---
title: "Zhu Xiaohu: To B Will Be the Biggest Dividend, Bullish on Community Group Buying"
description: "The internet is increasingly penetrating people's lives and beginning to empower more traditional industries for transformation and efficiency improvement, presenting many opportunities. Zhu Xiaohu, a well-known investor in consumer internet and managing director of GSR Ventures, who has invested in unicorns like Didi Chuxing, Ele.me, and OFO, has shifted more attention to To B enterprise services this year, even calling enterprise services the biggest dividend of the next decade during an interview at the 2018 Jinji Lake Entrepreneurship Competition."
author: "李威"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-10-31"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/TK9O8CfbB1OQz4vG_LR7eg"
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# Zhu Xiaohu: To B Will Be the Biggest Dividend, Bullish on Community Group Buying

> The internet is increasingly penetrating people's lives and beginning to empower more traditional industries for transformation and efficiency improvement, presenting many opportunities. Zhu Xiaohu, a well-known investor in consumer internet and managing director of GSR Ventures, who has invested in unicorns like Didi Chuxing, Ele.me, and OFO, has shifted more attention to To B enterprise services this year, even calling enterprise services the biggest dividend of the next decade during an interview at the 2018 Jinji Lake Entrepreneurship Competition.

****The internet is increasingly penetrating people's lives and beginning to empower more traditional industries for transformation and efficiency improvement, presenting many opportunities.**
As a well-known investor in the consumer internet field, Zhu Xiaohu, managing director of GSR Ventures, who has invested in unicorns such as Didi Chuxing, Ele.me, and OFO, has shifted more attention to the To B enterprise services sector this year. He even called enterprise services the biggest dividend of the next decade during an interview with media at the 2018 Jinji Lake Entrepreneurship Competition.
"China's internet hotspots have been changing rapidly, roughly every two to three years, and such changes are normal. Compared with the past decade, the changes in the next decade will be more significant," Zhu said. The reason for this change largely stems from the fact that **the disappearance of the mobile internet demographic dividend has shifted enterprises from scale expansion to improving efficiency through technology.**
In this transformation, enterprise service software has begun to be accepted by more companies. More than a decade after leaving Yibao Network to become an investor in 2007, Zhu Xiaohu has witnessed the explosion of enterprise services. "In the next decade, we believe that although the money Chinese venture capital institutions can earn from the enterprise services market may not necessarily exceed that from consumer internet, it will at least be comparable in scale."
Zhu cited an example: last year, an enterprise services company he invested in had revenue of 20-30 million yuan, and this year it will reach 70-80 or 80-90 million yuan. "The growth rate is already fast, and it's just at the acceleration stage; this momentum will be very obvious." Zhu said that the rigid demand for enterprise services is very clear, and success depends on whether enterprises are willing to pay for your services.
While focusing on the To B enterprise services market, Zhu also shared his thoughts on social networking, community group buying, mini-programs, and education in the interview. He believes that opportunities in the social field always exist, but high risk and high returns come together; the explosion of community group buying is more suitable for consumers in second- and third-tier markets; traffic is now basically in the hands of a few giants, and mini-programs are just a lighter form than apps.
 _The following is a compilation of Zhu Xiaohu's interview by media including "New Business Trends NBT" (WeChat public account ID: newbusinesstrend):_
**Q: Now in the capital winter, everyone thinks the mobile internet dividend has bottomed out, and consumption and education will be more favored. What are your thoughts?**
**A:** China's internet hotspots have been changing rapidly, roughly every two to three years, and such changes are normal. Compared with the past decade, the changes in the next decade will be more significant. Because in the past decade, the demographic dividend has indeed been present, especially the rapid development of the mobile internet demographic dividend. Now the demographic dividend is basically gone, and the changes in the next decade may be more significant.
We feel the biggest dividend is in enterprise services. In the past decade, American venture capital institutions earned more from enterprise service providers than from consumer internet. Although the US consumer internet has many giants, the enterprise services field has more companies worth billions of dollars. Each may not be particularly large, but the number is very high.
