The old gold officially rang the bell, and Black Ant Capital once again ushered in a "highlight moment".
High gross profit and high growth, this is recognized as a good business at the moment. But in He Yu's expression, there is no dramatic plot in the process of Black Ant's investment in Laopu Gold, but like many cases in the past, it relies on "intuition" to fall in love at first sight, and then delve into research and follow-up, and hit the ground when the opportunity finally comes.
Black Ant Managing Partner Zhang Peiyuan first visited Xu Gaoming, the founder of Laopu Gold, in 2019, but it was not until 2023 that the other party opened the only round of institutional financing before the first listing, and the window was fleeting, and Black Ant completed all the processes from project initiation to transaction within two months, faster and more resolute than its peers.
For this project, Black Ant has discussed a series of issues internally, such as to what extent is the rapid growth of long-established gold related to the rise in gold prices? Is its high gross margin sustainable?
These questions were dismissed after in-depth consumer and company research. Black Ant is convinced that the fundamental value of Laopu Gold is based on brand precipitation, and its barriers and potential can be viewed from the perspective of a potential luxury brand.
A black ant investment manager who followed up on the case told 36Kr that Xu Gaoming, the founder of Laopu Gold, cherished words like gold. However, after the opening of the investment window, the two sides chatted for several hours, and the topic was not about gold stocks, but about the attributes and growth trajectory of luxury brands, which quickly resonated with Xu Gaoming.
The feel and cognition accumulated by long-term investment and consumption have helped Black Ant harvest this almost impeccable project from a business point of view-
According to the prospectus, the compound annual growth rate of revenue of Laopu Gold in the past three years has reached 58.6%, and the gross profit margin has exceeded 40%, which is much higher than the level of about 20% of traditional gold jewelry brands, and the average annual revenue of the store in 2023 is close to 94 million yuan, more than twice that of 2022 (it is understood that the same-store revenue is still growing rapidly so far in 2024).
After the IPO of Laopu Gold was launched on June 20, Tencent Investment, China Southern Asset Management and CPE Yuanfeng joined the cornerstone investor team.
Black Ant is also the investor behind a series of star consumer companies such as Bubble Mart, Giant Biotech, Helens, Heytea, Yuanqi Forest, UR, Ming Ming is busy, and Yuan Ji Yun Dumpling.
The most recent time out of the circle was when the snack collection store company "Mingming is busy" that they invested in announced that it had exceeded 10,000 stores on June 12. No matter how the environment changes, black ants always seem to catch the good company of the moment.
On the eve of the gold bell ringing in the old shop, He Yu, the founding partner of Black Ant Capital, was interviewed by 36 Krypton. During the three-hour conversation, He Yu shared his judgment on "good projects", his understanding of the changes in the consumer market and fundraising environment, and his understanding of his own capabilities and boundaries.
He Yu has always shown a temperament that is unhurried and Chinese-style: talking more about specific and micro project logic, and less about exaggerating exciting stories; does not deny the difficulties and adjustments encountered by some star projects in the past, nor is it eager to make 100% recognition of today's "sinking market consensus" and "consumption downgrade"; At a time when RMB funds are widely questioned as "not market-oriented enough", he said, "Don't see change as a bad thing."
He Yu, founding partner of Black Ant Capital
36Kr: When was the first time you visited the old gold?
He Yu: In 2019, we noticed this brand, so one of our partners, Zhang Peiyuan, visited Mr. Xu in Beijing. He has a deep understanding of the product, the category, and how to build a brand, so he keeps in touch.
When the investment window opens and we meet again in 2023, we already have investment intentions in our hearts. After that, every time we met, we could talk for hours, from the office to dinner.
36Kr: When the pre-IPO round completed the capital increase, it was only a few days before the old shop submitted the prospectus, is this a fast-paced investment?
He Yu: Generally speaking, pre-IPO projects will be more watery, and everyone has relatively awareness and consensus. The old store is special, it has no historical financing, although the output of a single store is very high, but the number of stores is relatively small, and the market has a lot of non-consensus on it compared to underwater.
However, we were resolute in the process of initiating the project, due diligence, voting decision, and then completing all the transaction executions in less than two months.
36Kr: How do you deal with non-consensus?
He Yu: Perhaps everyone's first reaction when they come into contact with long-established shops is to benchmark with traditional gold brands, while the gold brands in the market used to be based on efficiency, that is, the cost advantage brought by scale.
Looking at the differences in the consumer industry from the dichotomy of efficiency and experience, if an experience-oriented project is judged by the standard of efficiency, it is wrong to judge the true value of the old store.
From the first contact, we did not understand it in this way, but based on its product and content creativity, time precipitation, positioning in the minds of consumers, and recognition in high-end channels, we understood the barriers and value of the old shop, and believed that it had a good foundation for developing into a luxury brand.
