Building a Solid Financial Foundation, I Took the Price War to My Rivals' Home Turf | FreeS Talk
The CEO fights on the front lines; the CFO guards the bottom line.
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What Does Financial Health Mean for Startups?
At the "CEO Talks" series event co-hosted by FreeS Fund and Baichanghui on August 19, Baichanghui CEO Shen Wei and former Qunar president Sam Sun had an in-depth conversation, sharing financial health tips for early-stage companies and hard-won lessons from going toe-to-toe with giants in price wars.
Sam Sun brings over two decades of experience in finance and capital markets. He previously worked in audit at KPMG, and served as CFO and president of Qunar from January 2010 to September 2015. He is now CEO of Beijing Ruipu Education Technology, and serves as audit committee chair and independent director at Fang.com, Yirendai, and CAR Inc.
The "CEO Talks" series continues this week. If you're interested in "How Startups Can Avoid Cash Management Pitfalls," come hear from Haizhou Jiang, co-founder of Qidian Financial Services. Click "Read More" at the end of this article to register.
Here's what you'll learn from Shen Wei and Sam Sun's conversation:
- The right time to hire a CFO is around your Series C or when you're gearing up for IPO.
- Build a financial forecasting model using business-language metrics like user numbers, traffic, and pricing — then spend 3-6 months refining it.
- Bring in professional consultants as advisors early on; save institutional compliance audits for later stages.
- Put expiration dates on promises like loyalty points — don't make perpetual commitments just to keep customers happy.
- Going public is a high-stakes leap with genuinely low odds of success. Employee stock options need early attention.
- When fighting a price war, take the battle to your opponent's home turf.
↓ Full breakdown below ↓
Former Qunar President Sam Sun: How to Build Rock-Solid Financial Foundations Behind the Frenzy of Price Wars
Source / Baichanghui, WeChat: baichanghui666
Edited and compiled by / Baichanghui, FreeS Fund
After Series C, You Need a CFO
▍Shen Wei: I'm co-founder and CEO of Baichanghui. Before this, I led mobile operations at eLong. Sam and I didn't know each other personally back then, but we were "frenemies" for three or four years. Today, Sam will share the financial challenges he faced as an executive at Qunar and later as a founder, along with the lessons he learned.
First question: For early-stage and growth-stage companies, when do you need to bring in a CFO? And what does a CFO's scope of work cover?
▍Sam Sun: Companies typically hire a CFO around Series C or when they're preparing to launch an IPO — relatively late-stage, in other words. I personally joined Qunar right after they completed their Series C.
Generally, a CFO handles financial and accounting operations, including reporting and tax, plus some legal and IR (investor relations) work, along with investments, M&A, and related activities. If the company has substantial cash on hand, the CFO may also oversee treasury management.
Another area that's increasingly important is business data analytics. Whether this falls under the CFO's purview? That's up for debate. I believe it should. Because business analytics can never be fully divorced from financial figures — things like profit, customer acquisition costs, and so on.
▍Shen Wei: What kind of help can a CFO typically provide?
▍Sam Sun: A CFO's contributions fall into two categories: external and internal.
First, what they bring from the outside.
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Capital operations expertise — investments, M&A, and so on. Early-stage companies rarely need this, but mid-to-late-stage companies do, and it's hard to cultivate internally.
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The ability to work with investors. Early on, the VCs you deal with tend to know your business and industry well. But when you're preparing for IPO, the investor universe suddenly expands to include all kinds of institutional investors, sell-side analysts, and so on. They won't have the deep familiarity that VCs who've done their homework possess. At that point, you need a CFO who can bring them up to speed quickly.
Second, internal management functions.
A CFO helps strengthen budgeting, accounting, tax planning, and related functions. These capabilities usually exist already, just with gaps. In the early days, those gaps don't matter much for business growth. But in later stages, whether your accounting is accurate or your tax planning is sound becomes increasingly consequential. Bringing in an experienced CFO at that point to coordinate these things can elevate the company's overall operations.
▲ A CFO can help with capital operations and strengthen internal management.
▍Shen Wei: So what you're saying is, early on, if you're in a high-growth sector and the CEO can tell a compelling story, it's still relatively easy to raise money on favorable terms. But in later stages, once the story's been told and it's time to execute, you need to lean more on numbers and financial sophistication for capital operations — that's when you need a CFO. Especially in investment and financing, CFOs are most professional at the PE stage, where they can interface directly with investors.
