Two joyous gatherings, spotlighted by People's Daily commentary, Forbes China's Best Venture Capitalist, and 50+ other awards... The past is prologue; the future holds promise.

峰瑞资本·January 6, 2020

Do what's right, not what's easy.

FreeS Fund's December newsletter. We want to share our latest updates with friends who have long followed and supported us:

FreeS Fund hosted offline events for portfolio CEOs: "FreeS Open Talk" and "FreeS Tavern."
FreeS Fund was named to Zero2IPO's "Top 50 VC Firms in China 2019," China Renaissance's "Top 10 Angel Institutions of 2019," and China FOF Research Center's "Top 50 Best Early-Stage Investment Funds in China 2019" (ranked 7th). We also received recognition from media outlets including Sansheng, 36Kr, Lieyunwang, and Qianbidao. FreeS Fund founding partner Li Feng was named to Forbes China's "Best Venture Capitalists" list and China FOF Research Center's "Top 100 Most Popular Founding Partners Among FOFs 2019."

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

Consumer: Three Squirrels surpassed RMB 10 billion in omnichannel GMV. "Three Squirrels Daily Nuts" won People's Daily Online's "2019 Ingenuity Product Award" at the 16th People's Choice Ingenuity Awards. As exemplars of new brands, Chicecream and Saturnbird were spotlighted by People's Daily Commentary.

Tech: Unity powered Coca-Cola's Christmas brand marketing. SoundAI Technology and Guoxin Technology launched an on-offline voice module, and jointly released with UNISOC a new AIoT solution. Nine Clouds Rocket received National High-Tech Enterprise certification.

Education: Onion Math completed its full-subject brand upgrade, officially rebranding as Onion Academy. Deer Music was selected for Apple's 2019 list of outstanding local apps and games, and opened its first experience store in Shanghai.

Enterprise Services: Shangyue partnered with Joyoung to launch the Joyoung Joy Mall. CAICT released the Graph Database White Paper and Basic Function Standards, with the Fermat Technology team contributing to its drafting.

Healthcare: Longwood Valley Medical received National High-Tech Enterprise certification.

Awards: In December, nearly 30 FreeS family companies collected 50+ awards, earning recognition from third-party institutions including People's Daily Online, The Washington Post, Sina, Cyzone, 36Kr, Lieyunwang, and Qianbidao.

In the context of innovation, the world moves at lightning speed. In the year ahead, we will continue to do what is right rather than what is easy, and look forward to constantly encountering innovation and the extraordinary.

FreeS News

FreeS Fund hosted offline events for portfolio CEOs:

"FreeS Open Talk" and "Tavern"

"FreeS Open Talk" is an intimate offline gathering for CEOs in the FreeS family. We invite experts who know their fields inside out, along with seasoned FreeS family CEOs, to share knowledge and practical experience on topics and directions our CEOs care about.

On December 29, "FreeS Open Talk" was held in Shenzhen, featuring ten founders. Standing at the tail end of 2019, the founders spoke candidly about their growth and struggles over the past year, as well as their thinking about the future of their companies. They were not only honest and truth-seeking but also generous in giving advice to one another.

"FreeS Tavern" isn't a specific venue — it's a mobile waystation built for FreeS family CEOs, with drinks and stories. Founders gather with Uncle Feng and other FreeS teammates for late-night conversations over drinks.

On December 15, "FreeS Tavern" came to Suzhou, where seven CEOs joined us for drinks and lively conversation. Two weeks later, "FreeS Tavern" opened for business in Shenzhen.

FreeS Fund recognized by Zero2IPO, China Renaissance, China FOF Research Center, and other institutions

In December, FreeS Fund received recognition from Zero2IPO, China Renaissance, China FOF Research Center, and other institutions. These weighty honors are also expectations. FreeS Fund will continue pressing forward in early-stage investment, staying research-driven and committed to long-term value.

