With the rise of mass innovation in China, money is flooding into startups, especially those in the latest emerging verticals. Xiaomi CEO Lei Jun puts it more colorfully: “Even a pig can fly if it is in the middle of a whirlwind.”
Despite the sector-wise differences, history is repeating itself in China’s internet industry. Nearly every whirlwind sector is going through a similar path. A certain hot industry attracts a swarm of startups, then a large amount of capital dives in to fuel the extravagant cash burning war for players to snap larger market share. Finally, the battle ends in a merger between the industry leaders, like the case in Didi and Uber China.
But at least one thing is different now: the speed at which the entrepreneurs and investors are reacting to the rise of a new vertical. From the first boom of taxi-booking service in early 2013 to the final merger between Didi and Uber in late 2016, it takes around three years for Didi to establish its sole dominator position in China’s ride-hailing market.
For the bike rental boom, it takes only two years for the industry to witness the creation of its first unicorn. For the on-going rise of power bank rental industry, things are going even crazier. In less than 2 weeks earlier this April, a combined RMB 300 million (US$ 43 million) financing from over 20 investment institutions was thrown into the industry.
“The fast rise of ride-hailing and bike rental industry is taking the country in a big way. Even internet behemoth like BAT are afraid of losing market share in the latest emerging industries,” said Yuan Yuan, CEO of Ankerbox, at TechCrunch Shenzhen today. Ankerbox recently sold a 60% stake to Chinese online retailer Jumei for RMB 300 million.
The fast reaction from capital is pushing companies into the whirlwind even faster.
“As an entrepreneur, we are feeling the cut-throat competition in this industry. The capital is shortening the industry growth cycle from a few years to one year or even less. Take Xiaodian for example, we are now operating in 33 cities around the country, but if you asking me about this figure next month, it’s probably over 140,” said Tang Yongbo, CEO and founder of Tencent-backed Xiaodian which landed a combined RMB 450 million funds this year.
With so much capital flowing in, we have to wonder if the cash burning battle is imminent for power bank rental? The answers from founders of Xiaodian and Ankerbox, China’s top two power bank rental startups, varied, but they echoed in that subsidy-driven strategies is just means for customer education.
“Price war is just a means to educate the customers for them to adopt to the new kind service more quickly”, said Mr. Yuan. “When I was working for Taopiaopiao back in 2015, China’s online sales of movie tickets account for only 20% of the total box offices in China. After the subsidy war, over 80 percent of the tickets were sold through online channels now.”
Yuan further emphasized that the core problem would be how to enhance the user experience in terms of service accessibility, security, and more. “Subsidy is just a method, not the final goal.”
Tang shared Yuan’s opinion but adds more details. “From June 20, Xiaodian will partner with WeChat Pay and mini app to launch pilot testing power bank rental service which a fee of 1 fen (USD 0.014) from users. Through aggressive marketing plans, we want to have more users to know and try out this service.”
Xiaodian and Ankerbox represents two of the mainstream power bank rental service models in China. Xiaodian features fixed charging stations, which are placed in public places including restaurants, billiard rooms, KTVs, and subways. On the other hand, AnkerBox allows users to rent portable power banks which users can take with them and return to other power stations.
“Different models have their own advantages and would find their most suitable application under different scenarios. Still, I think the core problem still lies in the user experience issues I talked about earlier,” said Yuan.