Once a favourite, the sharing economy is losing its charm with Chinese investors Part (4/5)

The sharing economy: just a passing fad

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The sharing economy: just a passing fad

Last October, a FA agency, which had served many sharing economy startups, received a furniture-sharing project. But when the agency pitched the project to investors, “none showed any interest in investing”. Clearly, the sharing economy fad was fading.

This fading trend is best captured in the fact that the once heralded shared-charger startups also hit buffers in raising capital. Among all the shared-charger startups that got funded by VCs last year, most outside the top 5 have either gone bust or switched to other businesses. “Some of them, unable to raise equity capital, had no choice but to turn to debt financing,” according to the person familiar with the matter.

Follow ups rather than downs. This is also the rule that people hold onto when it comes to financing investment hotspots. “The long-tail VCs’ interest in the sharing economy will die down as soon as the top VCs stop playing the game”.

In one case, a first-tier angel fund has even deleted the “sharing economy” column in its project management system, which it had configured specifically for managing sharing projects. “The sharing projects should fall into one existing industry category or another, so it makes sense to put them back to the category where they belong,” explained the company.

Even LI, who stood out as a keen hunter for projects regarding the sharing economy in the VC space last year, “now spends only 20% of his time on ‘sharing business’”. For most projects regarding the sharing economy, he doesn’t even care to take a look. In his words, those sharing projects generally see low frequency of use, limited market potential and demand.

“All valuable elements in the industries concerning the basic necessities of life have already been fully tapped into,” said LI. As such, it is not that he doesn’t see any potential in the sharing economy, it’s just that there are now not many physical asset-focused sharing startups worth investing in. As of now, only sharing businesses centering on the sharing of labor, opportunities and idle items are able to capture his attention.

“Mobike didn’t fare as well as expected. Some small sharing projects have been brought up only to fail. These combined have ultimately dampened the investors and the entrepreneurs’ expectation on the sharing economy,”, ZHOU Zijing (ZHOU), CEO of Ether (以太创服), told 36Kr.

Take for instance, shared chargers. A field survey once conducted by a media outlet revealed that a large power bank cabinet in a bustling business center in Beijing was only utilised four times in a day, one time in the morning and three times in the evening. Worse, the shared power banks in a restaurant and a coffee house weren’t used at all. Some shared-charger companies had even seen the frequency of use for each of its shared chargers in a day slip from “3-5” to “0.5-0.7”.

Needless to say, the sprouting of new investment hotspots has also played a part in watering down the sharing economy craze. From ZHOU’s observation, the business proposals on sharing businesses have been increasingly supplanted by the ones on mini programs, new retail and blockchain ever since last summer.

As ZHOU sees it, many sharing businesses, such as sharing bikes, shared chargers and mini karaoke bars, are intrinsically businesses built around intelligent terminals. “The unmanned shelves business, to some extent, was also inspired by the sharing economy. As a matter of fact, some founders of unmanned shelves businesses had even billed their companies as sharing businesses,” said ZHOU.

Blockchain has been gaining increasing traction, and the investment hotspot has shifted with it. Many investors told 36Kr that they have “witnessed personally” some entrepreneurs in the sphere of sharing economy turn into blockchain experts in a mere one or two months.

Sadly, some startups have experienced “collateral damage” amid the dramatically dwindling craze of the sharing economy. An example is YZ-IoT (云纸物联) LIAO Yuxing (Xiamen) founded last September. As part of the company’s effort to eventually “intelligentize public toilets”, the mini program it designed is dedicated primarily to garnering user traffic with its scan-for-toilet papers function. As a matter of fact, LIAO had repeatedly explained since day one that his business is “not about shared toilet papers”. Still, his business proposal got tossed away when it was submitted to some previous backers of sharing economy startups earlier this year.

Written by: LIU Jing

Editor: HONG Hu


This is Part 4 of a 5-Part feature

Part 1: The dramatic rise and fall of startups

Part 2: Copying the success of bike sharing

Part 3: An increasingly smaller pie

Part 5: Ever shifting investment hotspots