Article | Qian Qiao
Interview | Qian Qiao,Xuan Yang
Editor | Xuan Yang
Cover | IC photo

The story about Kathy’s investment in BossZhipin is almost a copy of that about her investment in JD.com. Forced by her strong intuition of“not letting the founder go”, she signed the TS the very evening of meeting the founder with extreme generosity and even not the least hesitation on any of the terms.

After creating a myth of the 143-time return from JD.com, Kathy has made another accurate snipe – Capital Today has made 5 follow on investments of nearly USD40 mn in total in BossZhipin within 6 years since 2015 and has thus become the biggest institutional shareholder of the latter upon its IPO, gaining nearly 38 times of book return so far.

Kathy has made friends with Jonathan ZHAO, CEO of BossZhipin, out of competition. At the time when ChinaHR.com and Zhaopin.com, which they respectively represented,were competing with each other, Kathy and Jonathan were rivals and were therefore quite familiar mutually. Kathy regarded Jonathan as a person that“I will invest in whatever business he is doing”, and promised she would“hold the company long” after its IPO.

Undoubtedly, Kathy’s investment in BossZhipin is another rigorous execution and best demonstration of her own investment methodology – seizing a good company, unswervingly overweighting and holding it long enough. And as a result, BossZhipin has become the fourth great projects that Capital Today has earned more than USD1 bn from,following JD.com, Meituan-Dianping and Yifeng Pharmacy.

Kathy fully attributes the success to her firm faith in“Big Bet” and“Home-run”with regard to investment.

She’s in the meantime updated some observations and perceptions.As the“VC Queen”, Kathy has felt increasingly fewer capitalists and founders who are firmly bound with each other as“partners” in spite of more money and fiercer competition in the market, given the heat of consumer VC in the entire primary market over the past two years. To some extent, it is a sense of loss felt in a new era by a capitalist who has undergone a number of VC-founder partnerships and has provided numerous founders in difficulty with encouragement and funding.

Kathy and 36Kr had a conversation on the day of BossZhipin’s IPO. She told about her story of investing in Jonathan in 21 hours 6 years ago, and also confessed what she has failed to understand and identify as well as what she has“gained” and“missed

01
About BossZhipin and its IPO

36Kr : You and Jonathan, CEO of BossZhipin, have known each other since early. What moved you in deciding to invest in the project?

Kathy : Jonathan and I became friends from rivals as he was CEO of Zhaopin.com while I was Chairwoman of ChinaHR.com. Our ChinaHR.com did better later on while I thought Zhaopin.com was also doing a good job in highend services for white collars.So despite the competition I considered Jonathan a respectable rival.

One of our interns noticed this product in March 2015. I received her Wechat message 6 o’clock in the morning and I made an appointment with Jonathan to meet each other at 9 p.m. or so that very day. Two of my fellows and I made a one-on-one interview with four of their senior managers and we took a look at their backend data, after which we signed the TS at 3 a.m. the following day.36Kr : Why in such a hurry?

Kathy : He told me he had almost settled with another strategic investor, which was also a listed company.That investor was pushing him to sign and he would feel guilty for pulling back. Then I told Jonathan it was not a matter of decency or relationship;rather,it was about whether he desired to build a great company, one he would have control of the company’s destiny. It was effectively motivating.And the investor was bargaining at a number of harsh terms while we showed much more sincerity. So he signed with us, soon after which we offered the bridge loan.

36Kr : Your most well-known cases are all about large-sized trading platforms and you have also expressed your preference for“big business”. However, BossZhipin is in a vertical market segment.

Kathy : Yes, it is indeed vertical. It is because I’m very familiar with this racing track and I’ve known Jonathan for so long. He is the person I want to invest in.I would probably invest in whatever business he is doing.

36Kr : What advantages does he have?

Kathy : Jonathan is so insightful that he cuts to the chase in a few words. The slogan“Taking to the bosses” grasps human impulses.

In the past, the recruiter for an enterprise was mainly the HR, who, however, was less motivated and probably has inferior judgment. So Jonathan changed the player of the role of recruiter into big bosses of small companies as well as small bosses of big companies, who were both decision maker of recruitment. In this way,the efficiency of recruitment has become higher. Later head hunters were also included.

