Interview with Liu Chunhe, CEO of Newborn Town: It will be a hard time for small start-ups in AI era.
Venture Innovation Tencent Technology, Feng Jun 2017-04-27 14:40
On April 27, 2017, the Global Mobile Internet Conference (GMIC) was held in Beijing. Newborn Town founder and CEO, Liu Chunhe, received an exclusive interview with Tencent Technology during the meeting .
Liu Chunhe thought that there are two directions in the second half of the Chinese Internet: one is to enhance efficiency, another is to expand the scale; to enhance efficiency is the application of artificial intelligence, and expand the scale means to go to the international market.
Recently, artificial intelligence has become a hot spot in the investment field, but for small start-ups, on the one hand, its technology and talent can not be compared with large companies; on the other hand, it is difficult to obtain large-scale data.
“Several BAT giants have also penetrated into all fields of life, including basic necessities, especially generally optimistic about the medical, financial and other spot fields.” Liu Chunhe is not optimistic about the prospects of small start-ups in the AI era.
As a global top-ranked third-party company majors in desktop products, Newborn Town in October 2016, has completed a few hundred million yuan of D round of financing. Liu Chunhe revealed that after the financing of the Newborn Town, it has developed from a product to a dozen products, accumulating more than 600 million users.
In addition, Newborn Town has also set up a Large Sailing Fund, funds for the first phase scale attains 100 million yuan, specifically to support the domestic small and medium-sized entrepreneurial team out of overseas, aims to do the Chinese span-Internet linker.
Liu Chunhe said that China’s Internet is in the world’s leading position, no matter in technology, products, talent, commercialization, and capital fields, China has a strong competitiveness. At present, China’s out-sailing model is still in the early stages, capitals which pay attention to this field is not much, it will be a blue ocean.
In May 2016, A-share listed company (002209.SZ) has announced that it intends to purchase shares and cash to buy Newborn Town, and other 12 transactions held by the other side of the total holding 100% stake in the Newborn Town, among them, the payment of cash is 163 million yuan, and the issued shares is 152 million shares.
Later, the media widely questioned that the Newborn Town had only 14 million revenue three years ago, but to be sold 2.5 billion. Later the trading broke down. In this regard, Liu response to Tencent technology, said the Newborn Town is not very concerned about capitalization things, and will not spend too much time on it in the future; but to return to the commercial nature, so that Newborn Town can keep a fast increase.
The interview records is as followed:
Tencent Technology: First welcome to Liu guest Tencent technology. Recently artificial intelligence is a special hot spot, how do you view such a situation?
Liu: Because I am with technical backgrounds, and manage this company for some time, I think that there has several elements or several possibilities for an industry to become an awesome industry. Firstly, it must have the scale; secondly, efficiency enhancement, and thirdly, subversive technology & subversive business model. These three things constitute the cause of one rapid development industry.
China’s Internet in the scale of development has disappeared, artificial intelligence is much efficient. So I think it is a way instead of an industry. Because one can be called the industry must attain a certain scale, such as from a province to the country. So I am more optimistic about the out-sailing may be an industry,maybe a scale to be upgraded.
Tencent Technology: Many people put forward the second half of the Internet, you think one is artificial intelligence, and another is a foreign market, are these two are very important directions of the second half?
Liu: One is to enhance the efficiency of artificial intelligence, the other is to expand the scale, which is sailing out. From the historical view, the rapid development of the real industry is always the scale instead of efficient, there have no chance for small companies with slow development. Because upgrade efficiency is always exclusive to big companies, that is, artificial intelligence opportunities do not belong to small companies, because there is no data for them, then how to do artificial intelligence?
Tencent Technology: There are some views that vertical and subdivided areas of small companies may still accumulate some data.
Liu: Some kinds of difficult. Because for these large Internet companies, they also penetrate into the various sub-sectors, including basic necessities, vertical subdivision areas may do some attempts to cooperate with the giants when is in a good time.
So I am not optimistic for it that is in the name of the industry.
Tencent Technology: Which segments you think can make the first breakthrough to improve efficiency in the field of artificial intelligence, and achieve relatively large achievements?
Liu: I do not do the domestic research too much, so there is no in-depth judgments. We combined with advertisers when engaged in artificial intelligence. We will find that the common pain point, and it is how to match people with information, you can not see what you want most of time, the proliferation of information. For example, you see an ad on the Internet while you do not like it, it is not what you want. We are now developing Solo big data, is the artificial intelligence data platform, to give the users’ tags and precise positioning, to know “Who he is, where he is, and what he will do, generate new species on the basis of these labels. So we apply advertisements and contents in this field. Such as Solo Now, one of Solo products, which is a carrier of integrating personal information and personal services. What’s more, it is quite different, which is the need to use artificial intelligence.
Tencent Technology: Through checking the information, I see that the Newborn Town has completed the D round financing, what the layout after that? Including some strategic layouts…
Liu : The most important keywords for Newborn Town in recent years called “evolution”, which developed from a product to more than a dozen products, from zero user to more than 600 million users now, from a few people to 200~300 people, from never melt to complete the four rounds of financing now. At the same time, we do investment: we set up a large sailing fund, specifically to support small and medium-sized teams to go overseas, its first phase of funds was more than 100 million yuan.
We are now focusing much on sailing upgrading. The sailing is more of the game applications, is isolated from sailing that even do not need the local infrastructures, just download an APP, and even do not know where the users are. Yesterday I met a friend who is a leading enterprise in a certain area, he has never been to that place. We now call the pan-Internet sailing is not only the game applications, but the other many things, such as film and television, literature, Internet finance, O2O or even things made in China. These things will be very spot in this year and are also the direction we focus on. So that is what we are doing this year, and pan-Internet sailing is also we pay much attention to.
