New Zealand team-building, fundraising, new launches... Go strive, go make mistakes, go fall, go triumph in 2019 | FreeS Fund Chalkboard · January

On our first day back after the holiday, we're rolling out the January edition of the FreeS Fund (FREES FUND) newsletter, sharing the latest updates with friends who have long followed and supported us:

• FreeS Fund invested in coffee brand Saturnbird Coffee's Pre-A round, Jiuzhou Yunjian's new round, and Aobei Environmental Protection's angel round.
• FreeS Fund took a team trip to New Zealand — going further together.
• FreeS Fund was named to "Top 30 Best Early-Stage Investment Institutions of 2018" and "Top 30 Best Early-Stage Post-Investment Service Institutions of 2018."

We're also sharing good news from the FreeS family:

• Deep tech: General Secretary Xi Jinping visited Tianjin for inspection and watched a product demonstration by EFY Intelligent Control; the turbopump passed medium testing, bringing Jiuzhou Yunjian's Lingyun engine development another step forward; Silicon Valley tech company visionICs partnered with BAIC Group's new energy division to establish an autonomous driving joint lab; NextVPU showcased the computing power of its N171 visual processor chip at CES 2019; Shangyue announced partnerships with Alibaba Cloud and Lianjia.
• Consumer: Huasheng Haoche reached strategic partnerships with Luyang District Government and PICC; Three Squirrels launched a new beverage product called "Second Brain."
• Honors: Club Factory ranked in the global top 10 shopping apps by downloads in 2018; Bluepha co-founder Teng Li was named to MIT Technology Review's "Innovators Under 35 China"; Chicecream and Plant N' Joy made the "New Artisan 100" list; Chicecream and Saturnbird Coffee were featured on "Chinese Food and Consumer Startups to Watch in 2018."

In the year ahead, FreeS Fund will continue to stay grounded and push forward, while staying curious about the unknown — always looking forward to encountering innovation and the extraordinary.

FreeS Fund News

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New Investments

▍FreeS Fund invests in coffee brand Saturnbird Coffee's Pre-A round

Specialty coffee brand "Saturnbird Coffee" recently completed a Pre-A round of funding in the tens of millions of RMB, with FreeS Fund as the investor. The proceeds will be used for e-commerce channel expansion and content operations.

Saturnbird Coffee's approach is to extend the drinking scenarios for specialty coffee. Through equipment improvements, even coffee novices can brew pour-over with consistent flavor. The company went further by co-developing LABS (Lossless Aroma Brewing System), which extracts specialty coffee into crystalline powder — easily soluble in cold or hot water or milk, while preserving the coffee's aroma and flavor. With portability, specialty coffee can now enter homes, offices, and even travel and outdoor scenarios. (See coverage: [36Kr] Exclusive | Coffee brand Saturnbird Coffee completes Pre-A round in the tens of millions, becoming top domestic coffee brand on Double 11 within two months of launch)

▍FreeS Fund invests in Jiuzhou Yunjian's new round

Recently, Jiuzhou Yunjian completed a new round of funding in the tens of millions of RMB, with FreeS Fund — its angel round investor — continuing to back the company. The proceeds will be used for company operations and R&D of liquid rocket engines and liquid propulsion systems.

Founded in 2017 as a private commercial aerospace company, Jiuzhou Yunjian focuses on developing liquid oxygen-methane engines for commercial launch vehicles. In just over a year since its founding, the company has completed the development and testing of all component-level products for its Lingyun liquid rocket engine (12-ton thrust). In January 2019, it completed China's first commercial aerospace turbopump test, marking that the Lingyun engine had broken through all key technologies and was entering the assembly and testing phase. (See coverage: [Jiuzhou Yunjian] Jiuzhou Yunjian completes new round of funding in the tens of millions)

▍FreeS Fund invests in Aobei Environmental Protection's angel round

Waste sorting and recycling platform Aobei Environmental Protection has completed an angel round of funding in the tens of millions of RMB, with JD.com and FreeS Fund as investors. Founder and CEO Yongyin Yang said the proceeds will be used for business expansion and team building. Previously, Aobei Environmental Protection had received seed funding from FreeS Fund.

