Good Fortune Favors Prepared Founders | BlueRun Ventures Portfolio "Financial Management" Post-Investment Event
Sound financial management is an essential capability for navigating cycles, with over 150 members of the BlueRun Ventures community participating in the event.
The macro environment is shifting, and we need to prepare earlier for uncertainty. For startups, sound financial management is an essential capability for navigating cycles. Recently, over 150 members of the BlueRun Ventures portfolio participated online in a post-investment exchange themed "How Financial Management Drives Sustainable, Effective Growth."
The event featured founders and executives from diverse backgrounds: Yao Xin, co-founder of PPIO and founder of PPTV, who started as a student entrepreneur and weathered the 2008 financial crisis; Zhang Zhaofeng, former Finance Director at Midea Group and CFO of Little Swan, who shepherded Midea to its public listing; Zhou Yuchao, CFO of Gaussian Robotics in intelligent manufacturing; and Deng Meichen, CFO of Artplay in the internet sector.
This article summarizes portions of the event. We will continue rolling out themed post-investment series to encourage and grow alongside our founders!
- Strongly recommend shifting from a "growth strategy" to a "profitability strategy." Pay close attention to gross margin and marginal contribution rate — two critical metrics.
- Must monitor personnel costs. Restructure your team and retain valuable employees.
- Must ensure positive cash flow, with at least 12 months of runway, especially for businesses with inventory and slow customer collections.
- Invest capital and talent in high-margin, growing product lines and customers. In the current environment, identify which customers and product lines are not generating gross margin and address them promptly.
- Stay alert to opportunities that emerge from crises. On one hand, control costs and shift mindset from growth to profitability; on the other, maintain sensitivity to whether crises create new opportunities for growth. Of course, new opportunities require investment — founders should prepare budgets and scenario analyses before committing.
- Prioritize financing and financial management. To get finance right, it must integrate with operations and align with company strategy and goals. Every executive needs to understand finance and embed financial metrics into operational KPIs.
- Rethink what constitutes true commercial value. For B2B companies: whether you help clients improve efficiency and reduce costs, and through pricing power, how much of that value you can capture. For B2C companies: whether the gap between customer lifetime value and customer acquisition cost is sustainable, and whether you can continuously increase user stickiness at low acquisition costs.
- Assess how urgent your funding situation is. When evaluating cash flow, we typically model different scenarios. Two common approaches: an aggressive scenario using current execution targets and projected spending, assuming linear market conditions; and a conservative scenario using conservative revenue targets with rationalized spending.
- After running the numbers, if you have 18-24 months, you're temporarily safe and can develop steadily, though still cautiously; if 9-12 months, you must immediately implement cost controls and downsizing to extend runway to 18-24 months, unless you're actively fundraising — in which case, don't fixate on valuation, close quickly; if 6-9 months, in my view, don't count on fundraising at all. Implement comprehensive contraction and cost-cutting immediately, however painful, because survival is everything.
- At this point, the company's entire strategy is cash-flow breakeven. It's not just about contraction — it's about pursuing breakeven. To get there, you need to increase revenue and cut costs. I emphasize cutting costs before increasing revenue, because revenue growth still requires investment, while cost-cutting is something you can act on immediately and push through rapidly.
- Business operations are the most important thing for any enterprise, whether startup or established, physical or digital, public or private, internet or non-internet — ultimately, all must follow commercial logic. From founding to survival to growth, a business must eventually become profitable and return value to society and capital. This is the fundamental core.
- Returns are the core, so operations are the essence. In today's society, all business development requires resources and capital, and capital seeks returns. If a company doesn't treat operations as its essence, it's difficult to generate returns or conform to economic principles. To sustain profitability, a company must persist in continuous operations. I believe operations are a culture, the DNA of a company's development. If a company doesn't emphasize operations from the start, it's hard to grow and thrive.
- Everyone should consider finance's value and role in a company. Finance must focus on gross margin, net profit, cash flow, asset efficiency, risk, and operational efficiency. Many companies' finance functions pay little attention to these, and other departments even less. The CFO is simultaneously an insider, change agent, and initiator, as well as an observer and reactor. As insider, initiator, and change agent, the CFO must participate in operations, improve profitability, drive process transformation, reduce risk, break down barriers to efficiency, identify operational problems, propose improvement plans, and require other departments to cooperate in implementation.
- If finance merely serves as observer and reactor, producing financial statements without engaging in operations, it adds no value to the company's development. Whether a startup, growing company, or mature enterprise, these issues need attention at a certain stage. Only by being an insider, change agent, and initiator can finance and operations truly integrate, enabling smooth development.
Q: Based on your respective operational experience, how do you build budgets well and make them more accurate?
Deng Meichen (Artplay): All core management teams, including first-level profit center and cost center managers, need to reach a shared understanding of translating all business metrics into financial statements. Hold regular strategy workshops where the CFO maps out core metrics for the group and each department, setting growth targets and efficiency targets.
Zhou Yuchao (Gaussian Robotics): Simplify budgets as much as possible, focusing on cash accountability for each department, with additional revenue and gross margin metrics for sales and production centers. Business and finance departments often categorize expenses differently. Early on, get both sides to agree on definitions so departments have clearer visibility into actual spending, which also helps with future improvements.
Q: Once budget mechanisms are established and finance-operations integration is achieved, but expenses still exceed budget, what should be the next step?
Yao Xin (PPIO): For early-stage startups, being able to budget six months out and control execution within plus or minus 10% is already quite good. Analyze whether overruns stem from uncontrollable seasonal factors or execution failures. Budget control isn't simply having finance slash all expenses. It's actually tied to management's expansion and development rhythm — distinguish between what's hard to adjust and what will impact the next 3-6 months.
Zhang Zhaofeng (Little Swan): Budget variance is actually normal. But you need to know which variances are fatal and which are normal. For new industries, budgeting is extremely difficult because you don't know where market maturity lies, whether sales will materialize, etc. But some variances are intolerable. For example, when the economy suddenly deteriorates, the entire company must execute strategy accordingly.
Further Reading
Offense as Defense: Choosing a Path Different from 98% of Cybersecurity Companies | BlueRun Ventures Dialogues with Moyun Technology
BlueRun Ventures was founded in 1998 in Silicon Valley. BlueRun Ventures China was established in 2005 as a venture capital firm focused on early-stage startups.
Currently, BlueRun Ventures China manages multiple USD and RMB dual-currency funds with over RMB 15 billion in assets under management, making it one of the largest early-stage funds domestically. The firm invests primarily at Pre-A and Series A stages across hard tech and innovative interaction, enterprise technology, new consumer, and healthcare sectors. It has backed over 150 startups including Li Auto, Waterdrop, QingCloud, Guazi.com, Qudian, Songguo Mobility, Ganji.com, Energy Monster, Yuntou Semiconductor, Machenike, Cloudsaint Intelligence, Anxin Wangdun, BioMap, and others.
BlueRun Ventures has been ranked #1 on Zero2IPO's "China Top 30 Early-Stage Investment Institutions" and ChinaVenture's "China Best Early-Stage Venture Capital Institutions TOP30," and was named among Preqin's Top 10 Global VC Fund Managers for Sustained High Returns.
The firm has also received consecutive honors from Forbes China, 36Kr, Cyzone, Caixin Media, CBNweekly, Jiemian, and other media, including "China Early-Stage Firm of the Year," "China Top Venture Capital Firm," "Most Founder-Friendly Early-Stage Firm," and "Most Influential Early-Stage Firm."