Fudan students “garbage collection” to support an IPO: valued at 25 billion

I never thought that a humble second-hand business could support an IPO.

This second-hand business may be much bigger than imagined.

In investment news, China’s largest second-hand consumer electronics trading and service platform, Everything New Life Group (Love Recycling), has formally filed an IPO prospectus to go public on the New York Stock Exchange. Previously, company founder and CEO Chen Xuefeng had made it clear that a valuation of $4 billion to $5 billion would be the base line for the company to conduct an IPO.

As the helmsman of Love Recycling, Chen Xuefeng is a programmer from Fudan University. At the beginning, he and his Fudan brother founded the barter C2C platform LeEco, but the project failed in the end. In 2011, the upgraded version of Leyi – Love Recycling was officially established, focusing on electronic product recycling. 2020, Love Recycling was upgraded to Everything New Life, with 2 business segments under the new brand – used cell phone business and garbage sorting business, and now one year The revenue is over 4.8 billion yuan.

Along the way, Love Recycling’s financing journey has been difficult. In the early years, VC institutions once tore up the TS (investment letter of intent) because they did not recognize the Internet company’s practice of doing stores. It was not until 3 years after the company was founded that the company’s financing gradually opened up. Nowadays, Love Recycling has experienced 8 rounds of financing, behind which include famous institutions such as Wuyuan Capital, Tiantu Investment, Dachen Caiji, Kaihui Fund, Jinglin Investment, Qianhai Mother Fund, Tiger Global Fund, Guotai Junan and Jingdong. This second-hand business may be much bigger than imagined.

Graduated from Fudan, once failed to start a business 80 programmers rely on recycling cell phones to run to IPO bell ringing

Behind Love Recycling is a post-80s programmer from Fudan University.

In 1980, Chen Xuefeng was born in Huangshi, Hubei province, and studied at Tongji University as an undergraduate, then obtained a master’s degree in computer science from Fudan University. 2006, after graduating from university, Chen Xuefeng worked as a technical manager in Shanghai for a while.

Until the appearance of Fudan alumnus Sun Wenjun. In 2008, Chen was impressed by a news story – “Pin for Villa”, in which an American man bartered for a villa in more than a year. In 2008, Chen was impressed by a news story about an American man who bartered for the right to use a double-storey villa for a year with a single pin.

The idea of entrepreneurship was then born in the minds of the two men. They realized that with the development of China’s economy, the problem of what to do with surplus household goods was becoming a problem. Therefore, Chen Xuefeng chose to start a “second-hand” business, building a C2C platform, Leyi.com, for bartering. At that time, the project won a 100,000 RMB start-up fund from Fudan University.

After two years of part-time work, it was only in 2010 that Sun Wenjun and Chen Xuefeng went into full-time operation of the website. At that time, the main employees of the company were some part-time students from Fudan University, and these people basically stayed with the team after graduation. However, when the team of Leyi.com expanded to more than 10 people, the project couldn’t be done anymore.

Chen Xuefeng later reflected: “There are three main reasons why this project was not successful: first, I am from a technical background, and when I made the platform, I hoped to achieve matching through technical means, but it was later proven to be very difficult; second, because of our lack of market and user thinking, the project was out of the basics; third, the platform transaction volume was insufficient, and we ignored the The ‘pin-for-villa’ case was serendipitous in nature and took more than a year to complete intermittently, and for the platform, the fragmented transaction demand could not support an effective order.”

The failure of the project once brought the team to the verge of disbanding, and also made the team calm down again to think. Behind closed doors to seriously review, Chen Xuefeng believes that there are still opportunities in the second-hand industry. “At that time wanted to choose a not popular, difficult to do the industry, not so then countless competitors, BAT and other large players eyeing, there has long been no opportunity for you.”

So the team chose to transform and target the direction of electronic product recycling. 2011, love recycling was officially born in Shanghai. Initially, Love Recycling was only an online platform, but because electronic products need to be professionally tested, the purely online approach was prone to user disputes over the quality and price of goods.

Negative comments such as “malicious price” and “non-transparent procedures” also had a negative impact on the brand image of Love Recycling, and although this “generation gap” could be effectively solved through face-to-face recycling, the cost of explanation and operational efficiency could not be optimized.