Tencent Technology: Any projects here, could you take an example?
Liu : For example, we voted a company is to do college students installments in India , which is similar to the domestic staging products, its growth is very fast, and is not same with the traditional applications of the sailing team. We also invested in a company is specialized in making videos, focusing on doing contents, similar to China’s “Er Geng”, do the contents from globalization, which is very subversive people’s imagination.
Tencent Technology: During the process of sailing, what aspects should be paid attention, a lot of difficulties, or facing many choices?
Liu : That is not very important, difficulties and challenges are not important, it is important that do not deny your own understanding of matters. It is the size of this matter beyond the imagination of all, that is to say the logic we can now go out of the sea, is not a business opportunity, the biggest logic is the strategic opportunity from the national level. Because the Internet in China is the world’s leading, so does the industry, meaning that we are going to travel around the world. The US company is a global company because ten years ago they have led them all over the world. Today, this time point of China Mobile Internet (Micro blog) is the industry-leading, all innovation is out of a global at the same time, such as the shared bicycles, shared charging have all gone abroad. We do not give ourselves limits, there are many people take difficulties as the logic of sailing, that does not exist. I suggest that never give yourself limits when sailing abroad. Our industry journey has just begun 0.01%, even though there are many companies, but there have only a few companies with billion dollars, so in a sense we should see forward.
To give a realistic example, the region like Middle East, we feel that it will make progress in the Middle East soon, but the real situation is even not exceeded five companies, and the number of each company is no more than 10 people, it is not a real landing. A few years ago, Japanese consumer electronics land in China obtained thousands of people. So the industry has just begun.
Tencent Technology: And what will happen if it is compared with the local Internet companies?
Liu : The local companies are completely without any competitiveness. From technology, products to talent, commercialization, and capital, it is an industry leader for all above, including the United States, China is in leading position.
Tencent technology: Last year we almost sold to a listed company, and why finally it did not take place?
Liu: I spend very little time on capitalization, may only 1%, the other 99% of the time is on business and products. For the Newborn Town, capitalization is only a choice, as to choose which form, we will follow the environment and accordance with its natural. From our view, we still want to cultivate a great company. Because there is a dream in my lifetime is to cover 1 billion users, and give these users a good value, but now it is still far from my dream. There are many opportunities for us, and I do not care to choose when to use what way to dry in the end, that is not important. If a company puts all the energy on capital, the company may make money, but not a great company. We spent 0.01% of time this year, and we do not need to spend more time on it.
Tencent technology: Whether the ultimate goal is capitalization of the market?
Liu: Not necessarily, return to the commercial nature, if a product and business model can bring value to the users, then it also well to not be listed. Of course, if the market is conducive to the rapid development, we can market, and choose time, node flexibly, we must find an optimal solution, and the optimal solution to choose is the biggest difficulty for entrepreneurs. Many people are not the optimal solution, but the worst solution. For example, there is a principle in our higher mathematics that is called the Lagrange Median Theorem, and there has a definite conclusion between point A to point B. The slope from A to B must exist an optimal solution. But many people find the opposite of the slope, which is not the optimal solution. What we do when sailing, includes globalization, capital, products, etc, all of which is based on searching for the best solution and is most suitable for us now.
From the start to the present, Newborn Town has always been to maintain independent thinking, from the name you can see that we want to keep curiosity and keep changes. Curiosity and change are our key words to be kept.
Tencent Technology: I saw the news out there are also questioned voice last year, which we do not have so much revenue, but valuate 2.5 billion, does it a little bit high?
Liu: The financial news is more chaotic. In fact, the so-called valuation means the expectations that others put on us, it is common to be underestimated, but I like to be underestimated. A company ought to never be overrated, because it will surprise everyone if it has been underestimated . Newborn City to bring you a common image when you hear it at beginning, but if you come to see, it is a good company, and then I will very happy for that. I do not want to hear that the company is awesome, but when comes to look, it is common and unsoundness when contacts in-depth. I hope to demonstrate a surprise company to others, and it is underestimated. There are more than 600 million users in Newborn Town, we do not eager to cash like many others , we put income within a controlled range of growth. Because we want to do a long term, not a short one.
Tencent Technology: Do you think the valuation should be higher than 2.5 billion?
Liu : This is not important, for whether valuation of 10 billion or 100 billion, it is useless. To return the origin, even if your company value of 100 billion, it is useless. So still have to return to the commercial nature, do not be fooled and kidnapped by the capital. Sometimes you even do not know if my company has 100 billion market value? Useless. The core of an entrepreneur needs to maintain an independent thinking, sober head, and return to the origin. The greatest happiness is not to see how much the number is, but whether my products are able to give users’ surprise. When I see our users like that an Ukrainian child like Solo very much, became one of our developers, who made money through the developers, and send money to their parents when the Ukrainian war happened. I am very happy for that, this is the core point of my business.
Tencent Technology: How about summarizing the future development directions or strategy of Newborn Town?
Liu: “Scale and efficiency” is a biggest logic. We are doing three items: products, advertisements and data. Thee three items together constitute the vision of things we do. We hope that human and information in the world will be match accurately. There will have more powerful products and larger user size of Solo products: Solo ads has been the top three mobile ads platform of sailing out of China; Solo data, with using the Silicon Valley data experts, making the efficiency more optimized, so that the border efficiency and content matching efficiency is getting higher and higher, in addition, artificial intelligence is to help us provide efficiency.
So these three items are large-scale, efficient, and hope Newborn Town can maintain a rapid growth in this year.