If you take a detour in the cognition of this issue, you may have doubts about the market share, growth driver, and competitive barriers of the old shop, and you will miss the short investment window at that time.
36Kr: Now there are often long queues in the stores of the old gold, was it a sought-after case at that time?
He Yu: At the time of investment last year, the entire capital market was relatively restrained in consumer projects, and everyone did not take it lightly. At the same time, the investment window is very short and the time is very tight.
The long-established gold Hong Kong Canton Road store
36Kr: How can you tell if it's worth so much money?
DH: First, it has a higher gross profit margin than other gold brands, and some new product lines are moving into the luxury gross profit range.
Second, the rate of return on capital investment of the old shop is much higher than that of the industry. We feel that it has both high-end and large-scale attributes, which is a very attractive point, so its valuation logic is not the logic of benchmarking costs and processing fees, but the logic of an experience-oriented brand with product pricing power and high brand premium, and there are no competitors in this price band.
36Kr: What impressed you the most in the process of investing in the old shop gold?
He Yu: Consumer feedback. The consumers we surveyed called it the "golden end", and when you talk about brands like Cartier and Bulgari, everyone is willing to recommend it to their friends. It is actually quite difficult for a Chinese brand to have this sense of value and pride.
Plus, there's some counter-intuitive tearing to it. Sales are already high and growing rapidly, but there are really not many people around us who know about it, which means that there is a lot of room for growth in the future, which is also something that makes us very excited.
36Kr: In your last LP, there were industrial companies and industrial capital, how are they different from the US dollar LPs in the past?
He Yu: At present, the participation of industrial capital in black ants is actually more of a financial consideration. However, we usually have close communication with many industrial companies, and the resources of large enterprises may be able to help the startups we invest in, or they may be potential buyers in the future.
36Kr: What is the goal or preference of large companies to buy assets?
He Yu: The first one, buy the crowd. Large companies tend to do "big people", but the subdivision positioning products of "small people" are not very good at being done by large companies, and it is not easy to incubate them internally.
In addition, some industries may compete to a certain extent and also need to reintegrate to reduce internal friction, which has also happened in history. There are many other dimensions of mergers and acquisitions, such as buying supply chains, buying channels, buying regional markets, and so on.
36Kr: Last year, Snacks was very busy merging with Zhao Yiming, and everyone was shocked, what is the role of black ants in this matter?
DH: Of course, we fully support this, because it will help to improve the efficiency of the industry more quickly. More importantly, the two founders cherish each other, and the bottom has the foundation of recognition and trust in each other's cultures.
Previously, at this year's franchisee conference, they even released the WeChat records of the year, and in 2021, they almost signed the merger.
36Kr: There are still co-CEOs in the era of big mergers and acquisitions, but it's hard to see two founders like this on the same stage today, it's amazing.
He Yu: Looking back, I don't think it's very common, and it definitely doesn't mean that you can push it by external forces. First of all, there is such a demand in the industry, and secondly, the two founders also have to recognize each other very much, which is difficult to replicate.
36Kr: When did you find out that this industry can be so big?
He Yu: In 2021, we went to the county to investigate and saw that this format is very suitable for the sinking market, and then we went to study and understand it. I've probably mentioned to a lot of people that this is what I think has been the biggest thing for offline spending in the past 5 years, and it's also one of the biggest opportunities.
In the past few years, which offline projects have been iterated into infrastructure for people's livelihood? China is a multi-tier market, and this is the first offline retail network that can reach more than 50% of China's population. It is large enough and proven in almost all provincial markets.
36 Krypton: It is equivalent to when you are looking for a case, the snack is very busy is already the first, and the sequoia has also entered.
HE Yu: Yes, Sequoia predates us. We looked at sixty or seventy companies in this track, and then felt that the time stage was relatively early, and there should be more than one in the end, and there were still investment opportunities.
At that time, Zhao Yiming's scale was at most in the top ten, but we bet on it. First, it grew up from the county seat, and it can be seen that it is different from its competitors in terms of door, store type, price, and products. Second, after chatting, we think Zhao Ding is good.
36 Krypton: What are the shining points of Zhao Ding?
He Yu: He is an entrepreneur with long-term thinking and pattern, and has a strong altruistic spirit for users and franchisees. In addition, he has been doing retail business entrepreneurship in the sinking market for many years, and has many iterations and summaries of the franchise system and store operation management.
Finally, there is a strong user insight and the original intention to create value for users. We always want to make sure that the founders we invest in have the mindfulness to create value for users.
36Kr: This case has a chance to grow into the biggest business in the project you invested?
He Yu: In terms of scale, it is now the largest, and we have many companies with billions of revenues, and there is only this one with more than 10 billion yuan.