FreeS Fund founding partner Li Feng named to Forbes China's "Best Venture Capitalists" and "Top 100 Most Popular Founding Partners Among FOFs 2019"

On December 30, Forbes released its "Best Venture Capitalists in China" list. FreeS Fund founding partner Li Feng was named to the "Top 100 Best VCs," ranked 30th. This ranking has run for over ten years, aiming to identify China's most forward-looking fund investors who deliver abundant returns. (See coverage: Forbes — Forbes China Releases "Best Venture Capitalists" List, Neil Shen Ranked First | VC List)

On December 8, the "2019 China FOF Annual Conference," hosted by China Venture Capital Committee and China FOF Research Center and organized by China FOF Research Center, concluded in Beijing, with the release of China FOF Research Center's 2019 annual honors. FreeS Fund was recognized by China FOF Research Center, receiving "Top 50 Best Early-Stage Investment Funds in China 2019" (ranked 7th); FreeS Fund founding partner Li Feng was named to "Top 100 Most Popular Founding Partners Among FOFs 2019." (See coverage: China FOF Research Center — China FOF Research Center 2019 Annual Honors List Released!)

FreeS Perspectives

▍FreeS Fund's Li Feng: In an era of growth, whoever is "fast" gets big; in an era of saturation, whoever is "good" gets big

What does the shift from growth to saturation mean? In an era of growth, whoever is "fast" gets big; in an era of saturation, whoever is "good" gets big. Being fast requires the efficiency and ability to quickly "translate"; being good requires efficiency and capability across the entire industrial chain.

Why do some companies that thrive in an era of growth falter in an era of saturation? Because in growth phases, you ride the market — whoever reaches users first, whoever captures mindshare first wins. But the second stage of upgrading requires efficiency and capability across the entire industrial chain. You need to squeeze out a drop of water at every link in the chain, so the product can become comprehensively better.

What does "good" mean? Why do users start caring about quality? Users all start from a place of not knowing, of trying things out. In 2011, when you bought a phone, you mainly looked at looks and price. Today, even women who hate hearing technical specs can rattle off several technical reasons for buying Huawei. They've become mature consumers who know how to judge product quality. (See coverage: iHeima — FreeS Fund's Li Feng: Following Cycles, Following Structure, Finding Long-Cycle Investment Opportunities)

▍FreeS Fund's Li Feng: The long-term value of retail brands is built on supply chain differentiation and efficiency

Looking at the outcomes, the long-term value of nearly all retail brands is built on supply chain differentiation and efficiency.

There are plenty of examples. Take Saturnbird. Many people think Saturnbird succeeded because of branding and marketing, but few notice that it actually solved the two most painful problems of instant coffee: first, you needed a stirrer, and second, you needed hot water.

To eliminate both the stirrer and the hot water requirement, they put enormous effort into production processes, achieving the solubility they have now while significantly improving flavor fidelity. That's the prerequisite that enabled their front-end marketing to work. (See coverage: Langchao New Consumption — Li Feng: Today Is the Best Era for Consumer Entrepreneurship)

▍FreeS Fund Partner Yongcheng Yang: No communications technology is better suited to China's national conditions and market than 5G

In the early stages of 5G commercialization, hardware equipment suppliers will likely be the primary beneficiaries. Applications and services built around 5G probably won't explode the way they did in the 3G and 4G eras — especially not in entirely new, massive-scale internet service formats and domains. This situation may persist for some time; we need sufficient patience and endurance to wait for new ideas to emerge, develop, and mature.

While 5G may not feel urgently transformative from an internet services perspective, the commercial deployment and operation of 5G networks itself is enormously significant for China's technology sector and national economy. It's a major long-term positive — there's no reason not to be optimistic. Moreover, on a global scale, no current communications technology is better or more suitable for China's national conditions and market than 5G. There's every reason to throw ourselves into it with enthusiasm. (See coverage: 36Kr — The First Year of 5G Commercialization: Which Startups Will Capture the First Wave of Dividends?)

▍FreeS Fund Partner Yongcheng Yang: We're Already a Manufacturing Powerhouse — How Far Are We From Becoming a Manufacturing Strong Power?

We may be a manufacturing powerhouse, but we're not yet a manufacturing strong power in the true sense. We must be clear-eyed about this.

Take 5G and automotive manufacturing as examples. We have two frequency bands: sub-6 GHz and millimeter wave — the range from several dozen GHz to several hundred GHz. We have certain advantages on the sub-6 GHz mobile handset side, but in the millimeter wave range, the US still holds absolute dominance. On 5G base stations, and on the fiber-optic communication chips that connect to backbone networks — particularly high-speed, high-performance chips — we remain heavily dependent on imports.