On the job seeker side,they uploaded their C.V. and then became the products in the shop window – the ones that might be called by any person. BossZhipin has also changed it into mutual selection. And they include many passive job seekers who are not eager to change their jobs but would like to know and talk with the bosses. It’s good. That’s why MAU of the recruitment app manages to reach 30 mn.

Furthermore, Jonathan is a good recruiter. We wanted some AI talents, most of whom were working for Baidu or ByteDance. What would motivate them to join a vertical company like his? So he was sticking to them on the phone. One of his technical masters came for Jonathan after Jonathan had spent two years talking with him everyday.

36Kr : You have often studied the winner pattern. So how do you describe it for the recruitment sector?

Kathy : It’s a double-sided network effect. The more job seekers, the more bosses, and vice versa. It’s an unbridgeable moat which brings the first movers very strong advantages. While you are still contemplating how to push up the demand on both sides through the same approach, the first movers have had their business significantly heated.

Generally, in a sector with the double-sided network effect, there are no more than two leaders eventually.

36Kr : What is the most critical advice you have given Jonathan throughout the growth of BossZhipin?

Kathy : Tell him to advertise.

I insisted on advertising when I was at ChinaHR.com and keep doing so for our investee Ganji.com. I told Jonathan Spring Festival was an exceptionally favorable time point as most people go back to their hometowns and watch TV in leisure time all day long because they are stuck with their moms with nothing to do so watching TV and cellphones at the same time. So the advertisement achieves the maximized effect and coincides with people’s needs for job change after the Spring Festival. I told him how to advertise for thorough market penetration and how to boil water to 120℃.

The platform business mostly relies on word of mouth. However, when your base is very little, word of mouth works trivially and the key is to expand your DAU base first.

36Kr : Did he fully accept your advice?

Kathy : He had USD10 mn of cash in his bank account but his company was still suffering loss. So he was hesitating on a 6-million-dollar advertisement plan. Then I suggested another small round of financing in which I would underwrite the full amount in case of no other interested investors. Soon we completed it. And he felt the benefit later on as his flow was growing nicely. And he copied it during the World Cup.

Frankly speaking he needed encouragement, and I was the very person to encourage him

36Kr : The secondary market is quite volatile recently and a number of stocks priced high early this year have suffered a 50% dive so far. What have you talked on with Jonathan?

Kathy : I talked with him. I talk to all the CEOs before their companies’ IPO mainly on two points :

Firstly, the stock market is very short-term-focused and most investors stare at your quarterly report. You are abandoned if you post bad results for several quarters. But in my opinion,don’t care about the stock price.We believe in what Warren Buffett says that in the short run the stock market is a voting machine but in the long run it is a weighing machine, which weighs how heavy you are and how much you are worth.

Secondly,the founder tends to be repeatedly advised after the IPO to mortgage his stocks for some financial products. My advice is absolutely never. If you mortgage your stocks, you will be subject to margin call when your stock price goes down, or you will lose your control when you fail to answer it. Someone loses all he has earned in his previous life, and Mr. Gensheng NIU is the most typical example.

36Kr : What advice do you give to those ready for or seeking IPO?

Kathy : My experience to date is to raise money when you can instead of when you need, because it is safe after all. Sufficient funding is important since we are undergoing fierce competition and fighting big battles.

The unwillingness to raise money derives from no other than the worry of equity dilution. But nowadays there are super votes upon IPO,which ensure a founder of his control over his company. It’s not a serious problem. Moreover, equity means the amount of wealth. If you manage to win the battle and to make your business big, you must be worth a lot of money.

The market circumstances today depend on the actual situation. In general I don’t think it is necessary to hurry for IPO. The stock market focuses on the short term and sometimes your employees interpret the dive in your stock price into failure of your company and are likely to get much frustrated. You’d better make yourself the No. 1 player with a comfortable lead sector-wide before you seek IPO. If so,you will not sacrifice and compromise for the short-term market.

02
About the consumer VC heat

36Kr : The consumer VC has been heated in recent couple of years. New brands are not likely to be as keen for financing as TMT companies. Do they have to raise money as much as they can?