Thinking about it, Chen Xuefeng made a bold move – to open offline stores, and in dense, expensive shopping malls. This really surprised everyone, it was the time when the O2O concept was hot and various pure online platforms were attracting people’s attention with their low cost, light mode and fast expansion.

At the end of 2013, the first offline store was opened amidst doubts, and since then, it has been unstoppable. Today, Love Recycling’s store revenue accounts for more than 50%, and the store’s offline transactions and advertising effects have long covered the high costs.

In September 2020, “Everything New” replaced “Love Recycling” as the new group brand, and the new brand has 2 business segments – used cell phone business and garbage sorting business. In the words of Chen Xuefeng, Love Recycling has transformed from a consumer Internet company focusing on cell phone recycling to an industrial Internet company driven by supply chain capabilities.

After 10 years in business, Chen Xuefeng, an ordinary programmer at the beginning, has become the CEO of a company with thousands of employees step by step, while about to win his first IPO.

With an annual revenue of 4.8 billion and 750 stores, this hard business can support an IPO
How can a humble second-hand recycling business support an IPO?

At the beginning, Love Recycling started with recycling cell phones, focusing only on the online platform. In order to improve operational efficiency, Chen Xuefeng began to think about transforming offline in 2013. After a series of market surveys, he found that the cost of the store model was lighter than expected, and that consumers were more willing to spend in the superstore scenario. Obviously, this is the best scenario for used cell phone recycling.

Chen Xuefeng has done a simple calculation: the one-time hardware investment for a simple store is 70,000 yuan, and the monthly operating cost of a store is about 30,000 yuan. The prospectus shows that by the end of March 2021, the company had 755 stores, of which 733 were Love Recycling stores. This means that in store operations alone, Love Recycling also needs to consume nearly 300 million yuan a year.

The company has already made a profit on used electronic products in 2017, but Chen Xuefeng is already planning the next step – the incubation of the B2B model of the pat machine hall business. This is the first step in the layout of the whole industry chain, and an important step in making the outside world aware that “love recycling is more than just cell phone recycling”.

In June 2019, love recycling merged with the pat pat of Jingdong, the oldest of the e-commerce circle, to make up for the shortcomings of its own B2C business, and also got the precise traffic of Jingdong 3C trade-in, finally forming a complete closed loop of C2B+B2B+B2C. Chen Xuefeng believes that this is a strong combination of chemistry, but also love the recycling of the “counter-trend flip”.

After owning the three business brands of 3C products C2B recycling platform “love recycling”, B2B trading platform “pat machine hall” and B2C retail platform “pat pat”, love recycling will In fact, as early as in 2017, Love Recycling extended its tentacles to overseas. In fact, as early as 2017, AHS invested in Cashify, an Indian cell phone recycling company, and then bet on Trocafone, the largest second-hand company in South America, and built an automatic operation center with ecoATM, the largest cell phone recycling company in the United States, thus forming the “AHS DEVICE” overseas segment. overseas segment.

The four major businesses have fired at the same time to create today’s Everything New Life Group. According to the prospectus, in the past 12 months ending March 2021, AHS DEVICE has sold more than 26.1 million units of second-hand goods (excluding Jingdong spare parts warehouse business), and the total GMV of the whole platform was 22.8 billion RMB, ranking first in the Chinese market.

Fudan students "garbage collection" to support an IPO: valued at 25 billion

Revenue surfaced – the prospectus shows that from 2018 to 2020, the company’s revenue will be $3.262 billion, $3.932 billion and $4.858 billion, respectively. Moreover, the company’s overall gross margin for 2020 is 25.7%, a figure that is already higher than some cell phone manufacturers.

Although Chen Xuefeng has repeatedly stressed that “no bloodshed will be listed”, profitability is one of the problems it has faced in recent years. The prospectus shows that from 2018 to 2020, the company’s net loss will be 210 million yuan, 700 million yuan and 470 million yuan, respectively. In other words, in the past three years, Wangsheng has accumulated a loss of nearly 1.4 billion yuan.

