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Another sad scene.

Recently, some consumers received a message from the "Poyiyun" platform "to FlowerPlus platform users" stating that Shanghai Fenshang Network Technology Co., Ltd., to which FlowerPlus belongs, is currently undergoing debt clearance or restructuring. This means that the former flower unicorn is on the verge of bankruptcy and liquidation.

Founded in 2015, FlowerPlus focuses on daily flower consumption on a subscription basis and is one of the leading brands in China's flower e-commerce industry. It has received multiple rounds of financing and achieved a turnover of 800 million yuan at its peak. However, since September last year, FlowerPlus has fallen into an unprecedented crisis. The company's funds ran out and it was shut down for rectification. In December of the same year, its founder Wang Ke announced a restart and once sold flowers live to save himself, but his efforts were still unable to turn the tide.

This undoubtedly serves as a wake-up call to thousands of startups today: starting a business is difficult, and managing cash flow and surviving are the most important things.

Start of liquidation process

A flower unicorn falls

There were signs of this scene long ago.

As early as late June this year, the Shanghai No. 3 Intermediate People's Court issued an announcement stating that the rulingAccepted the bankruptcy liquidation case of Shanghai Fenshang Network Technology Co., Ltd., designated Shanghai Everbright Law Firm as the administrator.

The announcement stated that creditors of Shanghai Fenshang Network Technology Co., Ltd. (i.e. Huajia's parent company) should declare their claims to the administrator before August 24, 2024. Debtors or property holders of Shanghai Fenshang Network Technology Co., Ltd. should repay debts or deliver property to the administrator.

Further information comes from the "Notice of Bond Application for Bankruptcy and Liquidation of Shanghai Fenshang Network Technology Co., Ltd.", which was signed and sealed on August 8 this year. According to the notice, all creditors must declare their claims to the designated administrator within the prescribed period in order to participate in the subsequent liquidation procedures. The first creditors' meeting is scheduled to be held on September 4, 2024.

Before this, Huajia was already in crisis. In September 2023, Huajia issued an internal letter to all employees to suspend business for rectification, which caused a huge uproar. The letter stated:

The company has been facing unprecedented pressure since last year (2022). After struggling for more than a year, the founder and executive team have invested all their savings in the company, and I am personally already heavily in debt.

In the past few months, the company has been spending more than it earns due to the off-season, historical order fulfillment and bank repayment pressure; in early September, the company's bank account was blocked. The company had no choice but to decide to enter the stage of suspension and rectification.

Three months later, Huajia announced its restart. Founder Wang Ke said in an open letter to users, "Huajia has not closed down, the founder has not run away, and will not run away in the future, let alone lie flat." After that, he even started a live broadcast and sold flowers in the live broadcast room to save himself.

In January this year, Huajia issued another statement, using the revenue from new orders to fulfill contracts with old users and restart delivery to old users, with the first batch totaling 100 orders. At that time, Wang Ke lamented in the statement: "In 2023, Huajia experienced a fatal catastrophe. Strictly speaking, it is not an exaggeration to conclude that Huajia is 'dead'."

Despite many efforts, Huajia’s decline was unstoppable. Public information shows that Huajia’s official WeChat account was migrated in late July and renamed “Huajia Flower Subscription”. The account owner was changed from the original “Shanghai Fenshang Network Technology Co., Ltd.” to “Shanghai Zaolu Network Technology Co., Ltd.” The latter company was established in April this year, with Wang Xianhong holding 100% of the shares and serving as the legal representative.

Huajia founder Wang Ke is no longer in the new company.

After raising funds in the B round, why did it fail?

Wang Ke was born in the 1980s and started his business in 2010. He founded Linglingli Online Shopping and NOOLABEL Private Wardrobe, and is a serial entrepreneur.

In 2015, he founded Huajia, and proposed a daily flower subscription model of "online subscription + direct delivery from the source + value-added services". He once launched a 99-yuan monthly flower package, where users can order on a monthly basis and receive a bouquet of flowers on a weekly basis, aiming to make flowers a part of the lives of China's new middle class.

Mobile InternetIn that era, VC/PE was still investing in business model innovation, and Huajia also attracted a number of venture capitals. From its founding in 2015 to 2019, it completed six rounds of financing and became a unicorn company. Wang Ke once recalled that financing was not difficult at that time:

The investment circle at that time was relatively pure, which was more suitable for my personality, who was not good at socializing and drinking. Before 2020, I had never drunk alcohol in the rounds of financing for Huajia, and I didn’t even have much food with those investors. I just talked to them about business logic, repurchase rate, and user base, and the money came. The institutions that invested in me were generally more pragmatic.