Currently, Aobei Environmental Protection targets two types of scenarios: enclosed and open. The former includes schools, government agencies, and public institutions — tightly managed and easy to implement, but mainly serving an educational role in early stages. The latter includes communities and villages with weaker management, which are slower to get off the ground. Aobei Environmental Protection sets up self-service drop-off points in communities — unmanned spaces of about 20 square meters, open 24/7 for members. The team holds patents for both smart hardware and software. (See coverage: [36Kr] Exclusive | Aobei Environmental Protection receives angel round of tens of millions from JD.com and FreeS Fund, becoming a waste recycling educator starting from source separation)

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FreeS Fund's team trip to New Zealand — going further together

What a team means is going further together.

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In January 2019, we flew to the Southern Hemisphere, to New Zealand — where every glance up or down looks like a desktop wallpaper.

It felt like someone hit fast-forward — in seven days, we lived through all four seasons of New Zealand, weathering storms and catching rainbows together. We took helicopters over snow-capped mountains and trekked across glaciers, step by careful step. On this road less traveled, we had each other for company from start to finish. We drank and talked by the lake in Queenstown. The night and the wine were intoxicating, yet we stayed sober enough to remember the honest words our colleagues shared. We witnessed courage and personal breakthroughs — standing on that bungee platform, hearts pounding out a million reasons to back out, yet pushing through the fear, teeth clenched, inching forward, then leaping.

Together, we can have fun and grow.

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Beyond the fun, we also held a year-end review — laughs, tears, and all. The highlights:

• People are always the most important factor; get the people right, and everything else follows.
• Focus on long-term value and trust in the power of compounding — over a long enough time horizon, consistently doing the right things in one direction produces results beyond imagination.
• For 2019: think independently, keep experimenting, and keep doing what's right rather than what's easy.

Absolutely one-of-a-kind black tees in the world.

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We explored the world together, and along the way, rediscovered ourselves — or rather, how our colleagues saw us. The human lucky charm. The hermit crab. The party animal. The walking encyclopedia. The human recommendation engine. The schemer (though they'd never admit it). The seasoned driver. The model worker. The little sun. We're all different, and together, we're differently wonderful. Here's to going further together in 2019.

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FreeS Fund in the News

▍FreeS Fund Named to "Top 30 Best Early-Stage Investment Firms of 2018" and "Top 30 Best Early-Stage Post-Investment Service Providers of 2018"

On January 15, 2019, Pencil News hosted the "Pencil News · Truth Conference" and its 2018 "Truth List" awards ceremony in Beijing. The rankings followed objective and fair principles, aiming to reveal the true state of the industry and identify the most influential and promising investment firms and innovative companies. FreeS Fund was named to both the "Top 30 Best Early-Stage Investment Firms of 2018" and the "Top 30 Best Early-Stage Post-Investment Service Providers of 2018." (See: [Pencil News] Pencil News Truth List — 2018 Investment Firm Rankings Unveiled)

Perspectives from FreeS

▍Li Feng: Identifying Scale Effects and Network Effects in "Model Innovation"

The models that burned through the most cash and attracted the most investment were model innovations — finding something completely new that no one had done before. These tended to be internet plays, because the opacity and uncertainty made people willing to bet. Bet right, and winner takes all; bet wrong, and you lose everything.

The challenge now is that many of these businesses are no longer purely internet-based. So "model innovation" doesn't necessarily deliver real scale effects. And even when there are genuine scale effects, that doesn't guarantee network effects.

Scale effect means: if I'm number one, if I can just get big enough, if I can reach a positive feedback loop, I'll win it all. Network effect means: the bigger I get, the better I become. Search engines, for example — the more people use them, the more accurate they get, because every user is training the engine.