Chinese venture capital institutions have not made much money from enterprise service providers in the past decade; it has basically come from consumer internet. But in the next decade, I think there will be significant changes. The internet is increasingly penetrating people's lives and beginning to empower more traditional industries for transformation and efficiency improvement, presenting many opportunities. In the next decade, we believe that although the money Chinese venture capital institutions can earn from the enterprise services market may not necessarily exceed that from consumer internet, it will at least be comparable in scale.
**Q: What are the reasons for enterprise services becoming the biggest dividend?**
**A:** Our partners themselves came from enterprise services, so we have always understood enterprise services well. It's just that in the past decade, China's enterprise services did not reach an explosion point. From the data of the past year or two, the growth momentum of enterprise service companies has begun to accelerate significantly. There are several important driving factors:
First, China's labor costs were indeed relatively cheap before, and software did not show its value. Generally, small and medium-sized enterprises were unwilling to spend money on software, preferring to hire a few more employees. In recent years, wages for frontline employees have risen very fast, labor costs have begun to increase significantly, and software has begun to show its value. This is a very large driving factor.
Moreover, the post-90s generation is unwilling to do full-time work and prefers the sharing economy and gig economy. Recruiting, training, and managing post-90s is more difficult than managing post-70s and post-80s. This also makes the value of enterprise software more evident.
Second, many enterprise service software used to be PC-based, and PC software could be pirated. But today, software is cloud-based and difficult to pirate, so cloud-based enterprise services have started to rise, and enterprises have begun to purchase services.
Third, the value of enterprise service software empowered by artificial intelligence technology will become more significant. Because the application of AI technology is now becoming widespread, we see that enterprise services that can explode in the future are basically those empowered by AI and big data. Many things that were previously impossible are now being solved with AI technology.
Moreover, the barriers for AI-empowered enterprise service software will be very high. Previously, when an enterprise service software found a market, many people would follow, and price wars would begin. Today, with AI and big data driving, price wars are hard to fight, and many opportunities will emerge.
**Q: What are your focus points for To B projects?**
**A:** The principle is exactly the same as for To C projects. The rigid demand for enterprise services is very clear, and success depends on whether enterprises are willing to pay for your services. Similarly, we don't want to see entrepreneurs using subsidies or free methods to fight for the enterprise services market.
Last night, I attended a board meeting and told entrepreneurs in enterprise services that free methods cannot test whether your service is truly good or truly a rigid demand. Only when enterprises are willing to pay is it truly good. Whether enterprises are willing to renew is also important. Consumer internet looks at user retention, and enterprise internet also looks at retention, with even higher requirements than consumer internet.
For consumer internet projects, retention might be 20% after six months. For enterprise service projects, 80% might be willing to pay after a year, and they may pay more. Enterprise retention is 80% per year, and revenue retention exceeds 100%, meaning the 80% of retained enterprises are willing to pay more, so the money we receive may exceed 100%.
**Q: We see that giants are also paying a lot of attention to To B. From an exit perspective, will To B projects be easier?**
**A:** To be honest, when we invest, thinking about exit is too early. We focus more on whether there is demand and whether users are willing to pay. Now China's internet has entered the second half, and the dividend of enterprise services is beginning.
Why were we unwilling to invest in enterprise services before? Because revenue growth was slow, maybe a few million or 10-20 million yuan was the ceiling. Last year, the enterprise service projects we invested in had revenue of 20-30 million yuan, and this year it's 70-80 or 80-90 million. The growth rate is already fast, and it's just at the acceleration stage; this momentum will be very obvious.
**Q: Will the attitude of giants affect the entire To B industry?**
**A:** Yes, but more importantly, it's the development of the enterprises themselves. What makes venture capital excited is threefold growth in a year. This was not seen in enterprise services five or six years ago; only in the last year or two have we seen such growth momentum. Moreover, enterprise service software basically doesn't burn much money, unlike consumer internet which requires raising a lot of money. Enterprise services can develop this fast while at breakeven or slightly loss-making or slightly profitable, which is something venture capital loves to see.