Venture CapitalAfter entering the market, Huajia developed rapidly. The company built its own flower fields, sorting, procurement and other midstream links of the supply chain. It once had 15 million paying users and its monthly sales exceeded 100 million yuan. Wang Ke once talked about the situation at that time in a media interview: around 2017, the company's turnover reached 800 million yuan, supporting more than 10,000 people in the upstream and downstream industry chain. In 2018, 2019, and even in 2020 during the epidemic, Huajia was profitable.

But the situation took a sharp turn for the worse. During the epidemic, Huajia was deeply impacted; after the shadow of the epidemic receded in 2023, Huajia's business recovery was not as expected, and the platform renewal rate and the number of new subscribers shrank sharply.

Here, Hema,Dingdong ShoppingFresh food e-commerce platforms such as Douyin and Kuaishou have all started to engage in flower business. Under the competition from multiple parties, Huajia's living space was further squeezed until it issued a letter to all employees in September 2023 announcing that its capital chain was broken and it would suspend business for rectification.

“It must be acknowledged thatThe reason why Huajia’s capital chain was broken was due to its own organizational structure, management expenses and flower material cost risks., which should not be underestimated. "Wang Ke once reflected deeply that Huajia had received too much financing in the past. At that time, the company was in a period of rapid development and recruited a lot of surplus manpower and some high-end personnel, which caused a rapid increase in costs and conflicts between new and old employees. Internal consumption increased, but the business did not get any fundamental improvement.

During the crisis, the Huajia team tried to raise funds, but the investment market had changed. Unable to raise funds, Huajia's operations stagnated. At the most difficult time, the only 23 yuan left in Wang Ke's WeChat account was frozen.

At this point, someone advised him to file for bankruptcy directly. But he did not choose this path at that time, "Filing for bankruptcy is the easiest, but I don't want to do it. I think it's wrong and shouldn't be done this way." At that time, he had a belief in his heart that as long as the founder is unwilling to give up, it is difficult for a company to die.

We all know what happened afterwards: Over the past period of time, Wang Ke led the Huajia team to try hard to save themselves, but it seemed that they failed to turn the tide.

2024, the last one standing will be the winner

The alarm bells sounded.

Since 2024, sentiment in the venture capital circle has remained depressed. When investment institutions are faced with difficulties in fundraising, cautious investment, and difficulty in exiting, the chill quickly spreads to entrepreneurs, and startups without the ability to generate revenue are now in danger.

Just halfway through this year, we have already witnessed a number of star companies falling into crisis, with layoffs, salary cuts, and even founders publicly saving themselves. Without exception, they were once the best in the venture capital world, and some of them have embarked on a path of being unable to make profits, running out of funds, and trying to save themselves until they quietly collapsed.

When money is more expensive than ever, a cruel test of life and death is placed before unicorns, and the cash flow of enterprises has become a core indicator that everyone attaches unprecedented importance to.Cash flow is the lifeline of a business.

This truth resonates more and more in the current environment. Only good cash flow can help startups go further. "But many entrepreneurs are too optimistic, spend money recklessly, and have no basic understanding of cash flow," said Zhang Ying, founding managing partner of Matrix Partners, in an interview.

It is better to make blood than to rely on blood transfusion. Li Hongwei, managing partner of Qiyuan Capital, once suggested entrepreneurs:Develop a clear cash flow plan for at least the next 36 months.In her opinion, finding various ways to create cash flow in this complex environment is the most important task at present. Only in this way can we achieve sustainable development and build a solid foundation for our business.

Dachen Capital's Xiao Bing also talked about his feelings this year. We cannot change the macro situation, but we can do a lot in the micro situation. He reminded entrepreneurs to strictly control risks and operate prudently. "This is also what we often remind companies. The current situation requires a slow expansion and iteration speed. Cash flow is more important than anything else. For example, if you can run 100 meters, you should run 95 meters and leave some speed for redundancy."

At the same time, entrepreneurs should also be wary of developing path dependence on past successes. “In the current venture capital environment, industry selection is too important.Entrepreneurs should not stick to one industry, but should be flexible and proactive in transformation.”

Looking back over the past three years, the unprecedented changes are profoundly affecting every industry, every company and even every person. In this situation, some entrepreneurs decided to try another option: selling their companies.

This year, we have witnessed the birth of many M&A transactions.Tongwei SharesThe acquisition of Runyang shares with RMB 5 billion created the largest merger and acquisition in the history of photovoltaic industry. The transaction value is comparable to that of Runyang shares.IPOThe highest valuation of 40 billion yuan at that time was considered a "discount".

Even so, many people in the industry believe that this is still a natural deal. "The situation is stronger than people, and it is better than struggling alone until the capital chain is exhausted and the company goes bankrupt." An investor said frankly. All these are footnotes of the times.

Perhaps this winter will be a little longer than expected, but as long as we are still at the table, there is still a chance.

References:

"Huajia founder: The only 23 yuan left on WeChat was also blocked", China Entrepreneur Magazine

"Huajia founder: I don't want to be pitiful, I just want to survive", Daily People