▍Sam Sun: That's roughly right. Though companies grow gradually, and it's hard to pinpoint a definitive moment when you absolutely must bring in a CFO from outside.
The finance managers or controllers who join early, if they're quick learners with solid fundamentals and deep familiarity with the business, can grow alongside the company and help with many things during fundraising. It's just that some of the capabilities I mentioned are hard to develop internally.
Build Your Financial Model in Business Language, Then Refine It Over 3-6 Months
▍Shen Wei: In China's venture capital market right now, CFOs are a "scarce species." As a company grows, how does a narrowly defined finance function evolve into a much broader finance and related functions organization? How do you build that team?
▍Sam Sun: Let me share from my own experience. I joined Qunar in 2010. They had just completed their Series C, had about 100 employees, and the finance team was four people handling accounting, treasury management (though there wasn't much to manage), and so on. I faced this exact question: how do you gradually build out the finance team?
Frankly, the biggest pressure on startups is that you don't know how big the company might become, or what survival crises lie ahead. Some face greater crises — they're still burning cash, and once it's gone, who knows if the company survives. Others are in better shape — they have substantial bank deposits, or are already profitable.
Every company's situation differs, but in every case, the business itself matters most. After all, success doesn't come from having great finance; it comes from great business. So a CFO needs strong strategic sense and prioritization. I realized, for example, that Qunar urgently needed to build out its legal function, because without it, we'd start holding back the business.
▲ For startups, business development is unquestionably the priority; don't burden yourself with excessive pressure to formalize finance too early.
Startups don't need to rush into full financial formalization. In the early days, you can stick to revenue forecasts and skip expense and profit projections for now. Otherwise, your business team ends up spending too much time meeting your finance requirements, leaving less time for actual business work. Take it step by step. After six months or a year, once the company is bigger and the business direction clearer, you can start doing more comprehensive forecasting.
When I joined, much of Qunar's business was still experimental, still feeling its way forward, with a lot of uncertainty. I proposed building financial forecast models from the business perspective. Typically, finance people build forecasts starting from what they know best — Excel spreadsheets — calculating revenue, costs, expenses, income tax, net profit or loss. But I saw two problems with this approach:
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If finance builds spreadsheets using their own familiar language, the forecast will likely disconnect from the business teams. You list out administrative expenses, selling expenses, and ask business people to fill them in — but they won't understand what administrative expenses or selling expenses even mean. You need to use business language: this is the travel budget for so-and-so's department, this is the payroll for such-and-such's department. (Of course, don't ask business people to fill in payroll numbers.)
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When a company is still early-stage, finance needs to be clear about the business purpose of budgeting. What startups first need to know is their revenue growth rate and business growth rate — this is also what investors care most about during fundraising.
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After finishing forecasts, you need to constantly look back and keep checking the gap between projections and actual results, continuously refining the mathematical models used for forecasting. These models include user numbers, traffic, pricing, and so on. Through three to six months of adjustments, the models gradually become accurate. You don't need to add headcount yet; only when you need to do full forecasts should you consider whether to hire dedicated finance staff for this.
In short, as CFO, you need to understand the company's business direction and pace, then based on your own judgment, gradually add newer, more formalized elements into day-to-day finance work, slowly expanding the team.
Hire the Finance Director First, Then Build the Team
▍Shen Wei: Regardless of company size, a key part of the CFO's job is organizing and building the finance department. Generally speaking, what should the hiring sequence look like?
▍Sun Huihui: If possible, it's best to go straight to hiring at a relatively senior level — a finance director or tax lead.
I tend to make a leap and hire the finance director once the company can handle some basic functions — say, when there's already a cashier and an accountant handling bookkeeping. At this point the team isn't fully built out, so they'll need to do some hands-on work themselves while also starting to hire others. The upside is that a team built by them will be more stable, avoiding the risk of adding layer by layer.
There's another point worth noting. Over years of recruiting and leading teams, I've noticed that many CFOs, when facing urgent tasks, think about just doing it themselves to get it done quickly. But we should actually try to restrain that urge, pause, and consider how demanding the task really is in terms of time and quality.
▲ A team recruited and built by the finance director themselves can maintain better stability.
Not all work needs 100-point quality. From a back-office management angle, I use every task as an opportunity to think about who I can train, who I can test. For example, we had a finance manager whose previous work was accounting — they'd never done budgeting before. A budget-related task came up, and I gave it to them, gave them a week to try. They might do well, they might not, but you need to give them that chance. If it goes well, that means this person can be promoted or moved to a different role.