Kathy : It does not need to raise so much if it doesn’t suffer much loss by itself. But I think it’d better raise more if it wants to sacrifice profits for growth for a longer time.

36Kr : Players in conventional sectors cannot understand brand companies’loss-for-growth model.

Kathy : I think it’s understandable. Three Squirrels, which we invested earlier, didn’t break even until reaching 1 bn sales as it was continuously acquiring customers. So it still depends on how big you want to be. Even if you are running a brand, it is huge fixed cost for nationwide layout as you have to open warehouses, arrange logistics and advertise here and there.
In my opinion, early loss is acceptable and you have to scale up your business rapidly through investment. If in two years you manage to achieve a size which you should have achieved in 7-8 years under the business-asusual scenario, you will benefit from the size effect. Of course it is preconditioned on a considerable old customers repurchase rate. Just invest if you can see repeat orders growth.

36Kr : There is too much money in the market and most projects are valued high. Do you think it is somewhat overheated?

Kathy : There is a trend for today’s consumer sector financing that when a number of capitalists fight for one project, the FA tends to invite as many VCs as possible in order to justify his/her value, and to allocate each with small equity. I think it is a very bad mistake.

Money is no difference, but to is to look for a partner. Founders are young.They inevitably encounter many challenges as they go through the growing pains.At that time they need a good director to offer some value-add.

Even such an outstanding guy as Steve Jobs was respectful of Board members. The Director from GAP gave Jobs many ideas on retailing, without which he might have made quite a lot of detours and have fallen into some traps.

Nowadays most Board members are young kids, how valuable are their advice? Maybe on the contrary it’s a waste of time. Why so? Founders have to think it over and to look for those really helpful, one or two are enough. Firmly bound with each other, both are willing to put in time and energy for the other.

36Kr : Is there any new project in consumer sector over the year that you looked at and didn’t invest in but is a pity for you today?

Kathy : Those we looked at and didn’t invest in are mostly not large enough. What I want are big category. Our staff are limited and so is our time. So you have to be patient enough for the great company to emerge. Indeed there are not many great companies. If you devote all your time to mediocre ones and wish to involve in 100 cases a year and make a decision every three days, do you have time for insight and value-add, for deciding whether the company is good and deserve double down or triple down?

36Kr : I heard you had a chance for Genki Forest but you thought TANG Binsen’s price quote was too high?

Kathy : We did want to invest, but he offered a whopping price then,which was too expensive for me to make any profits. Today it seems there is really likeliness for it to grow very big. I gave it up for price reasons, which means Iam still not bold enough.

But I invested in his Challengers Capital, so we talk with and learn from each other on a regular basis.

36Kr : What did you talk about most recently?

Kathy : They are continuously expanding SKUs. Actually, attracting customers with big sparkling water SKUs is duplicable.

36Kr : Tang Binsen is so confident of the valuation of his company. He even thinks it is somewhat undervalued.

Kathy : He is great to the extent of so many categories expansion. He learns fast and iterates quickly, and is highly focused.

36Kr : Any example?

Kathy : The first time I met him he didn’t quite know how to advertise. I gave him some tips and felt he’d made great progress when he phoned me later.

He has in-depth insight of brand business too, and I quite agree with two perceptions he has recently mentioned. One is a founder is generally not very

outstanding if he/she has worked for others for more than a year. Another is if you do some business for three years but still find no advantages, you have to quit it because time is not your friend.

36Kr : What do you think is the difference between this generation of brand founders and the past two generations represented by Richard LIU and Xing WANG, respectively?

Kathy : The platform model focuses on cost and efficiency while the brand model, on differentiation. Representatives of the two models are even different in temperament. Platform operators and retailers are stingy while brand businessmen are super“picky”.

36Kr : How“picky” are they?

Kathy : Perfection, hard to satisfy. Positively speaking, it is craftsmanship.And negatively speaking, it is nitpicking.

Do you know how picky Jobs was? His outlet was about to open but he felt much unsatisfied after a visit there. He wanted a kind of yellow sandstones he had seen with his first girlfriend at Florence. But how difficult it was to find the identical ones after so many years? He was very angry and the whole team almost cracked up as the plan was totally postponed. That is what I refer to as the craftsmanship, and also the“pickiness” I want.