**Q: In the second half of the internet, will the combination of AI and IoT also present significant opportunities?**
**A:** We mentioned earlier that AI-empowered enterprise services are a very obvious trend. AI-empowered consumer applications are also very obvious in areas like content distribution. The application of AI in consumer internet is still relatively early. For example, current phones have AI chips, but phones with AI computing power on the consumer side are still relatively expensive, and penetration is not yet widespread. It may take a few more years. But on the enterprise side, AI-empowered services will be very, very common.
**Q: What other opportunities are you watching in the To C market?**
**A:** We've noticed that many recent C-end applications may be To B To C or To G To C. Because the demographic dividend is over, acquiring C-end users has become very expensive. Acquiring C-end users through B-end or cooperating with the government is a better way.
**Q: How do you view the opportunities in WeChat mini-programs?**
**A:** There are many opportunities in WeChat, after all, it has 900 million monthly active users. But now the cost of acquiring users on WeChat is also rising very fast, and today it may not be much cheaper than other internet channels.
**Q: Are the mini-programs launched by Alipay and WeChat more beneficial to slightly more mature enterprises?**
**A:** I don't think so. For many not-so-high-frequency application scenarios, mini-programs are more suitable. Today, it's very difficult to get consumers to download a new app. For not-so-high-frequency scenarios, downloading an app is unnecessary because the acquisition cost is very high. Mini-programs are simpler; no need to download an app. When users see something at the scene and find it useful, they can directly open the mini-program and use it.
**Q: Are there any good cases in mini-programs?**
**A:** Mini-program games have a very high daily active user ratio, and indeed, the demographic characteristics of users are quite different from previous game users. We found that middle-aged women really like playing mini-program games, and their willingness to pay is also very strong, which subverts our previous judgments about games. Previously, not many female players, especially middle-aged women, played games, and we generally thought female users were not willing to pay. But mini-games have subverted some of our previous views.
**Q: What are the future possibilities for mini-programs?**
**A:** Generally, non-high-frequency application scenarios will be expressed through mini-programs. Most scenarios are not high-frequency; high-frequency scenarios are too few. For most non-high-frequency scenarios, users don't need to download an app, so mini-programs are more suitable. Not only Tencent, but Alibaba and Toutiao have also started making mini-programs.
Now we tell any startup: don't develop an app first; make a mini-program first. If the mini-program works well, then make an app. If the mini-program doesn't work, there's no need to develop an app.
**Q: Will the entire mini-program ecosystem become more closed in the future?**
**A:** No. No matter what you do, traffic is basically in the hands of a few giants. Mini-programs are just a form. The strategies of Tencent, Alibaba, and Toutiao are still relatively early, and we need to see more.
**Q: Besides mini-programs and enterprise services, what other tracks are you bullish on?**
**A:** Education. Education has always been an evergreen tree. Quality education is relatively better; exam-oriented education is not so compatible with the current environment.
**Q: Are there any special criteria for investing in education?**
**A:** The same criteria. Customer acquisition cost, retention rate. We are relatively conservative and look at the numbers.
**Q: How do you evaluate the online piano accompaniment track?**
**A:** There are 20-30 million piano students. To be honest, the fees are acceptable. A piano student contributes a few thousand yuan a year, which is already a market of tens of billions. I think the market is big enough. If a student can practice for five or six years, that's a high duration. I'm already happy to collect money from a user for five or six years.
Because the rigid demand for accompaniment is very obvious, the retention rate is very high. I invested in this project because my daughter also uses it. Without accompaniment, honestly, supervising her practice every day hurts the relationship. Kids don't want to practice. Now the teacher helps her, so parents don't need to urge, and the effect is much better.