Chinese manufacturing must push deeper, advancing into high-performance components and critical technologies. Only then can we become a manufacturing strong power. (See coverage: Qianbidao — FreeS Fund Partner Yongcheng Yang: We're Already a Manufacturing Powerhouse — How Far Are We From Becoming a Manufacturing Strong Power?)

FreeS Fund Portfolio Updates

Consumer | Three Squirrels surpasses 10 billion RMB in omni-channel GMV

As of December 3, Three Squirrels' full-year 2019 transaction volume exceeded 10 billion RMB, hitting the "Squirrel 10 Billion Dream" target set back in 2014 one year ahead of schedule. It became the first and fastest domestic snack company to reach 10 billion scale. On December 15, "Three Squirrels Daily Nuts" received the 16th People's Choice Ingenuity Award for 2019 Product of the Year from People's Daily Online, recognized for its high quality, strict technical standards, and perceivable product value for consumers.

Since its founding in 2012, Three Squirrels has grown from a five-person Taobao shop to a listed company with over 3,800 employees, widely hailed as "China's first snack stock."

In the first half of this year, the company completed its historic transformation from a nut brand to a full-category snack brand. It is now evolving from an e-commerce platform into a digital supply chain platform enterprise, with a fresh positioning as a manufacturing-centric private-label multi-format retailer, continuing to provide hundreds of millions of users with high-quality, affordable, fresh, diverse, and convenient joyful snacks. (See coverage: Three Squirrels — Squirrel Headlines: Three Squirrels 2019 GMV Breaks 10 Billion!; Three Squirrels Official WeChat — People's Daily Online: "Three Squirrels Daily Nuts" Wins 2019 Product of the Year)

Consumer | As exemplars of new brands, Chicecream and Saturnbird get the nod from People's Daily Commentary

The rapidly rising new consumer brands of late mostly come from food & beverage, apparel, and beauty. Unlike traditional brands that emphasize offline presence and advertising spend, these "small but beautiful" new brands mostly built momentum through online e-commerce platforms, leveraging celebrity live-streaming, cross-brand collaborations, and KOL (key opinion leader) / KOC (key opinion consumer) live-sharing and product seeding to create viral buzz and bandwagon effects. Their personalized business philosophies and new marketing paradigms based on the internet and social media have sparked a transformation spanning supply chains, marketing models, and business thinking.

Selling the same product to different consumer groups is an art, and a familiar strategy for many traditional brands. But for new brands, selling similar products to the same demographic is equally savvy. New brands target increasingly segmented markets. Saturnbird delivers convenient "specialty instant" coffee to fast-paced urban white-collar workers, hitting the sweet spot of "a high-quality cup of coffee anytime, anywhere." Chicecream uses Chinese-style roof-tile design to evoke Chinese aesthetic sensibilities, riding the wave of guochao (China chic). Genki Forest, with its 0 sugar, 0 fat, 0 calorie positioning, caters to young people's health and wellness psychology... New brands have abandoned the pursuit of being everything to everyone, instead starting from narrow entry points to more precisely capture the demands of niche groups, then going deep vertically and doing it to the extreme. (See coverage: People's Daily Commentary — Chicecream, Saturnbird: Do You Know These 2019 Breakout New Brands?)

Tech | Unity powers Coca-Cola's Christmas brand marketing

During the Christmas season, Unity partnered with Coca-Cola's brand team to bring the Coca-Cola Polar Bear family — one of the world's most recognizable brand IPs — into the real world through AR. Users simply opened the app, pointed their camera at a product, and unlocked interactive animated content: snowball fights with the polar bears, an interactive 3D light and music show, and multi-scene AR experiences. They could also share content to social networks and participate in promotional activities. (See coverage: Unity Official — Unity Powers Coca-Cola's Christmas Brand Marketing)

Tech | SoundAI partners with Unisoc and NationChip to launch new products

On December 19, the "2019 Unisoc AIoT New Product Launch & Developer Summit" opened in Shenzhen. At the summit, SoundAI and Unisoc unveiled their jointly developed AIoT solution. Unisoc launched the Chunteng V5663, China's first highly integrated AIoT solution supporting Wi-Fi 5 + BT 5 + MCU, with SoundAI's SoundAI Azero multimodal interactive intelligent operating system built in. It provides an RTOS-based intelligent voice solution designed for a wide range of IoT applications, delivering a new optimal solution of low power consumption, low cost, and high performance for the AIoT sector.