Do more of this kind of training and testing in normal times. Then when there really is a time-urgent task, you already have a clear grasp of where your team members' capabilities end, and you know who you can call on in a pinch. This applies not just to finance teams — I think every manager should think about this.
Bring in Professional Consultants Early, Save Institutional Compliance Audits for Mid-to-Late Stage
▍Shen Wei: I quite agree with your one-step approach of getting better people in place earlier.
Take my own example. Baichanghui, from its early development stage through to its growth phase, started with just one cashier and found an external bookkeeping company to help with accounts — very low cost, about 800 yuan per month, and we kept that going for over a year. After we did a new funding round, we needed to start getting compliant, and that's when problems hit. The financial statements had issues, and we had to redo all the finances from the past two-plus years. We found a financial audit firm to handle this, and the quote was over 200,000 yuan. All the money we'd saved before came back with interest. That was a painful lesson.
You also mentioned that the CFO should try to anticipate the company's current business situation as much as possible. This connects to another question: whether it's the U.S. SEC or China's CSRC, compliance review processes are extremely strict. Over a company's long growth journey, what advice do you have on compliance?
▍Sun Huihui: A few points to keep in mind.
Startups typically don't have enough resources and want to put limited resources where they matter most. This often leaves them facing a dilemma: on one hand, if you spend a lot of energy on strict compliance now and the company dies in a year or two, all that work was for nothing; on the other hand, if you don't care about compliance at the start and your business really takes off in two or three years, the cost of going back to clean up could be far greater.
I suggest startups think about it this way: in the early stage, hire an experienced professional consultant as a board member or advisor to make sure you don't dig yourself into a big hole. Some holes are unavoidable, but don't dig really big ones.
Take bookkeeping as an example. A startup can't hire a very senior finance director to do bookkeeping — that person won't stay. You have to use either an external bookkeeping company or hire relatively junior finance staff, and these people may lack experience, or not have clear direction, or even make mistakes without realizing it. At times like these, you need a consultant to come in monthly or quarterly, and if they spot a big hole, correct it promptly.
Further down the line, once the business reaches a certain stage, you need to seriously consider bringing in a professional institution for a health check.
▲ After its Series C, Qunar hired firms to conduct reviews from legal, tax, and accounting perspectives.
Take Qunar as an example. I joined in 2010, and in the second half of that year, we hired a law firm and an accounting firm to do three reviews — legal, tax, and financial accounting health checks — with the purpose of checking whether the company's current condition was suitable for a U.S. listing. On fees, law firms typically charge 100,000 to 200,000 RMB, accounting firms 200,000 to 300,000 RMB — all very normal.
This kind of health check shouldn't be done too early. If many of the company's businesses aren't yet fully formed, even if the firm tells you where the problems are, you can't fix them. You might even need to keep doing things the wrong way for business development's sake. And if a year or two later the business has changed significantly, you'd need another health check anyway.
When you're within a year or two of going public, you can bring in a professional institution for a health check. This means you'll need to operate according to the check's findings going forward. Problems discovered during the health check give you a relatively ample year or two to slowly correct and work through them.
Going Public Is a Leap Into the Unknown, and the Success Rate Really Isn't High. Which Financial Details Become Roadblocks?
▍Shen Wei: You've shared a lot of proactive preventive advice and guidance. During your time at KPMG doing audits, what negative or failed cases did you encounter?
▍Sun Huihui: At KPMG I came across many companies that felt they were about ready to go public and brought in accounting firms to do audits. Going public is a leap into the unknown, and the probability of success really isn't high. In every founder's mind, their company is already doing great, so listing should work. But in reality, companies often carry serious flaws. The path to going public isn't immediately passable — you might need to wait two or three years, fix some problems, and by then the gap between company valuation and the founder's imagination is often huge. All kinds of unfavorable consequences follow.
▲ Startups often underestimate the difficulty of an IPO.
From a financial accounting perspective, the problems I saw mainly fell in these areas:
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Social insurance, benefits, personal income tax and other items related to employee compensation. Startups are sometimes not fully compliant, initially thinking they'll save where they can. Then when the auditor comes before listing and says these need to be made up, the amount becomes astronomical and looks terrible on the financial statements.
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Employee stock options. Employee options basically don't involve company cash or cash flow, so they should be arranged early — don't keep putting it off. Sometimes founders don't want to issue options, preferring to wait until the company's listing prospects are clearer before planning. But by then employee mentality has shifted. When company valuation is relatively high, issuing options then means higher accounting costs.
