The Most Connected Will Win—and the Power of Capital Markets

This piece is worth reading. Two points I would highlight: 1. In the internet era, the most connected will win! Not necessarily those who sell best or make the best products… Think back to China’s “3Q war,” the conflict between 360 and Tencent. Leaving the outcome aside, Tencent transformed itself afterward. Previously, it wanted to copy whatever it saw and then use its platform advantage to crush competitors. After the 3Q war, it went from everyone’s enemy to a friend—and shareholder—to most. It actively built an ecosystem, investing in JD.com, Pinduoduo, Vipshop, and Mogujie to pursue Taobao and Tmall from four directions. After changing its thinking, Tencent moved from wanting to do everything itself to combining others’ strengths into a powerful empire. 2. Capital’s connections and power “I recognized this side of capital markets too late. Every investment gives me an opportunity to knock on someone’s door.” Q: Was the battle with Shopee related to recognizing the power of capital too late? A: This is the side of capital markets I understood too late. Every fundraising process is an opportunity to explain what the company intends to do. It involves extensive communication with investors. Every investment opportunity brings participants and people knocking on doors. It gives me a good opportunity to knock on other people’s doors and make the company better understood in the market. That is why I chose corporate bonds. Through the battle with Shopee, I gradually understood the meaning of capital markets. When we listed on the OTC market, I simply thought the company had achieved something, should go public, and should give shareholders liquidity. That was all I considered. So I sold only existing shares, because I did not need to raise money. In 2017, the year momo’s share price overtook ours, I also lost money because of the subsidy battle with Shopee. Shopee spent US$200 million over four years; I spent US$100 million over two years. All US$300 million went to 7-Eleven and FamilyMart. (Editor’s note: Customers could collect purchases at convenience stores. Shipping costs normally borne by buyers were paid entirely by the platforms.) I had not realized that one day I would face a war of attrition over resources. I had thought e-commerce was a cash-rich business: we had virtually no accounts receivable. Now I think differently. I see capable companies out raising money every day. Because when you truly need money, the market will not give it to you.