Behind the VC / PE gathered, valued at 25 billion Why they look at the secondary market
Financing, is one of the life and death of Chen Xuefeng’s ten-year venture.

In 2011, Love Recycling successfully received $2 million in Series A financing from Five Sources Capital (formerly Morningside Capital), the first investment institution introduced by Chen Xuefeng’s team. According to Chen Xuefeng, Wuyuan Capital was interested in the huge but empty market of the second-hand recycling industry, followed by the recognition of Love Recycling’s team, which “graduated from a famous school, worked for a famous company and had a lot of experience”.

However, in the following three years, Love Recycling repeatedly hit a wall on the way to financing. Chen Xuefeng once recalled: “At that time, the flow model of Internet companies was in full swing, an Internet company to do stores, that is dirty, tired and stupid, basically no one recognized”, and even the TS (investment letter of intent) that had been signed with investors was torn up twice.

Several times by the investment institutions splashed cold water, which made the whole startup team feel desperate at that time. It was not until July 2014 that Love Recycling received a Series B investment of $8 million from IFC and Wuyuan Capital, an investment institution of the World Bank. Since then, Love Recycling opened up the financing situation, and in the course of the following years, it almost kept the rhythm of one round of financing a year. The round led by Tiger Global Fund and followed by Jingdong in July 2018 was particularly smooth. “Launched in March, arrived in June.”

The logic behind the VCs’ move is easy to understand – China’s cell phone recycling rate is low, with more than half of all cell phones in an idle state; but at the same time, the system is ponderous, with varying standards of recyclers at all levels, leaving the entire cell phone recycling industry still in a more fragmented state, lacking quality branded recyclers to provide reliable one-stop recycling for used cell phones With the immature market situation and huge market demand, the future potential of China’s 3C product recycling market is huge.

The epidemic is another impact on Wangsheng Group. During this period, there are media reports that Wangshang has pushed the “salary concession” system internally, i.e., the whole staff “concession” of 10%-30%, and at the same time, a series of benefits and subsidies such as five-insurance and one-fund are cancelled, and employees are required to work in the company for 12 hours a day on average. Some employees even said on social media. Some employees even said on social media that the company’s series of practices “are the rhythm before the closure”. Then in September, while upgrading its brand, Everything New Life officially announced a $100 million Series E+ round of funding to dispel the rumors.

Now the Everything New Life Group has brought together a large team of investors. SkyEye search APP shows that the Everything New Life Group has conducted at least eight rounds of cumulative financing of over $1.1 billion, behind which surfaced more than a dozen VC/PE institutions and giant enterprises, including Wuyuan Capital, Tiantu Investment, Jinglin Investment, Dacheng Caiji, Kaihui Fund, Qianhai Mother Fund, Tiger Global Fund, Qicheng Capital, Guotai Junan, Qingxin Capital, Jingdong, etc., which is considered luxurious.

It is noteworthy that Crypto also joined the camp of investors of Everything New Life Group in 2021. This means that after having Jingdong as the core leverage, Love Recycling finally took Racer outside the fifth ring and ran to the small town youth who also have a strong demand for used mobile digital products.

Before the IPO, founder Chen Xuefeng held 10.9% of the shares of Wangsheng Group, while the largest shareholder Jingdong Group held 34.7%; Wuyuan Capital held 14.0%, the largest VC investor; in addition, Tiantu Investment and Tiger Global Fund held 8.5% and 7.3% of the shares respectively.

Fudan students "garbage collection" to support an IPO: valued at 25 billion

Sources say that Love Recycling is seeking a valuation of $4-5 billion at the IPO. This is also in line with the IPO planning roadmap of “valuation to $4-5 billion before going public”, which Chen Xuefeng has stressed many times before. In other words, the minimum market value of Love Recycling is 25 billion RMB.

Ten years running, experienced all kinds of bumps on the road of entrepreneurship, the sense of crisis has been accompanied by the new life of everything, Chen Xuefeng once said in an internal mobilization meeting: “As an Internet enterprise strongly dependent on the offline retail industry, everyone should be prepared to live a hard life.” And now, this company has stood in front of the IPO bell ringing gate.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/fudan-students-garbage-collection-to-support-an-ipo-valued-at-25-billion/
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