a culture of not settling down to do products, which is also destroying the survival foundation of these online travel startups.
There are only two future development models for tourism: one is to go up, to cloud, big data, and big platforms; the other is to go down, to deep O2O, to root deeply and seize resource ends.
The tourism industry will form a new three-tier structure in the mobile Internet era: platform enterprises with standard products like air tickets and hotels as core business and others as supplements; platform enterprises with leisure non-standard products as core business and other hotels and air tickets as supplements; and deep O2O enterprises that sink to the resource end and occupy offline terminal resources.
For tourism entrepreneurs, the key is to do products well, serve users well, and use the Internet to improve the efficiency of the tourism industry. At the same time, online travel startups should strive to coordinate resources, channels, and future service capabilities to build their own core competitiveness.
Three
**Cross-border Online Shopping**
Representative case: Mitime (Mitao)
Death time: March 2016
Mitao.com was once a benchmark for cross-border e-commerce, achieving an impressive record of three rounds of financing in one year: in 2014, before the launch of Mitao.com, CN Haitao received 1 million yuan from Cai Wensheng; in July 2014, Mitao.com received a Series A round of $5 million. In November of the same year, Mitao.com received a Series B round of $30 million.
In its early stage, Mitao adopted a model of overseas purchasing agents and shopping guides, allowing overseas merchants to settle in and connecting to foreign shopping websites, integrating services related to shopping (including third-party payment) into the backend, so users could complete the shopping process themselves.
Later, Mitao transformed into a B2C self-operated cross-border e-commerce platform, launching one hot product per day, hoping to create a cross-border e-commerce version of 'Vipshop'. At this time, competitors Miyah and Yangmatou also appeared. In the competition with later entrants, Mitao gradually lost ground.
Mitao also imitated domestic e-commerce platforms' festival-creation activities to create its own festivals. Although it attracted traffic in the short term, due to high user acquisition costs, low repeat purchase rates, and low gross margins, it clearly lacked stamina. During that period, besides burning money on inventory, it also spent heavily on marketing and advertising, which unbalanced Mitao's capital turnover.
As the capital winter came, Mitao retreated to the single vertical market of Korean shopping, but since the Series C financing was not finalized, all transformation opportunities were lost.
Comprehensive comment:
According to the new policy details, the import tax rate for cross-border goods has changed from basically exempt in the past to now paying 11.9% of the total purchase price. In the cross-border e-commerce field, the industry's net profit margin rarely exceeds 10%.
The disappearance of policy dividends has made the simple and crude 'hot product model' useless. With policy catalysts, the reshuffle of the cross-border e-commerce industry has arrived, especially for those that rely entirely on bonded warehouse inventory, which face unprecedented pressure in this round of reshuffle.
In 2017, cross-border e-commerce will enter a stage of comprehensive competition in supply chain, services, logistics, and other aspects.
In front of giants like JD.com, Alibaba, and Amazon, which have strong traffic, capital, and brand resources, the former advantages of Mitao and others are insignificant. In the future, a competitive landscape may form with giant e-commerce as the main market players and emerging companies' specialty products or services as supplements.
But as long as they adhere to a user-oriented business philosophy, regardless of company size, whoever can truly capture the needs of target users and provide better quality products and services has the chance to gain a place in the market.
Four
**Fresh Food E-commerce**
Representative case: Meiwei Qishi
Closure time: April 2016
As one of the earliest large-scale companies in fresh food e-commerce in China, Meiwei Qishi's path was smooth. Its predecessor was the fresh food B2C website 'Zhengda Tiandi' founded by Thailand's CP Group in 2011, renamed 'Meiwei Qishi' in 2013, and received a $20 million investment from Amazon in 2014. With these two halos, Meiwei Qishi quickly developed into a large-scale fresh food e-commerce platform with over 5,000 categories and its own full cold chain, and became one of Amazon's first partners for fresh business.