36Kr : Who has such temperament among the founders you have recently met?

Kathy : Concon, Founder of Ubras. She’s rather“picky”, very demanding on fabric and craft. It was making tens of millions revenue a year when we invested, but nearly 4 billion by this year. Why has it been growing so fast? The key is good product in my view.

Similarly to Genki Forest, it goes with the fashion of the current time and comes to the point. Consumers like sugar-free and calorie-free products, as well as non-steel-rim, seamless and size-free bras.

36Kr : Is there any project similar to Ubras recently?

Kathy : I’m also looking for it. I have looked at many SKUs but none are big and cost-effective enough. Nowadays new brands have fallen into a strange cycle. TikTok is too expensive and they have to price high and fail to offer customers any privilege since they acquire customers on TikTok. Essentially the internet business is to get rid of middleman and get rid of tax on intelligence. I don’t think such high pricing conforms to the essence.

36Kr : People in the industry are impressed that Capital Today is a VC that knows both the internet and consumer sectors. However, more and more institutions have invested in the consumer market over recent couple of years. Do you think the competition is becoming fiercer?

Kathy : There is indeed plenty of money in the market. Nevertheless, we have seldom failed in winning any project we want. I think we have done well in grabbing the deal.

36Kr : In your eyes is there any enduring underlying logic critical for VC in consumer sector?

Kathy : The first is a market large enough. The brand business is not disruptive but the retail model is. A trillion RMB market will create a USD100 billion company. That’s why we invested so much in fresh grocery in 2015. We’ve invested in all the three models including Dingdong, Xingsheng and Yipin, because fresh grocery is the final category of e-commerce penetration. Whoever wins fresh grocery will win the world.

The brand business is not so big, with an ultimate pattern at a billion-dollar revenue and nearly hundred million dollar profit. Given the limited market for a single brand, the multi-brand business is better, which, however, requires very strong capabilities of the founder – he has to not only be“picky” himself but also manage his team well. After looking at the new brands recently, I still insist a good product be the One at the initial digit while marketing and sales be the Zeros that follow.

36Kr : By what do you improve your success rate of investment?

Kathy : During early days, whether a VC could make a fortune depended on whether you hit the“home run”. To us, a project made no sense unless it brought us at least 300 mn dollars and favorably 1 billion.

There were two details here. Frequency of“home run” and intensity of“homerun”. Frequency was a matter of luck, depending on if the VC had caught up with the internet, the mobile internet and AI. The other was intensity,which you could decide by taking more equity initially, doubling down and tripling down in each round and holding it long enough.

36Kr : JD.com was more like the first one?

Kathy : JD.com was a superposition of both. We earned 2.5 bn dollars from 18 million investment, a 143-time return. We took up 40% initially and doubled down, holding it for a dozen of years. But you cannot wish to always have 100-time-return opportunities.

36Kr : So what can you do when you do not have them?

Kathy : Something you can still decide.

For example, we’ve invested in Yifeng Pharmacy, which is doing conventional retail business. We invested 30 mn dollars in 2008 when it had only 70 stores, mainly in Hunan Province. Then it had boomed afterwards and it went IPO in2018, boosting the value of our holding shares to USD400 mn. It was quite good for a 11-time return in a decade and was comfortably cashable.

At that time, however, I was thinking among all the retailers we had invested in, Yifeng was the only one that had witnessed its old stores growing YoY every year. I’ve also read the biography of the founder of Walgreens. Wow, it’s such a good business. For a century or so, its family clan have had different descendants, both geniuses and mediocrities. But even the mediocrities had not broken down the business.As Buffett said, good business is defined as one even a mediocre CEO cannot ruin.

So I told my LPs I loved the company so much and it would be a Walgreens in China. If you had the same faith as I did, let’s hold it for another 7-10 years. Later 25% of the LPs decided to roll over together with us.

How valuable is the decision? After three years from 2018, my 400-milliondollar shares are worth 1.2 billion today. In other words, the former 300-plusmillion-dollar wealth growth took me a decade while the latter 800-million-dollar growth took only 3 years.

36Kr : So does it make you believe in anything more deeply?

Kathy : We have two beliefs : the power of brand, the power of compounding. This is just the power of compounding.