(Yicai Global) Oct. 22 -- The industrial internet will be a cyclical investment opportunity for the next decade, according to Zhu Xiaohu, a well-known Chinese venture capitalist and managing director of GSR Ventures.
While service startups are not as valuable as consumer internet firms, their capital efficiency is much higher than that of the consumer internet, so they should ultimately create more value for investors, Zhu said in an interview with Yicai Global at the World Internet Conference in the eastern Chinese city of Wuzhen. He previously grasped investment opportunities in the consumer internet era.
Take video conferencing software company Zoom and ride-sharing business Uber as an example. Uber now has a market value of almost USD40 billion, and Zoom has a market value of more than USD20 billion, but Uber cost USD15 billion before listing, and Zoom only financed USD130 million before listing. So, their capital efficiency is completely different, Zhu said.
"In the past decade, service company startups have generated more investment returns for US venture capitalists than consumer internet startups," he said. "Over the past 12 months, among listed companies with a listing value of USD1 billion, service company providers far outweigh consumer internet firms in terms of market performance."
Service company market opportunities should not be generalized. The openings should be looked at from the horizontal and vertical levels. The horizontal level includes cloud services, standard performance, and general technology, where startups have little chance. But at the vertical application level, many big companies do not do it themselves, leaving opportunities for startups, Zhu noted.
"Players in this field must be wary of price wars, and must not use the consumer internet-oriented approach to do corporate services," Zhu said. "Service companies must have customers willing to pay. Only corporates services where clients are willing to pay are good services."
There is no shortage of money in the market, especially US dollar funds. But everyone still complains of a 'capital winter,' which suggests that many projects are too bad, Zhu said.
"This is still a good opportunity for business deployment," he said. "It will be a great chance for investors and startups if they seize the technology dividend and use the internet to promote industry transformation and upgrade."
Editor: Tang Shihua