From Taobao intern to the father of Pinduoduo

Chapter 154 Tencent and Sequoia Capital jointly invest 200 million

Chapter 154 Tencent and Sequoia Capital jointly invest 200 million

At the end of November, at Pinduoduo's headquarters, Lin Mu looked at the month's report: Pinduoduo had successfully reached its performance-based agreement with Tencent a month ahead of schedule.

In the mobile phone accessories business, the total monthly revenue in November successfully reached 10 million.

The QQ underwear category achieved a revenue of 1500 million this month.

Currently, these two categories are Pinduoduo's second and third largest categories. Pinduoduo's largest category is, of course, the clothing and apparel market, which now has a total monthly turnover of 4000 million yuan.

Combined with other smaller product categories, the total monthly revenue reached 1.6 million yuan.

Driven by a phenomenal viral effect, Pinduoduo has now reached 400 million downloads and boasts 100 million monthly active users.

Million.

These 100 million users will spend an average of 150 to 170 yuan per month on Pinduoduo.

Of course, in order to reach this scale, Lin Mu also spent a lot of subsidies. Of the 5000 million he raised in the angel round, only the last 500 million remained.

Lin Mu pondered that after receiving investment from Tencent and Sequoia Capital this time, he would officially start charging merchants service fees.

The service fee will be charged according to the previous Pinduoduo standard, ranging from 0.5% to 3%, depending on the category.

Charge more for categories that are more profitable, and less for categories that are less profitable. As for GG slots, don't sell them for now, he's afraid it will cause a backlash from merchants.

Just then, Jiang Fan came to our door with a new suggestion, saying, "President Lin, I have an idea. The way we're subsidizing products and giving them away for free right now is burning through cash too much. I have a more efficient way."

"Tell me what you think," Lin Mu said.

Jiang Fan said in rapid succession, "Right now, all sorts of simulation management games are very popular on Tencent's QQ Space."

"I think we can add a secondary entry point in the Pinduoduo user profile section and launch a simulation management mini-game."

"Then we set up a reward curve: users spend 5 minutes playing every day, and within a week they can collect all the game items to redeem a free item, such as a few packs of snacks, the kind worth five or six yuan."

"Next, users will need to play for a month to collect the second item, after which rewards will be distributed according to the progress of one item per month."

"Of course, we can discuss the specific details of this reward curve internally."

Lin Mu nodded repeatedly; Jiang Fan's suggestion coincided with his own. In fact, after receiving investment from Tencent and Sequoia Capital, he had already prepared to enter the fresh food category.

In its previous life, Pinduoduo's second wave of growth came from the fresh fruit market, and the core engine driving this growth was a similar simulation management game called Duoduo Orchard.

Users can plant trees and fruits on the platform, and once the fruits ripen, they can exchange them for a box of physical goods such as apples and oranges.

Many internet companies later adopted this approach. For example, Meituan created a pet-raising game where users could earn cash rewards by nurturing their pets and reaching certain milestones.

Getting back to the main point, Lin Mu said, "Your idea is feasible, but I think we can change the direction. Don't pick rewards from the existing product pool. Let's use this game as a marketing engine to develop a completely new category: fresh produce."

Jiang Fan frowned. He was originally a novice in the e-commerce industry, but after six months of experience, he had gradually gotten the hang of it and had a clear understanding of the basic rules.

He said, "Mr. Lin, from what I understand, the fresh produce category is very difficult to operate; it's practically a hellish market. And although its profit margin isn't low, fruit is too perishable, and fulfillment costs are too high."

"Personally, I think that instead of developing a fresh food market, we should find another high-profit category."

Lin Mu said, "That makes sense, but I'm pretty sure that no e-commerce platform dares to get involved in the fresh food market right now."

"As long as we dare to do it and can do it, it's like building a small moat for Pinduoduo. I have a specific plan; we'll proceed in three steps:"

First, we can be more creative with our inventory by implementing a pre-sale system. We'll let users form groups first, and only after the order quantity is confirmed will we contact the orchards to ship the goods, reducing losses at the source.

Second, by collecting data, we can determine which province has the most user orders, and then develop local orchards and set up sorting centers near the orchards to reduce the turnover rate of goods and reduce losses and transportation costs.

Third, we've optimized the cold chain. Ordinary fruits don't need high-end cold chain logistics; that would be disastrous. Insulated bags with a few ice packs are sufficient. Furthermore, we only handle large fruits that are easy to transport, picking them when they're seven or eight tenths ripe, so they reach the customer at nine or ten tenths ripeness for optimal taste.

As Jiang Fan listened, his brows gradually relaxed. He thought about it again and realized that Lin Mu's words made sense. Moreover, the new financing of 200 million yuan was about to arrive. Even if this direction failed, the loss would be at most 10 million yuan, which would not significantly affect the overall operation.

So he turned to the technology department to push this project forward. His current role isn't specific technical development, but rather data analysis and support.

After Jiang Fan left, Lin Mu also took a car to the airport and boarded a plane to Shenzhen.

Shenzhen, Tencent's headquarters.

In the conference room, Lin Mu, along with Mr. Peng from Tencent's Strategic Investment Department and Mr. Yang from Sequoia Capital, signed a financing agreement. Soon, the 2 million yuan financing will be transferred to Pinduoduo's account.

At that time, Pinduoduo's valuation will reach 10 billion yuan, while Lin Mu's personal valuation will reach 6 million yuan.

After signing the contract, Lin Mu chatted with the two investors, telling them about his desire to develop a large-fruit competition in the fresh produce category.

The plan of Tao.

The two investors were cautious. Mr. Peng said, "Lin Mu, Pinduoduo is burning through cash too fast. At your current pace of development, this 2 million yuan might not even be enough for you to burn through for a year. The task of the next Series B financing will be very difficult."

"If we calculate based on a 3x valuation, that would be a valuation of 3 billion; based on an internet company's PE ratio of 10, your annual revenue needs to reach at least 30 million to be able to successfully raise funds in the capital market. The next round could likely raise 4-5 million."

Around one hundred million.

Lin Mu knew that revenue and sales volume were not the same thing. Pinduoduo's total monthly sales volume was 1.6 million yuan, but its revenue only reached a mere 2%, or 320 million yuan.

Of course, this is mainly because Pinduoduo does not currently charge service fees and relies entirely on losing money to subsidize merchants and users.

Once the user and merchant base grows and service fees are started, revenue will improve significantly.

Lin Mu thought for a moment. WeChat was going into public beta in 2011; if he remembered correctly, Xiaomi phones were also going to be officially launched in August 2011.

From this point onward, the domestic smartphone industry will experience rapid development. 2011 can be considered Pinduoduo's most difficult year; once it gets through this year, the road ahead will be smooth sailing.

Lin Mu remembered his previous plan to meet Lei Jun, so he asked, "President Peng, do you know Lei Jun of Kingsoft?"

Peng Zhijian (Peng's full name) said, "I know him. He's making mobile phones now, and he's really making a big splash, but I don't know if it will ultimately succeed. Why, would you like to get to know him?"

Lin Mu nodded and said, "I think this person has a lot of ideas, and I want to talk to him about pre-installing software on mobile phones."

Peng Zhijian said, "Okay, I'll arrange it for you." Then he remembered something and added, "Oh, right, didn't you tell Boss Ma that you wanted to meet Zhang Xiaolong? Zhang Xiaolong is free recently, why don't you go and get to know him?"

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