EverYi Capital places strong emphasis on “discipline.”

Key Takeaways:

1. Consumer goods is one of the most democratic and fair industries.
If the product is good and can reach consumers, they will buy and repurchase. If not, no amount of advertising or branding can convince them to keep paying.
2. “All consumer goods deserve to be reinvented” is not necessarily wrong, but the key issue is who should reinvent them.
3. Consumer upgrades are not just about raising prices. It can also mean improving quality at the same price point, increasing value for money, and making products more affordable while maintaining high standards.
4. Marketing is necessary, but product quality is paramount. The product is the fundamental “1,” while marketing is just the “0” that follows. As long as capital supply is unlimited, so is traffic, but business fundamentals must remain strong.
5. Investors must understand operations. Helping portfolio companies requires real operational experience. Before stepping into execution, everything may seem easy.

Consumer Investments Cool Down, but Strong Brands Keep Thriving

Over the past year, the cooling of new consumer investments has been one of the most noticeable shifts in the venture capital space. However, despite the slowdown, there have still been notable success stories.

• In January 2022, Yellow Swan, a premium edible egg brand under Fengji Food Group, completed a 600 million RMB ($89 million) Series C round.
• In July 2022, Landbase, the parent company of emerging chocolate brand CHOCDAY, raised two consecutive rounds totaling over 100 million RMB in Q2 2022.
• In March 2022, Mistine, a leading sun care and beauty brand, secured over 200 million RMB ($30 million) in its first external funding round.

What stands out is that EverYi Capital has backed all three of these consumer brands—each a leading player in its niche. The firm led CHOCDAY’s Pre-A round in early 2020, invested in Yellow Swan’s Series B later that year, and co-led Mistine’s funding round at the end of 2021.

Besides these investments, EverYi Capital is also one of the investors behind Genki Forest, the highly successful beverage brand.

EverYi Capital’s cautious approach to consumer investments sets it apart. Unlike many firms that aggressively chased deals in the past few years, EverYi has made fewer than 20 investments in its seven-year history.

“We felt uncomfortable with the pace of consumer investments in the past two years,” admitted Leo Fang, Founding Partner at EverYi Capital, in a recent conversation with IPO Zaozhidao.

EverYi Capital’s Investment Philosophy

Product First: Why the Right Consumer Products Matter

EverYi Capital firmly believes that product quality is the most important factor when assessing an investment opportunity.

“Consumer goods is one of the fairest industries—if your product is good and can reach customers, they will buy and repurchase. If it’s bad, no amount of advertising or storytelling can change that.”

This product-driven approach is also reflected in their operational support for portfolio companies. To enhance decision-making and post-investment support, EverYi has built a dedicated operations team.

Notably, EverYi Capital brought in:

• Carol Shen, former China GM at Estée Lauder and Greater China President at Gucci, as an Operating Partner.
• Gregory Cattin, formerly responsible for Danone China’s imported beverages business, Nestlé China’s RTD beverage unit, and VP of Sales & Marketing at Yinlu, as a Senior Advisor.
• Leo Fang himself previously served as China GM for luxury chocolatier Pierre Marcolini, where he opened the brand’s first store in China.

This hands-on approach has yielded results. When EverYi invested in Little Ondine (a beauty brand later acquired by Yatsen Global), its team restructured the product lineup, adjusted pricing, and expanded to international markets.

A similar post-investment strategy is being implemented with Mistine, where EverYi’s operating team is closely working with the brand on product strategy and positioning.

Discipline in Investment: A Rare Quality

Another defining characteristic of EverYi Capital is its emphasis on discipline.

“From the very beginning, we’ve emphasized discipline—just like in long-distance running, swimming, or fitness. You don’t see significant results in a week or a month. But after a few years of persistence, the outcome is undeniable.”

In a market where many firms rushed to deploy capital, EverYi took its time.

“We reviewed many deals in 2021 and issued multiple term sheets. However, we refrained from closing most of them for three reasons:

1. Not enough time to validate business models.
2. Many businesses were heavily dependent on capital rather than organic growth.
3. Valuations were often based on traffic size rather than fundamental business performance.”

This cautious approach has allowed EverYi to invest selectively, prioritizing long-term sustainability over short-term hype.

Q&A with Leo Fang, Founding Partner of EverYi Capital

1. The Consumer Industry Doesn’t Follow a ‘Winner Takes All’ Model

Q: Why did EverYi Capital remain highly selective during the past two years?

Leo Fang: The consumer sector doesn’t have the same barriers to entry as tech. This led to a flood of capital and new players, which created an overheated market. We expected a correction, so we stayed patient.

Q: Why did so many investments fail to materialize?

Leo Fang:

1. Many business models weren’t validated over time.
2. Companies relied too much on capital to drive growth rather than organic demand.
3. Valuations were traffic-driven rather than based on sustainable economics.

2. Marketing Helps, But It Can’t Replace a Good Product

Q: Many brands burned cash on traffic acquisition. What’s your take on this?

Leo Fang:

• Marketing is necessary, but product quality is the core.
• If traffic spend doesn’t lead to sustained growth, it’s time to reassess the product, team, or market positioning.
• “Unlimited capital means unlimited traffic—but that doesn’t build a strong business.”

3. The Right Team Matters More Than Just an Idea

Q: The phrase ‘All consumer products deserve to be redone’ has been widely used. Do you agree?

Leo Fang: It’s not about whether products should be redone—it’s who should redo them.

• Some categories, like edible oils, are better suited for large enterprises (e.g., COFCO, China Resources, Cargill).
• But premium eggs (Yellow Swan) or sugar-free chocolate (CHOCDAY) benefit from innovative challengers.

4. Overseas Brands Need Local Expertise to Succeed in China

Q: EverYi has invested in overseas brands. How do you decide which ones to bring to China?

Leo Fang:

• We evaluate whether importing a proven international brand is more efficient than starting from scratch.
• We directly invest in foreign brands and help them localize for China.
• Example: We invested in U.S. beauty brand Lime Crime, helped set up its China operations, and guided its market entry.

5. Lessons Learned in Consumer Investing

Q: What mistakes have you made in the past seven years?

Leo Fang:

• Underestimating the importance of execution.
• Misjudging teams and business models.
• Experiencing real operational challenges.

Q: Final thoughts?

Leo Fang: The market slowdown is a great opportunity. When the dust settles, we aim to hit the bullseye.

Original: https://mp.weixin.qq.com/s/nJE9F5W0cUTBP1fMq3JcLg (translated with ChatGPT)

By Stone Jin, IPO Early Know | August 9, 2022