36Kr: So you must have added a little more stake last year.
He Yu: We have been adding, before and after the merger, we have invested a total of 250 million yuan in three rounds, and we are very busy in Mingming. We also added a lot of money to Bubble Mart that year, and we also added a lot of Heytea, and I think good companies must add it.
36Kr: What do you think is the difference between channel business and brand business? Ming Ming is very busy and the old shop gold is actually a representative of both.
He Yu: Rather than channels and brands, it is better to say that consumption is divided into two types of business, one is efficiency business, and the other is experience business.
The long-established gold shop is a typical experience business. Generally speaking, categories related to emotional value, identity expression, values, and worldview are likely to achieve long-term premiums.
For example, sports and outdoor, coffee and wine, pets, but also skin care, beauty, jewelry. To do a good experiential business, you need the ultimate product, the ultimate content, and the precipitation of time.
When it comes to efficiency business, price and convenience are at the core. Of course, the channel should also have its own positioning, but users will not pay a premium for it, and the essence is efficiency.
"How fast and good to save", there is no difference between channels, but it just means that users at different levels have different requirements for price and quality. Your positioning is to target a certain group of users, so you want to serve them best, but this group of users must be efficiency-oriented here.
The advantage of efficiency is built on scale, and the advantage of experience is built on differentiation.
36Kr: Black Ant may be the institution that can best represent new consumer investment, so who is the case that best represents Black Ant?
He Yu: We invested in Jiang Xiaobai in the early days, which is a good company. Helens is also a good company, and now it is greatly affected by the changes in the business environment after the epidemic, but it still has good profits and is still the best company in the bar track, and I am firmly optimistic about the future.
There are quite a few, Bubble Mart, Hey Tea, Yuanqi Forest, UR, Giant Creature, Ming Ming is very busy, Yuan Ji Yun Dumplings and so on are all very good.
Zhao Yiming's snack store
36Kr: In the past few years, you feel that you have passed by, and then you look at a project that is a little regrettable, is there one?
He Yu: Of course, for example, the turning point after the Luckin accident is actually a very good opportunity, if you have enough understanding of the business facts of Luckin, you can seize it. Also, we missed the snow early on.
36Kr: Because of what you missed?
HH: The reasons are different. I think consumption needs to be constantly learned and accumulated, consumption is too big, there are too many industries and too many things, and it is full of various business models and opportunities.
The good thing is that we have been focusing on consumption, cognition is constantly iterative, resources are constantly accumulating, ability is constantly growing, and I believe in the power of focus and time.
36Kr: Did you miss Mixue because you hadn't started researching the county economy at that time?
He Yu: Yes, I didn't look so sinking at the time. I think 2022 is a turning point for the whole consumption.
36Kr: This "turning point" lies in parity and sinking?
He Yu: To put it simply, in the past 20 years, our consumption has been constantly escalating, and almost every year we can raise prices through product and service optimization, and consumers can accept it, because income is increasing, and expectations are very good, and this logic has changed after 2021.
However, in the long run, I think that these more lifestyle and experience-oriented things in first- and second-tier cities will come back and continue to grow, and I believe that as long as consumers continue to grow, there will be more and more experiential consumption like Laopu Gold, such as outdoor sports, pets, coffee, IP consumption, etc.
In the short term, the past few years must be in the channel of price reduction, first of all, the price is changing, but the cost will not become so fast, so many companies' product structure and business model have to be adjusted. It is a change and an opportunity, and it is under this trend that snack stores have created new business models and greatly improved efficiency.
36Kr: Is this a breakthrough in previous cognitive inertia? Most of the projects you have invested in before are typical consumption upgrades.
He Yu: Different stages are different. If you look backwards, the opportunity isn't necessarily below, just say that the market is like this today.
36Kr: How do you evaluate the current adjustment effect of Heytea?
He Yu: Heytea has been relatively mid-to-high-end from the beginning, and now it has been adjusted to the general public. The price reduction is not so simple, behind the whole set of products to services, supply chain and even business model changes.
At the end of last year, we only had about 800 stores, and now there are more than 4,000, in this price band, Heytea has real brand value, which depends on creativity and time accumulation.
We believe that ready-made beverages and bottled beverages have different logics and meet different consumer needs. Efficiency is important, but in the long run, it is not the final decisive point.
36Kr: What is the core point of the success and failure of Heytea's transformation? Find someone who knows how to join?
He Yu: Neo was the first to join, and he originally had a good understanding of this matter, but the entire organization and workflow still need to be re-established. The iterations completed by Heytea in the past two years are actually relatively rare and not easy. Neo is a very talented and hardworking person, very emotional and rational, very creative, but also very strategic and thoughtful.