The following day, SoundAI and NationChip combined their respective core strengths in chips and systems to launch the GX8008 — a new low-power, portable solution for the smart products market. This low-power online-offline hybrid module is built on NationChip's GX8008 AI voice processing chip, with SoundAI's multimodal interactive intelligent operating system Azero built in. Based on globally leading sound and AI fusion technology, it is open to enterprises, individuals, and third-party organizations, and serves as a dedicated module for intelligent front-end voice processing. (See coverage: SoundAI — SoundAI x Unisoc Jointly Launch Low-Power, High-Performance AIoT Solution Based on RTOS + Azero, SoundAI — SoundAI x NationChip Release Online-Offline Voice Module, Creating Portable Smart Product Solution)

Tech | Jiuzhou Yunjian and Longwood Valley Medical certified as "National High-Tech Enterprises"

Recently, Jiuzhou Yunjian and Longwood Valley Medical received "National High-Tech Enterprise" certification. This certification recognizes companies that sustain R&D and technological成果转化, develop core independent intellectual property, and base their business operations on these foundations. Jiuzhou Yunjian is currently the only Chinese aerospace company to master deep throttling engine technology and support rocket vertical recovery. Longwood Valley Medical applies AI across the full orthopedic clinical workflow, transforming orthopedic surgery from experience-based,轮廓化 procedures to standardized, precise, personalized, and intelligent ones. (See coverage: Jiuzhou Yunjian — Jiuzhou Yunjian Receives "National High-Tech Enterprise" Certification, Longwood Valley — Longwood Valley Honored with "National High-Tech Enterprise" Certification)

Education | Onion Math completes full-subject brand upgrade, officially rebrands as Onion Academy

On December 4, on its sixth anniversary, Onion Math decided to rebrand as Onion Academy. Onion Academy will work to become a full-subject online learning platform, offering courses across all subjects. In addition to math, physics, and Chinese, English and chemistry will launch soon. The Onion Academy app icon has been updated with a new logo and design style, and the "blue onion" will continue to accompany users in their learning lives. (See coverage: Onion Academy Subscription — Onion Math Rebrands as Onion Academy!Starting Today, We Offer Full-Subject Courses)

Education | Deer Music selected for Apple's 2019 Outstanding Local Apps and Games list; first experience store opens in Shanghai

On December 23, Apple released its "2019 Outstanding Local Apps" list, with Deer Music's "Deer Music Kids Piano" app among the selections. Apple noted that the app "hides music knowledge in fun levels, so kids learn while playing and fall in love with music. Kids follow the puppet through levels, from learning notes to practicing playing, gradually discovering the joy of music. With performance demonstrations by Shanghai Conservatory professors, this palm-sized music classroom is both professional and reliable."

Additionally, Deer Music has begun exploring offline. Recently, its first experience store opened in Shanghai, where instructors demonstrate playing techniques on-site. Deer Music has also launched a physical piano textbook that can be used in conjunction with the app. (See coverage: Apple — 2019 Outstanding Local Apps and Games List Released, Prepare to Be Inspired, Deer Music Official — Must Share!Shanghai's First Deer Music Experience Store Is Now Open!)

Enterprise Services | CAICT releases "Graph Database White Paper and Basic Function Standard," with Fermat Technology team contributing to drafting

On December 10, the China Academy of Information and Communications Technology (CAICT) released the Graph Database White Paper and Basic Function Standard. Fermat Technology's three co-founders — Lin Heng, Zhu Xiaowei, and Hong Chuntao — were part of the core drafting team for both the Graph Database White Paper and the Big Data Graph Database Basic Function Standard. The white paper and standard reflect the latest joint exploration by CAICT, Fermat Technology, and more than ten other enterprises on graph database standards, offering users a useful reference for evaluating product capabilities and selecting solutions, as well as guidance for building graph database systems. (See Fermat Technology's coverage: Important!CAICT Releases Graph Database White Paper and Basic Function Standard; Fermat Technology Contributes to Future of Graph Data)

