Red Children's nightmare: VC directly involved in management lost entrepreneurial spirit

October 6, 2008, Red Children Interconnection Technology Co., Ltd. general manager Li Yang returned to work after the National Day holiday, one of the investors TDF (Kleiner) to the Red Child representative Jinpeng to his office to come straight to tell him that the board decided to let him immediately leave the company he founded.

There was no sign of it beforehand. Li Yang was very surprised since June 2004 he and another three entrepreneurs set up red children, the main mail-order catalogue and E-commerce as a marketing method of mother and child supplies retailer, the previous year's sales revenue has reached 400 million yuan, and in March 2008 jumped the break-even line, became the most powerful E-commerce company. He asked another venture partner, chairman and CEO of Xu Xianxin, for a reply: "This is the decision of the board." "Next, Li Yang failed to reach any major shareholder. "Some people don't answer the phone, some say they have gone abroad." "He told global entrepreneur," he recalls.

Later, a holiday on duty staff told him privately, 11 Xu Xianxin and several vice presidents come to the company every day to meet, "they want to and a few vice president to greet, because people are I recruited, they subconsciously think these are my people." "said Lee.

He left with Li Yang and Wang Yu, the wife who had started his business with him. Xu Xianxin explained that the Board of Trustees that the two people can not be at the same time in the company, and they do not want to separate, so both leave. But in the eyes of the parties, it was tantamount to a coup.

In what is known as the "professionalization process" of the Xu Xianxin, over the past two years, there have been more than 30 middle and high level change. At a recent annual meeting in 2010, Xu Xianxin, the presiding member of the Conference, announced that the first part of the annual meeting was the applause of all staff and compliments to those who had worked for red children. This is an intriguing scene. The latest scene is that this January, Red Child executive general manager Yang "long-term leave" way to leave, the four founders currently only Xu Xianxin, the original 1 CEO+3 executive management team has ceased to exist.

"Red children don't need heroism. Xu Xianxin explained to global entrepreneur, "is the company accountable to one person, or to the whole person, or to a small handful of people?" "However, net SEO director Guo Yanjing in Weibo, said:" I heard that the internal middle-level struggle is still very strong, the department plans to carry out, many people have gone or started to go. ”

The entrepreneurial wave that has sprung up in China over the past more than 10 years has been a vibrant place, and has attracted a lot of capital bets. There are a lot of risky ventures that have created the Midas case, but I'm sorry, the red kids aren't. In the history, the red child altogether has carried on 4 rounds to raise the capital, the Northern Lights, NEA Kaipeng and so on venture capital business all invests in it. And with several founders, such as Li Yang, who are out of the Xu Xianxin, the capital will of the red Child alone, a capital and corporate founder is how the honeymoon evolved into conflict with the story of the surface.

China's consumer goods market if there is a long-term solution to the puzzle, it must be related to maternal and child supplies field. It does not seem to lack the demographic dividend base – China has a newborn population of around 20 million per year; rigid demand is strong – Chinese parents often spend very generously on baby supplies. So optimists say the market has a scale of 100 billion yuan. But the reality is that this area has not yet appeared tens of billions of magnitude of the dominant enterprises.

The red child was once thought to be the most promising seed to answer the riddle (please refer to the Gemag.com.cn "the Red Child" in the article), but the reality is sad. In the past two years, the red child has not been with the Chinese business market blowout and rapid growth, the scale has been hovering around 1 billion yuan, the IPO plan has been frustrated year. But similar consumer-goods retailers have been able to prove value through capital markets-last September, Dr. Frog, who topped the halo of "China's Children's consumer goods first", was listed on the Hong Kong board with annual revenues of only 630 million yuan, and on December 9, the business concept unit Dangdang was listed on the NYSE.

The seeds of misfortune were planted in 2008. Red children came to the crossroads earlier than other mother and child goods retailers. There has been a heated debate among several founders of the Red Child: Is it a comprehensive transition to e-commerce or an increase in the power of catalog sales? is to continue to focus on maternal and infant supplies market, or introduce cosmetics, 3C and other categories to do a comprehensive business? Adhere to the entrepreneurial culture, or large-scale introduction of professional managers? As a result, the venture capitalists chose to support Xu Xianxin, and Li Yang, who advocated focusing on maternal and infant supply markets, chose to leave.

Xu may be right. He saw the false exuberance of the seemingly hidden gold market. Although the number of newborns in China is about 20 million a year, the "consumer" that truly becomes the market for maternal and infant supplies is between 6 months from birth and two years old, meaning that the actual consumer group, including pregnant women, is at most 55 million. And there's a large number of rural consumers who may never have heard of buying bottles or peeing on the Internet. More fatally, these target consumers are far from loyal, and when the children are 2 and a half years old, they leave the market and the company has to look for new customers. Another problem is that the mother-infant sector has always been a strong brand of manufacturers, so retailers do not have the background fees, and the account period is very short. "The consumer groups we can cover are limited. If you were doing a business that counted transfers, would that be a big deal? Xu Xianxin said, "The red Child is not looking for high profits, but for repeat purchase rate." ”

Xu believes that this is the two lines of contention: to find more customers to provide existing products, or to existing customers to provide more types of product choices? But Li Yang still insists that red children should focus on the market segment, which keeps a steady growth rate of 30% per annum, rather than compete with multiple product categories in E-commerce sites such as excellence and Jingdong.

Li Yang, who left the red child in October 2008, had no chance to verify his ideas, but the real market did not stand on the side of Xu Xianxin. Several people familiar with the red Child said that last year's revenue was still only about 1 billion yuan. If according to Xu Xianxin revealed that the mother and child supplies accounted for only 40% of the calculation, red child this traditional advantage business of shrinking degree can be imagined.

For many red-child employees, the past two years have been confused and confused. At the headquarters of the Red Children Company of the 1th building of Tsinghua Science Park, our correspondent notices that there are two huge water tanks at the corner of the staircase, and that there is no fish in the jar, nor is it exquisite. A red boy employee said that the green plants in the building and the tapestries on the wall had been redesigned under the guidance of Feng Shui Masters, hoping the company would be able to "transfer" this year.

Crossroads