Or just think of it as one question: does getting bigger automatically make it better, and does being better automatically make it bigger? Take bike-sharing — people used to think it had network effects, but a lot of what happens in that business doesn't actually qualify. (See: [Cyzone] 9 Top Investors Debate 2019: What's the Next Big Thing?)

▍Li Feng: Greater Concentration, Fewer Giants

China is going through what Japan and the US both experienced — the shift from industrial powerhouse to consumption-driven economy. Fewer people will take on heavy debt to buy homes, and the one to two hundred million new urban residents from continued urbanization will create fresh incremental consumer markets. Unlike Japan and the US, China now has information technology and data technology as tailwinds. This means we can produce not just small-but-beautiful companies, but also giants that grow faster and larger than their Japanese and American counterparts did at similar stages. The concentration may be higher; the number of giants, fewer.

For technology innovation, the priorities are: first, balance technical capability with commercialization. Second, avoid restructuring industry chains if possible — instead, add value to existing chains, otherwise capital burn becomes too high. Third, identify the largest possible commercial application. And fourth, build real technical moats so you don't get overtaken by followers in the same direction. (See: [36Kr] We Talked to 20 Top Investors About 2019: Opportunities and Brutality, Certainty and Uncertainty)

FreeS Fund Portfolio Updates

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Deep Tech | President Xi Jinping Visits Tianjin, Views EFY Technology Demo

On the afternoon of January 17, 2019, the General Secretary visited the Zhongguancun Science Park Collaborative Innovation Exhibition Center in Tianjin's Binhai New Area, where he watched a demonstration of EFY Technology's collaborative intelligent control drone swarm and heard founder Junqi Qi report on the development of drone flight control technology, its applications, and the company's R&D progress.

The General Secretary fully affirmed EFY Technology's innovative spirit and entrepreneurial passion, remarking: "Listening to this young man, I feel all his potential can be mobilized."

Qi said the General Secretary's personal care and tremendous encouragement for frontline entrepreneurs in the intelligent technology sector has strengthened the company's resolve and confidence in independent innovation. The entire team is committed to working with full dedication, accelerating the building of an intelligent manufacturing enterprise, using technology iteration to drive operational upgrades, and contributing to China's high-quality development. (See: [SDIC Unity Capital] President Xi Jinping Inspects SDIC Unity Capital Portfolio Company)

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Deep Tech | Jiuzhou Yunjian's Lingyun Engine Turbopump Passes Media Test

In early January 2019, the co-axial turbopump — a core component of Jiuzhou Yunjian's "Lingyun" engine (12-ton thrust) — successfully completed cryogenic media testing. The test verified the accuracy of turbopump rotating-stationary component clearances, the multi-condition adaptability of sealing, bearing, and axial force designs, and captured key performance parameters. Throughout the test, turbopump speed, pressure, and temperature curves remained stable. Post-test inspection showed normal conditions, achieving all test objectives. (See: [Jiuzhou Yunjian] Turbopump Passes Media Test! Lingyun Engine Development Continues Momentum)

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Deep Tech | Silicon Valley's visionICs Partners with BAIC Group on Autonomous Driving Lab

During CES 2019, BAIC Group and Silicon Valley technology company visionICs established an autonomous driving joint laboratory to develop next-generation multi-sensor fusion autonomous driving systems centered on solid-state LiDAR.

LiDAR is a critical perception component in autonomous driving systems, enabling real-time centimeter-precision 3D scanning of surroundings with clear advantages across multiple driving scenarios. However, traditional LiDAR suffers from significant drawbacks in cost, reliability, and power consumption, making it difficult to deploy in mass-production vehicles. The new generation of all-solid-state LiDAR applies the same phased array radar principles used in the J-20 fighter jet. Autonomous driving systems built around solid-state LiDAR can surpass current camera-and-millimeter-wave-radar-based production systems in performance, cost, and reliability. (See: [Securities Daily] BAIC Group Boosts Autonomous Driving with Solid-State LiDAR)

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Deep Tech | NextVPU Showcases N171 Vision Processor Chip Computing Power at CES 2019

On January 8, 2019, at CES 2019, NextVPU showcased the computing power of its N171 vision processor chip.