But the more glorious it was, the harder it fell. On the afternoon of April 7, 2016, an announcement of Meiwei Qishi's closure and liquidation completely exposed the illusion: behind the glory was a black hole of burning money, and the capital chain broke, making it difficult for the company to sustain.
'It died on heavy asset investment,' said a former strategic supplier of Meiwei Qishi. After financing, Meiwei Qishi successively launched heavy asset operation models such as self-built cold chain logistics, processing centers, and large-scale construction of offline stores. Problems followed the barbaric expansion.
Without building a profit model and lacking capital transfusion, Meiwei Qishi ultimately could not escape the curse of 'death once weaned'.
Comprehensive comment:
After the baptism of the capital winter, fresh food e-commerce has moved from capital frenzy to a rational transition period. The bubble burst woke up a large number of 'dreaming' entrepreneurial speculators. Some vertical e-commerce with clear positioning have emerged, and the intervention of giants is accelerating industry integration and development.
At present, fresh food e-commerce still has broad market space and profit space. To grasp this prospect, the key is to solve the pain points of fresh food e-commerce. Fundamentally, ensuring the efficient operation of the supply chain is the core for fresh food e-commerce. Properly utilizing capital power, accurately controlling every link in the supply chain, and establishing a rapid turnover mechanism for fresh products are the only ways for fresh food e-commerce to have a future.
According to public data, by 2018, the total transaction volume of fresh food e-commerce is expected to exceed 200 billion yuan, with an average annual growth rate of over 50%. The industry will continue to grow rapidly. But in a fiercely competitive environment, the strong will become stronger and the weak weaker. Large fresh food e-commerce brands will further gain advantages, and small and medium-sized e-commerce will find it difficult to survive.
Five
**Food Delivery**
Representative case: Da Shi Zhi Wei
Closure time: April 2016
On April 29, the food delivery O2O platform 'Da Shi Zhi Wei', which had been online for less than a year, announced its closure due to failed financing.
Da Shi Zhi Wei officially launched in May 2015, targeting high-end users, and received a seed round of several million yuan that month.
The platform model was that chefs signed contracts with the platform and shared profits, using restaurant kitchens' idle time to reduce costs. By the time it closed, Da Shi Zhi Wei had established 24 crowdsourced delivery stations in Beijing and had an 800-square-meter central kitchen.
According to founder Fan Xinhong's farewell letter, due to the expiration of the central kitchen lease, failure to secure a new round of financing, and unfavorable conditions in finding new processing partners, Da Shi Zhi Wei eventually ran out of funds and could not continue, ultimately unable to escape the fate of closure.
Comprehensive comment:
With Meituan, Ele.me, and Baidu occupying the vast majority of market share, the food delivery market has formed a 'Three Kingdoms' pattern.
After the early positioning battles, there is still much room for improvement in services for merchants and users, which will be the main development direction for delivery platforms in the next stage.
In the future, different platforms will inevitably seize different segments to form a differentiated, distinctive, and personalized competitive landscape. At that time, the market will mature, entry barriers will rise, and competition will become more intense.
The new stage requires higher standards for players: they must have solid competitive capabilities, deeply understand the industry's essence, and have a down-to-earth attitude. For some food delivery brands, the best way to survive the winter is to prevent capital chain breaks and also find ways to survive even if capital withdraws.
Six
**Community Retail**
Representative case: Aixianfeng
Contraction time: July 2016
In founder Zhang Ying's positioning, Aixianfeng is a community retail convenience store, known for its 'one-hour lightning delivery' service.
Founded in May 2014, the company achieved an excellent record of completing 4 rounds of financing totaling $110 million in one and a half years. After receiving huge funds, Aixianfeng rapidly expanded its urban commercial network channels, but due to extremely weak market response and huge losses, after receiving the Series C round of $70 million in September 2015, Aixianfeng began to rapidly contract its front lines.