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Making reckless or excessive promises in sales contracts, creating accounting headaches. When preparing rigorous financial statements ahead of an IPO, these promises create revenue gaps. For example, if you promise customers that the socks they buy will never wear out, and you'll replace them free if they do, that promise means you can't recognize the revenue now. So companies should revise these promises at the appropriate time, or add time limits — like giving loyalty points a two- or three-year expiration instead of promising they're valid for life just to make customers happy.
How to Win a Price War?
Shen Wei: That covers our "mutual respect" phase. Now for the "mutual destruction." We both worked as executives at first-tier OTA companies in China, right during the decade when the domestic OTA market was brutally competitive. Price wars transformed China's entire travel industry.
Price wars typically reinforce the positions of the top two players, while everyone from third place down gets squeezed out. For example, Tongcheng Travel's attraction ticket business has done fairly well, but their hotel booking business was completely crushed by the price wars back then.
The price war initially broke out between eLong and Trip.com Group. eLong's hotel booking transaction volume once reached about 80% of Trip.com Group's, even threatening its leadership position. But then a "bad boy" burst onto the scene: Qunar.
Qunar took an extremely aggressive approach, committing an order of magnitude more money than eLong to the price war. Qunar had a unique advantage: it captured the young consumer market and the mobile market. In the transition from PC to mobile internet, Qunar grew and improved faster than anyone — earning the respect of everyone in the industry and all its rivals.
At the time, I considered myself an industry insider, but I was somewhat puzzled by Qunar. Why engage in this suicidal price war? Burning through several billion yuan in a few quarters. It wasn't until I saw the final result that it suddenly clicked — this was a meticulously planned D-Day landing.
As CFO, how did you leverage the company's cash flow? How did you estimate market size? How did you achieve阶段性 growth, then continue telling a growth story to the capital markets and win support from major shareholders? How did you communicate with Wall Street investors? I believe you played an enormous role behind the scenes and shouldered tremendous pressure.
Sun Huihui: You're too kind. We wouldn't call it meticulously planned — we'd say this battle had to be fought, and while fighting it, we did our homework more thoroughly than others.
We had several considerations at the time, which I'll share.
Looking back at Chinese internet history, the earliest price war was between Taobao and eBay, around 2005–2006, though it wasn't consumer-facing but merchant-facing. eBay always charged merchants, while Jack Ma said he would make it easy to do business anywhere, promising not to charge merchants — and never to charge merchants. (This statement proved incorrect in hindsight; once you have a monopoly, you change your tune.) In the years that followed, price wars became increasingly frequent: group-buying sites in 2010–2011, then the OTA sector, and later ride-hailing, food delivery, and bike-sharing.
▲ When eBay entered China, it fought a merchant-facing price war against Taobao.
Price wars are something all startups encounter in their development. Whether on defense or offense, knowing how to fight them is a skill startups need to think through and master.
First, when fighting a price war, you must take the battle to the enemy's home territory. When Qunar fought its price war, our first consideration was that we didn't want an all-out price war. If you analyzed China's major OTAs at the time, Qunar had one major advantage: our flight business was already the largest and quite profitable. We never fought a price war in flights. Looking back today, what's surprising is that our competitors basically didn't fight us on flights either. So flights became our stable rear base.
Therefore, we chose to start with two- and three-star economy chain hotels, targeting eLong more directly. Later on, we focused more on high-end hotels, hoping to attack Trip.com Group's home territory. It's like war between two countries — you always want to fight on the other side's soil. That's the basic rule of price wars.
Second, fighting a price war requires extensive analysis. Consumers might only see the price war, but we had to think things through — the more detailed the analysis, the better. When we developed our internal rules and strategies for price wars, we broke things down by specific cities and demographics, by specific hotels — we wanted to segment as much as possible and not waste money.
Similarly, during the price war, we had to analyze whether cash-back offers and coupons went to existing or new customers. You need to be clear on the purpose of the price war: are you competing with rivals for new customers, stealing customers from competitors, or improving loyalty among existing customers? Depending on these purposes, the strategies for red envelopes and coupons differed. We looked at Trip.com Group and eLong's cash-back red envelopes and found some of theirs rather cumbersome — consumers had to jump through hoops to get the coupons. So we made it as convenient as possible; often instead of coupon rebates, we just cut prices directly.
