Big platform creation in China coming to an end – AVCJ Forum

"We will see a change in the consumer internet space. The age of big platforms is sort of behind us. That kind of opportunity is going to be more scarce and maybe nonexistent in a few years," said Eric Li, founder and managing partner of Chengwei Capital.

Li described this as a winner-take-all model whereby investors provide a large amount of capital to gain significant market share. The last successful company to follow this strategy was Pinduoduo, which became a unicorn three years after its inception in 2018.

Since Pinduoduo's rise, numerous consumer platforms have raised funding, especially in the social e-commerce space. However, many of them have needed to adjust their strategy by providing software-as-a-service tools or by integrating with industrial supply chains instead of creating direct-to-consumer e-commerce platforms.

Boyu Hu, founder at China-focused venture capital firm XVC, said his firm has historically spent a lot of time trying to find platforms like Alibaba, Kuaishou, or Toutiao, but that these opportunities are disappearing. XVC's recent activity in this space has been more niche, including backing a mobile matchmaking platform.

"The rise of platforms like Toutiao, Kuaishou, or Bilibili is changing media consumption behavior. Over half of the population is spending one hour per day on these platforms. These are structural changes. We have been spending a lot of time trying to find good companies that can use these structural changes to build a competitive advantage to build distribution channels and brands," Hu said, adding that the latest trend is to build private-domain traffic pools on these platforms.

"I've seen a dramatic change in distribution and retail channels. A lot of companies are trying to use WeChat groups as a distribution channel," Hu added. "They're very good at the private-domain traffic operation. Douyin Xiaozhan [a sub-brand of Douyin] is also interested in generating private traffic."

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