Accompaniment is definitely more efficient online, but teaching must be offline because teaching is more complex and requires the teacher to teach offline. Playing the piano is not that simple. Accompaniment is definitely better online. The income from accompaniment is not as high as offline lessons, but offline accompaniment is too inefficient.
**Q: How do you view community group buying projects?**
**A:** I think the demand is very obvious. My wife uses it, and she has used it for quite a while. I see that the numbers for these startups are relatively healthy, basically not burning much money, and repurchase rates and user stickiness are relatively high.
**Q: Why has community group buying gained more attention this year?**
**A:** To be honest, community group buying has been around for several years. We've seen several group buying companies that have been doing this for at least two or three years. They rely on word-of-mouth from users to penetrate, and now they are starting to enter an explosive period.
**Q: Is community group buying more suitable for second- and third-tier cities?**
**A:** Because in second- and third-tier cities, choices are indeed fewer, so community group buying provides users with richer choices and is easy to explode. In first- and second-tier cities, there are many channels to buy things, and various products are relatively abundant, especially in Shanghai and Beijing, where it will be relatively harder.
**Q: Will platforms like Meituan and Ele.me breed new entrepreneurial opportunities?**
**A:** Vertical innovations will be numerous. We see self-heating hot pot, which is rising fast. Vertical industries have many opportunities. In China's micro environment, there are many innovations. A 30-yuan self-heating hot pot with fresh ingredients can generate 10-20 million yuan in revenue in a little over a year. It may not be suitable for venture capital, but it's very good for individual entrepreneurs.
**Q: What new trends will you watch in the consumption field?**
**A:** We are always watching the consumption field, but we don't know yet. You can't guess in advance. This year, community group buying and a bunch of social products have emerged.
**Q: Do you think there will be new opportunities in social networking?**
**A:** There are always opportunities in social networking; any social platform will age. We also see that social networking is a field where "one general's success costs ten thousand bones," with very high risk and very low success rate. But once successful, the returns are also very high, so entrepreneurs and venture capitalists are constantly willing to try. We are always watching, relatively conservative, hoping to see data like activity and retention.
**Q: Most current social applications have obvious user ceilings. Is there still room for bigger opportunities in this field?**
**A:** There will definitely be, but it takes time and a new opportunity. I think AI empowerment might be an opportunity. VR/AR entrepreneurs and investors once had hopes, but it seems too early now. In fact, AI empowerment will definitely have opportunities, but the timing is not yet mature, including the fact that AI chip phones are not yet widely adopted.
**Q: How do you view products like Bullet SMS, Yiguan, and SOUL?**
**A:** Ultimately, data speaks. Because the data for social products is very easy to judge: retention rate, activity, etc. Entrepreneurship is about trying and taking risks. Entrepreneurship and venture capital inherently involve risk.
**Q: How do you find good projects in the winter?**
**A:** The winter mainly affects RMB funds; it has little impact on top-tier funds. The problem now is not money, but the scarcity of good projects. China now has 10,000 new companies each year, but only 10-20 at most are truly worth investing in. Finding good projects still requires returning to the essence, returning to the numbers. We need to look at basic numbers, such as whether anyone is willing to pay for your product.
**Q: How long do you think this winter will last?**
**A:** Very short. China's internet cycles are all short. Every three years, we see a winter and a bubble. I estimate the capital winter will start to improve next year. To be honest, it's not particularly cold this year. Some companies have received valuations of $75 billion. Is that a winter?
**Q: How are valuations for projects this year?**
**A:** I think it's a bit better than six months ago, but honestly, it's not that cheap. You say capital winter, but I don't think it has that much impact. The winter only refers to the public market, where stock prices have fallen sharply. In the primary market, honestly, it's still autumn, just like today's weather.
**Q: Will projects that don't burn money or have good cash flow be more favored by capital?**
**A:** In uncertain capital market conditions, (capital choices) will be relatively more stable.
Source: New Business Trends NBT (ID: newbusinesstrend)
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