Third, once you start a price war, don't waver — have conviction. Because the ultimate purpose of a price war is to build brand awareness, to get more users to know you and understand you. At the time, we invested corresponding funds in marketing to promote our red envelopes and cash-back offers, creating consumer perception that the price war was intense and they could benefit. The goal wasn't to calculate exactly how much money went to consumers, but to actually acquire users. Users could be acquired through actual red envelopes or through marketing.
Fourth, before the troops move, provisions go first — you need to know whether the capital markets will accept a price war. We were already a public company at the time and had communicated with public market investors. Their mentality was that they liked seeing an upstart challenge the established leader in a sector.
Capital markets often view this kind of strategy as aggressive, but plenty of investors can accept it. Their acceptance depends on whether the aggressive strategy produces results during execution. So as long as our price war could convince people that we were expanding our user base, grabbing market share, and growing faster than competitors — noticeably faster — the capital markets would accept it.
As long as business growth was strong enough and investors bought in, the stock price wouldn't drop, and might even rise. This also meant that if we really did lose money due to the price war and needed capital, we could relatively easily raise new funds through secondary offerings in the public market to support the price war.
▲ Price wars carry high risk; thorough market analysis is essential before acting.
In any case, a price war is a high-risk endeavor, because the end result has to show accumulated business value. If you stop the promotions, can you return to your pre-price-war position? Can you defend the newly captured market share and retain the newly acquired users? If you can't, the money was wasted.
Shen Wei: Excellent! Let me follow up: in a存量 market, price wars can usually grab some market share, but the cost is quite high. I sense Qunar cared more about the增量 market. How do you predict future增量 in an industry?
Sun Huihui: I wouldn't say we were particularly precise about this. But we did start paying attention relatively early to how large the hotel booking market actually was.
In 2011, our executives held a meeting specifically to discuss the hotel business. Many of us came purely from internet or tech backgrounds — complete outsiders to the travel industry — so we brought in employees with hotel and travel agency backgrounds to brief us.
At the time, we learned that the overall hotel industry structure was fairly stable: Trip.com Group was where it was, eLong was where it was, some economy chain hotels wanted to go direct — basically everyone had staked out their positions, and it seemed hard to attack anyone.
But half a year later, around April or May 2012, we realized our understanding of hotels had been somewhat off.
What alerted us to this was Meituan. Meituan had started its hotel business, booking hourly rooms, and had developed a lot of new hotel booking demand in third-, fourth-, and fifth-tier cities. For example, we generally assumed hotel bookings would be low during Spring Festival, but in the south, especially Sichuan, hotel bookings were hot during Spring Festival. The reason was probably that people weren't playing mahjong at home anymore — they just booked a hotel room to play mahjong. These new phenomena helped Meituan's hotel business develop very well, with rapid volume growth.
We began building our own ground sales team to conduct a comprehensive survey of the hotel industry, including many guesthouse businesses, since many guesthouses weren't registered as hotels.
I wouldn't say we arrived at any particularly precise projections, but our later registrations in the hotel industry were indeed two to three times higher than when we started in 2011. Additionally, hotels in those years were undergoing a shift from offline to online booking. As an online player, we stood to gain more from that红利. We focused more on various new developments in the industry, including moves by new entrants, to prevent ourselves from overlooking important but still small changes.
Shen Wei: I've had some dealings with Zhuang Chenchao, and I feel your team styles are basically consistent — constantly calculating, deducing, and reasoning with data. During the price war period, were investors comfortable with your strategy?
Sun Huihui: Some investors questioned a lot. I would have a very candid conversation with them, telling them this strategy carried risk — could they accept it? If after a year our business growth reached 100%, that would prove the strategy successful; if not, then there was a major problem with the strategy. I couldn't pound my chest and guarantee 100%, so we'd wait and see.
With this kind of communication, investors would feel that if doing business had 100% certainty, it wouldn't be doing business at all. By daring to set a 100% growth benchmark, we let investors check our quarterly reports quarter by quarter. Most investors, in a rapidly developing industry, are willing to grow alongside you.
About Baichanghui (WeChat: baichanghui666)
Baichanghui is a short-term event venue rental platform built on a sharing-economy model. Users can book gathering and event spaces across China through their phones. Whether you're looking for an art museum to host a product launch, a private villa for a team get-together, or an off-site to spark inspiration for your employees, you can find the right venue quickly and precisely here.
This Saturday (August 26), our "CEO Talks" series will feature Haizhou Jiang, co-founder of Qidian Financial. His topic: "How to Avoid the Cash Management Traps That Sink Startups." Click "Read More" at the end of this article to register.
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