36Kr: In addition to starting to understand sinking, have you had any major cognitive changes or corrections in the past two years?
He Yu: Actually, I think that cognition should not be too extreme, sinking is just a supplement to the perspective, and the focus of each stage is slightly different.
It's not that today we think the sinking market is good, just the sinking market. China's first- and second-tier cities definitely have opportunities, and lifestyle is the development trend of human society, which will not change. We will still look at experiential consumption, even if it was last year, we have also invested in some, and we will still invest in the future.
In addition, we also continue to pay attention to large supply chains and brand companies that provide the best products. Overseas companies are also looking at it, and have invested in projects such as E-bikes, headphones, and snow-clearing robots. Oladance, a headphone brand invested in 23 years, was also acquired by the industry, which is also our first case of merger and exit.
I think there may be another direction in the future, that is, virtual content consumption, and if there are good projects in it, I will definitely go to see it.
HeyTea New York store
36Kr: Is there any difference between the distribution of your work energy this year and previous years?
He Yu: It's not much different, but it takes more time to visit more industry partners to discuss their views on the industry and whether there are some more diversified cooperation opportunities.
We are an industrial fund and want to be more industrialized from day one. In the long run, if it is only pure capital, the barriers are not high enough, and there must be more industrial resources and industrial capacity.
Second, from our perspective, whether we can see different, non-public investment opportunities, or create some new investment opportunities, this is what we need to do as a vertical fund.
36Kr: Will you continue to raise dollars in the future?
HE YU: It is necessary. I believe that China's consumer market is an area that foreign LPs will focus on for a long time, and it is relatively less disturbed by the external environment.
36Kr: Compared with raising US dollars, how will the way of raising RMB work will be different?
He Yu: I don't think we should regard the matter of the government of the RMB fund and the state-owned LP as bad, and we should not separate it.
It's not that I'm serving the government, it's about serving entrepreneurs, whether it's the industry, the government or entrepreneurs, we have to find common ground and turn a thing into a good thing, for example, how the government's demands can become more beneficial to startups.
36Kr: You're optimistic.
He Yu: I've been here for so many years. We have always been optimistic and see the good side of things. For example, it is said that the market is very bad and Hong Kong stocks are very poor, but looking at the hot subscription of old gold is another contrast, the important thing is not the outside, but yourself.
36Kr: Where does optimism come from? At a time when everyone is generally pessimistic.
DH: I still believe in the opportunities in the Chinese market, especially in the consumer sector. We have a unified market with the largest population base, and the biggest opportunity must be in China, but different stages have different requirements for our investment capabilities, and we need different perspectives and practices.
36Kr: You said before that the opportunity to invest in Helens was the first time you went to their store, and you felt that you had to get in touch with them. It's intuitive, but you're very rational.
He Yu: Investment must first respect the phenomenon, existence is reasonable, this is a basic principle of consumer investment, everything that happens, first admit it, if other people's business is already very good, don't admit it. But intuition is not enough, and the final shot must rely on rationality and deduction of business logic.
36Kr: What are your intuitions about Bubble Mart and Helens?
He Yu: The feeling I got from Bubble Mart at that time was that his IP was very good-looking, and I could feel how fanatical the users were in the store.
Like Helens, you can't see anything special when you go in, the location is very bad, but the business is exceptional, and the stairs are full of queues on rainy days. It's the most interesting thing that goes wrong.
36Kr: Now that AI is so popular, as an investment and consumption institution, do you have any opportunities to find this?
He Yu: The long-term impact will definitely be very large, from the supply chain to manufacturing, R&D, and customer acquisition channels. The first thing that will change is definitely marketing, and AI will be widely used in the consumer field in the future.
We have been studying the impact of AI on consumption since the beginning of last year, and this kind of knowledge follow-up must be there, not lagging behind, not having poor information, and predicting changes. But we also have to know our own boundaries, and we pay more attention to the changes that AI will bring to the industry, and physical consumption will not be subverted overnight, and will always exist.
36Kr: Is it possible for a new e-commerce giant to emerge online?
DH: It's entirely possible, or if the giant changes from A to B, it can happen. But we don't invest in Internet and platform companies, this is not our investment.
36Kr: If there is such a big opportunity, don't you look at it?
He Yu: Even if it is an opportunity, it is not an opportunity for us.
36 Kr: Will it only be Sequoia's chance?
HE YU: Definitely. In terms of investment, every institution is different, and capabilities are not formed in a day.
36Kr: What is the essential difference between Sequoia's opportunities and yours?
He Yu: Sequoia is a real VC, but we are not a VC, but a consumer vertical fund, which is more limited in the investment field, but has higher requirements in the accumulation of industrial resources, industrial cognition, and multi-perspective and multi-dimensional investment. In the future, we will be more industrialized.