The N171 vision processor features an industry-leading deep neural network engine, capable of supporting several trillion operations per second. At this year's CES, the N171 was demonstrated primarily in ADAS and security surveillance applications, showcasing its world-leading computing power for high-speed moving objects through two real-time detection capabilities: depth estimation and pixel-level semantic segmentation.

Also on display alongside the N171 was NextVPU's star product — the Angel Eye smart glasses. Based on cutting-edge computer vision and AI technology, these glasses convert visual information into audio to assist visually impaired individuals in perceiving the world and navigating their surroundings. Angel Eye represents perhaps the "warmest" application of combining two of the most advanced technologies: artificial intelligence and computer vision. (See: [NextVPU] NextVPU Wraps Up a Successful CES 2019 — See You Next Year!)

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Deep Tech | Shangyue Announces Partnerships with Alibaba Cloud and Lianjia

Recently, Shangyue announced that it has become an Alibaba Cloud partner and simultaneously an Alibaba Cloud middleware ISV partner. Shangyue will work closely with Alibaba Cloud on SaaS services, leveraging Alibaba Cloud's technology and products to advance the digitalization and online transformation of enterprise procurement. (See: [Shangyue] Shangyue Becomes Alibaba Cloud Partner, Driving Digital Transformation in Enterprise Procurement)

Separately, Lianjia signed a cooperation agreement with Shangyue to build a procurement internet platform. Through this partnership, Shangyue will help Lianjia's procurement system connect with suppliers and major e-commerce platforms via its procurement middle-platform and SaaS applications, enabling real-time online procurement operations and driving digital transformation of Lianjia's procurement business. (See: [Shangyue] Lianjia Signs with Shangyue to Build Procurement Internet Platform)

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Consumer | Huasheng Haoche Reaches Strategic Partnerships with Luyang District Government and PICC

On the afternoon of January 9, 2019, the strategic cooperation signing ceremony between Luyang District Government and Huasheng Haoche was held at the Luyang District Government Affairs Center.

As an emerging unicorn in China's auto sales sector, Huasheng Haoche has been driving transformation in the automotive new retail industry since its founding in 2015, continuously innovating products, technology, and services to address pain points in the sector, promote consumption upgrades, and become a significant force in advancing the healthy and rapid development of China's automotive new retail industry. Luyang will provide Huasheng Haoche with new opportunities, offering quality resources, policies, support, and services. (See: [Luyang Investment Online] Partnering with "Huasheng Haoche," Luyang Adds New Force to Automotive "New Retail"!)

On January 10, 2019, Huasheng Haoche and PICC, China's largest non-life insurance company, signed a strategic cooperation framework agreement in Sichuan, formally establishing a comprehensive strategic partnership. The collaboration aims to integrate innovative auto insurance services and extended warranty products with automotive new retail, achieving greater complementary strengths and resource sharing to protect Huasheng Haoche vehicle owners. (See: [Global Times Online] Huasheng Haoche and PICC Reach Strategic Cooperation to Jointly Protect Vehicle Owners)

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Consumer | Three Squirrels Launches New Beverage "Second Brain"

Second Brain Mixed Nut Dual-Protein Coffee Milk — in Three Squirrels' vision, this is a functional leisure beverage targeting young consumers and represents the company's strategic product for expanding into the beverage category. It went on sale online on January 13.

"On the surface it looks like cross-category expansion, but in essence it's the result of Three Squirrels' deep cultivation of nuts and continuous innovation." Zhang Liaoyuan defined 2018 as the founding year of a new era, and through iterative upgrades, Three Squirrels discovered a new "five-in-one" business model, creating good products that integrate flavor, freshness, and fun with a distinctive Squirrel character. (See: [Food Panel] Unboxing | First Look at Three Squirrels' First Beverage New Product, Competing with Red Bull, Nestlé, and Six Walnuts!)

