Devott Insights: The Sword Dance of Capital – The Sad Game for Entrepreneurs
Source: Chnsourcing.com.cn View: 246 Date: 2015-09-06

After a series of speak on “people’s entrepreneurship & public innovation” from Li Keqiang, the prime minister of China who also drank a cup of vanilla cappuccino with flower shape of “3W”, the entrepreneurship really has been popular. Capital on one hand becomes the direct power in promoting wave of entrepreneurship and lighting the passion of people’s entrepreneurship. However, the situation is “hot money are everywhere but lack of good projects”; on the other hand, capital also becomes the biggest maker in producing entrepreneurship bubble that cause some temporary arguments such as “financing has no return” “B round of financing will dead”.

Succeed of entrepreneurship needs comprehensive functions from strategy, technology, teamwork, capital and other elements. Just as said by Li Kaifu in opening class of entrepreneurship, “if you want to do entrepreneurship well, it is necessary to have effective capital, accurate business decision and a batch of talented employees”. However, currently we only can see that although having good enough idea team, we also will fail in “war of burning money” that is more and more serious without support from capital. Such as past “war of hundreds teams” in online taxi field including Didi, Kuaidi; then “the war of festival” between each e-commerce platform…. According to statistics, in those failure cases, 36% of enterprises failed in capital chain rupture.

One of entrepreneurship investors once said” no capital, no investment”. He believed that entrepreneurship can’t be casually undertaken by ordinary people. If you want to start your own businesses, it is necessary for you to provide capital. That was ruthless but true. For entrepreneurs, capital is a double-edged sword; and good entrepreneurs are good sword dancers. Song Zhongjie, the founder of Dida once created “Dida Tuan” that failed in serious “war of hundreds of teams”. He summarized that failure experience that he underestimated the expanding of Tuangou industry; therefore he provided not enough investment and preparation. Especially, the less investment amount was difficult to form scale finally. Recalling a painful experience, Song Zhonjie has finished three rounds of financing only for Dida within more than a year, and prepared to face fierce war. Although this, another round of war of subsidies from Didi Shunfengche and Uber will push Dida on the dangerous ground. That is the reality.

Capital is irreplaceable driven power to promote entrepreneurship, and is also background for enterprises to expand and innovate. However, if in a capital whirlpool, enterprises are difficult to extricate themselves. Either not gets capital then fizzle out, or gets the kidnapping by capital then lost themselves (such as YHD.com). Because of capital, there are entrepreneurs laughing, crying, living or died everyday.

This post is a personal or group view of Research and Advisory members and don't necessarily represent Devott's positions, strategies or opinions.

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