Overall, Aixianfeng's business model has no innovation in essence. 'Aixianfeng is actually an Internet retail company, except that its delivery relies on terminal community mom-and-pop stores; its products are not only selling other brands but also hope to operate some own brands; it just opened its stores on the Internet, and its warehousing, supply chain, and logistics are no different from traditional retail.'
Moreover, Aixianfeng, which adopted a franchise system, also had problems controlling the quality of service connecting consumers.
As of January 2016, the company retained fewer than 10 cities, and under huge financial pressure, it continued to shrink its network and effectively lay off employees. With investors eager to see profits and no way to 'open sources', Aixianfeng could only choose to 'cut costs' to ensure normal operation.
Comprehensive comment:
The community service market is very broad, with dozens of subcategories each being a hundred-billion-yuan market, but it is still in early development, with a bright future but a tortuous path.
There are too many pain points in all aspects of community services in China, coupled with the huge demand brought by consumption upgrades, there will be many entrepreneurial opportunities in community projects in the future. No matter how you enter the community, ultimately community service is a comprehensive demand: cutting across with a platform model is easy to gain volume but relatively lacks control over services; going deep in a segment is slower in the early stage but has more stamina. Generally, those with capital advantages can cut across, while grassroots entrepreneurs are advised to go deep.
Community O2O entrepreneurship is destined to be a long-term undertaking, and it is almost impossible to expect quick success. For this reason, giants will not do it themselves, which gives entrepreneurs opportunities. Giants provide the platform, and entrepreneurs integrate backend services, and a win-win ecosystem may gradually be established.
**Financing market is a tale of two extremes: where did the fallen 'martyrs' lose?**
Watch his tall building rise, watch his building collapse. Such a review of rise and fall always makes people sigh. But fortunately, what stops are projects, not entrepreneurs.
While Meiwei Qishi fell, 'old masters' in the fresh food field received investments: Tiantian Guoyuan received a $100 million Series D round, and Yiguo Fresh completed a Series C round invested by Alibaba and KKR.
While Mitao was in bankruptcy liquidation, Xiaohongshu received $100 million in financing, valued at about $1 billion, becoming a de facto Internet unicorn.
So, what is the difference between these dead projects and the entrepreneurs who broke through?
On the surface, entrepreneurs seem more willing to attribute failure to capital chain breaks. But on closer inspection, there are many factors worth considering.
(1) Can you grasp the core value?
The intervention of capital and the influx of hot money have made the market repeat the strange logic of 'financing - burning money - refinancing - burning money again'. As for whether it hits user pain points and whether the project has value, the most core thing has become the most secondary.
The 'Bopai Car Care' in the above case is a typical 'fake demand'. First, these services can be completed offline, and moving them online is not very meaningful. In addition, door-to-door car wash services themselves have no profit or very thin profit, are difficult to standardize, and service and quality are hard to guarantee, which is also something pure Internet companies cannot touch.
Furthermore, if burning money is only to cultivate user consumption habits, not to mention it is difficult to see results in the short term, if it is fake demand, even burning for eight or ten years will not have a future. Didi's previous burning money was considered feasible by many investors because it found the real pain point and grasped the core value.
A truly valuable automotive aftermarket project is a platform that provides users with integrated online and offline services: order online, service offline, both are indispensable, forming a closed loop, with both the convenience of online transactions and the experience of offline services.
Platform projects that only integrate resources and provide online entrances are clearly fake O2O. Users follow whoever burns money fiercely, and there is no actual competitiveness. After investment cools down, such projects will naturally be eliminated.
(2) Can you grasp the rhythm of development and financing?
Financing must not be short of money. Ganji.com CEO Yang Haoyong (Weibo) repeatedly emphasized, 'In the winter, O2O companies without money cannot survive 6 months. If money does not arrive, everything is nonsense.'
The above cases of rise and fall all have problems with capital chain and rhythm control.
Cash flow management is very important. You must plan every penny, do not 'take it for granted', and do not wait until money is almost used up to start financing. Bopai Car Care and Meiwei Qishi expanded personnel and product lines on a large scale after receiving financing, lacking a sense of crisis and ignoring that business exploration must go hand in hand with financing. As a result, after burning through the money, they found there was no capital to continue.