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FreeS Fund Portfolio Awards

▍Club Factory Ranks in Top 10 Global Shopping Apps by Downloads in 2018

On January 17, 2019, data analytics firm Sensor Tower released the top 10 global shopping apps by downloads in 2018, with Club Factory making the list alongside Amazon and AliExpress. (See: [Baijing Chuhai] 2018 Shopping App Download Top 10 Released: Shopee Ranks Fourth Globally, Just Behind AliExpress)

▍Bluepha Co-founder Li Teng Named to MIT Technology Review's "Innovators Under 35 China"

Since 1999, MIT Technology Review — the world's longest-running and most influential emerging technology business publication — has annually selected a group of scientists, researchers, and tech entrepreneurs under 35 who demonstrate the greatest innovation and impact. They are inventors, entrepreneurs, visionaries, humanitarians, and pioneers. This is widely known as the MIT Technology Review "Innovators Under 35."

On January 21, 2019, the 2018 China region winners were officially announced. Dr. Li Teng, co-founder of Bluepha, was named to the list as a "Visionary." (See: [Bluepha Lab] Bluepha Co-founder Li Teng Named to "Innovators Under 35 China")

▍Chicecream and Botanist Named to "New Artisan 100" List

China's first authoritative new artisan list — the "New Artisan 100" — was officially released in Beijing on January 4, 2019. The list was jointly published by Wu Xiaobo Channel, Fudan University, JD Big Data Research Institute, Zero2IPO, Qingbo Big Data, and Longxin Research Institute.

Brand selection criteria covered four dimensions: first, products and brands that evoke personified associations; second, brands serving consumption upgrades and the new middle class; third, capability for large-scale production; and fourth, sales performance between 5 million and 3 billion RMB. Chicecream and Botanist were both named to the list. (See: [China Daily Online] China's First Authoritative New Artisan List Released in Beijing)

▍Chicecream and Saturnbird Named to "2018 Notable Chinese Food & Consumer Startups" List

On January 15, 2019, FoodPlus released its annual list of 2018 notable Chinese food and consumer startups, with Chicecream and Saturnbird both making the cut. The list was compiled based on FoodPlus's observations and research into food consumer goods and food entrepreneurship, with emphasis on the company itself, its fundamentals, its team, and its approach and angle for entering the market. (See: [FBIF Food & Beverage Innovation] 2018 Notable Chinese Food & Consumer Startups (Part 1))

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FreeS Fund Perspectives

▍IceKredit's Gu Lingyun: Winter Has Arrived; Fintech Companies at Series B and Beyond Have Better Odds

The foundation of risk control — data — will ultimately be consolidated and integrated by the state. On the technology-driven risk control front, I don't think many players will survive. Perhaps two or three, maybe three or four cross-industry players, and possibly one dominant player per vertical industry. For example, in the express delivery sector, there might be one institution that deeply understands express delivery data and can build a scoring system based on that industry, which could then be applied across other domains.

Entering the second half of 2018 and the economic downturn, I personally believe that in the fintech track, companies that have reached Series B or C, proven their business models, and emerged as leaders in their sectors have better odds. Because we've grown together, there's greater trust. (See: [01 Caijing] IceKredit's Gu Lingyun: Winter Has Arrived; Fintech Companies at Series B and Beyond Have Better Odds | Weapons Record Interview)

▍AppAdhoc's Wang Ye: Innovative People Will Receive Both Material and Spiritual Rewards

The internet industry's dividend period is fading. Product design, brand building, user acquisition, customer acquisition, user activation, and monetization have become top concerns for internet companies and traditional enterprises going online. Major internet giants are now establishing growth hacker labs — little known to the outside world, but receiving significant internal attention.

If projects can be tested and their scientific validity demonstrated, decision-making risks can be reduced and even growth hacker phenomena can be created. Over time, a company's internal innovation capacity improves, and those who excel at innovation will receive both material and spiritual rewards. (See: [TMTpost] Betting on A/B Testing, This Former Google Engineer Wants to Truly Bring "Growth Hacking" to China)

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