Enterprise Services | Shangyue partners with Joyoung to launch Joyoung Yuegou Mall

On December 28, Beijing Shangyue Network Technology Co., Ltd. and Joyoung Co., Ltd., a leading Chinese small appliance brand, jointly launched Joyoung Yuegou Mall, an enterprise procurement e-commerce platform. The platform will help Joyoung digitize and visualize its procurement management, popularize agreement-based purchasing, and create a new e-procurement experience. (See Shangyue's coverage: Joyoung Partners with Shangyue to Launch Yuegou Mall, Pioneering Digital Procurement Innovation in the Home Appliance Industry)

FreeS Fund Portfolio Wins Awards

In December, nearly 30 FreeS Fund portfolio companies collectively received over 50 awards from institutions including People's Daily Online, The Washington Post, Sina, Cyzone, EqualOcean, Lieyunwang, and Pencil News.

(Swipe to see more 👉)

Perspectives from the FreeS Fund Community

▍Club Factory's Jialun Li: When We Were at 5 Orders a Day, We Were Already Using a System Built for Hundreds of Millions of SKUs

Why did we decide to do cross-border e-commerce, and why did we choose the platform model? And why has our service actually turned out pretty decent?

Because we realized the key was to replace every link in the supply chain with our own systems, extract the data from each, and connect it all through a knowledge graph. Once the data is connected, you can optimize everything centrally and get every link moving in coordination — that makes the supply chain incredibly efficient.

How hard is this, and why can't many people pull it off? Because they can't commit to it. In the early days, plenty of things can be done by people — why bother building a system?

Before a data system is built, it's hard to say exactly how much efficiency it will improve. You only know after it's done. At the very beginning, we were selling 5 orders a day in the US. We could have just handled it manually, but we insisted on running it through the system. That WMS system hasn't changed from day one. It's as if, when we were at 5 orders, we were already using a system built to handle hundreds of millions of SKUs. (See Langchao Xin Xiaofei's coverage: Reaching Top 3 in Indian E-commerce in Two Years, Club Factory's Jialun Li: "Borderless E-commerce" Is a Bigger Business Than Taobao)

Shangyue's Miao Feng: What Roles Shape the Industrial Internet Landscape?

Here's how I categorize the industrial internet track. First, there's upgrading traditional industrial chains, which falls into three types. The first is large e-commerce platforms like 1688, whose value comes from facilitating transactions through information matching. Transactions themselves split into two kinds: platform-based and self-operated. Platform-based transactions form a stable structure because the entire transaction chain is very long, which gives rise to so-called B2B transaction companies. These further divide into several types: companies that were already in the B2B business, and those shifting from C-side supply chains to B-side.

Another category of traditional industrial chain upgrading is traditional B2B companies going digital. From a technology perspective, I divide SaaS into three types. The first is tool-based SaaS like WPS. The second is management SaaS — finance, ERP, HR, CRM, and so on. The third is transaction SaaS. Software delivers value by helping businesses find customers, do business, and manage operations. The first two types of SaaS help companies manage operations. E-commerce matching platforms help them find customers. Once you've found them, doing business — from order to fulfillment — is what transaction SaaS handles. That's where we started. (See Shangyue's coverage: The Real Value of Cost-Saving SaaS for Large and Medium Enterprises | China Industrial Internet Annual Conference)

Huasheng Haoche's Pengyun Chen: After-Sales Service Is the Real Growth Opportunity for New Automotive Retail Platforms

Traditionally, when consumers bought cars, they cared about two things above all: price and service. The main advantage of auto leasing was low down payments and low barriers to entry. On this foundation, Huasheng differentiated itself through residual-value leasing. But that alone isn't enough. After-sales service is where the real growth opportunity lies for new automotive retail platforms.

The follow-on chain of direct leasing transforms the relationship between the company and the customer. It shifts from a one-time sales relationship to an ongoing, tightly connected relationship throughout the lease period. The sales process stretches from a single transaction to three years, four years, or even longer. That creates enormous room for after-sales extensions — maintenance, repairs, insurance renewals, and so on. (See China News Service coverage: Procurement Exceeds 10 Billion Yuan, Business Volume Grows 30%: Auto New Retail Platform Huasheng Haoche Leaps into 2020)