There is also a situation where success seems imminent, but funds cannot last until then, which is very regrettable. For example, Mitao was already transforming, but lost its last chance because Series C could not be finalized.
The correct approach is: when about half of the previous round of financing has been spent, you should start thinking about where the next round of money will come from. If you wait until only 1/5 or 1/6 of the money is left, it will be too late.
Moreover, regardless of whether there is strong financial support, you must pay attention to balance during expansion: where to spend money, the speed of spending, and do not waste budget on unnecessary things or things that do not play a decisive role in company growth. If you spend all the money before creating excellent performance, the next days will be very difficult.
The market changes rapidly. The good situation at this moment may be disastrous the next. 'Troops and horses move first, food and fodder go first.' Being prepared can ensure a safe winter.
(3) Can you get out of false prosperity?
In the tide of capital, data fraud among startups has become the norm, with various scandals of fake orders, inflated financing amounts, and so on emerging one after another.
The 'Tao Zai Lu Shang' mentioned in the article habitually attracted users through promotions, increased transaction volume, then used the good-looking data to raise funds, and used the raised funds to continue promotions, repeating the cycle. In fact, it was just using crazy subsidies to create bubble orders and false prosperity, continuously raising its valuation to achieve psychological comfort.
But in the trend of tightening financing and increasingly cautious investors, if the company's business and products are not strong enough, it may be difficult to find the next round of financing. During the capital cooling phase, these startups with inflated financing and valuations are likely to be the first bubbles to be squeezed out.
Only startups that truly provide innovation and value have the opportunity to go further.
(4) Can you do a good job on profitability?
The profit model is the key to ensuring future cash flow, maintaining investor confidence, and avoiding falling into a dead end.
For startups, do not always fantasize about swallowing an elephant in one bite and care about 'scaling' early.
'Da Shi Zhi Wei' made this mistake. Until its closure, founder Fan Xinhong did not think there was a problem with the platform model; he just felt that time and money were not on his side.
But in fact, for an early-stage project, planning such a big chess game in less than a year, including central kitchens and crowdsourced delivery stations, was fatal to business model design and project development.
Relying on crowdsourced logistics to solve delivery problems is unreliable in itself. Not to mention the need for a huge operating system to support it, service, quality, safety, and stability cannot be guaranteed. In addition, product prices must be kept low, and with such configuration and operating costs, profitability is impossible.
Aixianfeng is the same. After financing, it blindly expanded city channels and spread its摊子, but the business model was not innovative in essence, and the market simply did not buy it.
The business model is a very realistic issue. Before considering making money, you need to understand the users your product faces and their needs, so you can design a profit model that makes them consume. This model must be sustainable to become the company's business model; otherwise, even large-scale layoffs and cost cuts will not help.
Unless everything is ready, do not casually upgrade the company.
**Dust to dust, earth to earth**
Most Internet startups are young people with no industry experience and no practical experience. These startups deviate from the essence of business. They are not to solve real pain points but to start a business for the sake of starting a business, so death is inevitable. They basically start from the Internet, are not grounded, can only stay online, and die once they touch offline. In short, everything is 'Internet+', completely homogeneous, with no technical barriers. The only barrier is whether you can fool investors.
After the madness of the past two years, everyone seems to have lost their vitality. Investors are no longer a good title for bragging, and entrepreneurs are tired. Dust to dust, earth to earth.
There are many fewer entrepreneurs on Zhongguancun Street. The Internet roujiamo that had long queues in 2015 is now deserted. It has been a long time since we heard from Huang Taiji or Diao Ye.
In the autobiography of the famous Japanese director Akira Kurosawa, 'Something Like an Autobiography', there is a saying: 'Waterfalls come from high places; the source water is calm, and here it becomes a torrent.'
The way of entrepreneurship is the same.
-END-
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