Sky9 Capital Founder and Partner Ron Cao reflects on 4 years with Power Bank Sharing’s #1 Stock, Energy Monster

2021-04-11 Source: Author: Jiali Zhou

Energy Monster listed on the NASDAQ stock exchange on April 1, 2021 with an issue price of $8.50/ADS and an opening price of $10/ADS, giving the company a total market capitalization of $2.3 billion. This marked the birth of power bank sharing’s number 1 stock, which also means that Sky9 Capital ushered in another listed company after the A-share listing of Qingcloud Technology earlier this year.

Back in May 2017, the Sky9 Capital team had already met all of the power bank sharing companies in the market. Then they met Mars Cai, co-founder Energy Monster. Cao remarked, “We were impressed by Mars’ from our first meeting. He exhibited a strong startup mentality, deep knowledge of the industry, and a tight, cohesive team. We had a great conversation and thought highly of each other.”

Shortly thereafter, Sky9 Capital invested in Energy Monster’s Series A financing and continued to invest in subsequent financing rounds over the next four years, becoming one of its top 10 shareholders. Now, Energy Monster has successfully tapped into the public markets, and Sky9 Capital, a consistent supporter, also received significant returns. “Becoming a unicorn in three years and going public in four years is rapid company growth. As an investor, my main feeling throughout this process is excitement and peace of mind,” Cao said.

The birth of power bank sharing’s number 1 stock

Sky9 Capital shares the investment backstory

The relationship between Sky9 Capital and Energy Monster began in 2017.

At the beginning of 2017, bicycle sharing companies like Mobike and ofo were growing like crazy and receiving multiple massive funding rounds. The market sentiment about the sharing economy reached a climax.

It was during this time that Mars Cai personally experienced a disappointing episode trying to charge his phone. As a former FMCG, consumer-focused executive in his thirties, he suddenly had a bold idea: make a better shared power bank. That’s how Energy Monster was born.

Sky9 Capital had already noticed the power bank sharing trend. Sky9’s team had been researching and tracking sharing economy business models, and Cao himself is an early investor in the sharing homestay platform Tujia. Sky9 Capital analyzed and evaluated various sharing economy business models rationally and logically. Unlike some models with overly optimistic market projections, Sky9 Capital believed there was indeed a strong demand for shared power banks and thus it had a very large market potential. In addition, the cost and rental price of shared power banks also made this a sustainable business with a short payback period. “It is worth entering this market segment.” In May 2017, when the Sky9 Capital team met Mars at Energy Monster’s office, they had already met almost all the power bank companies in the market. Energy Monster’s founding team was in place and attracting talents from tech giants like Meituan, Uber, Alibaba, and others.

Mars has served in branding and marketing roles for many well-known companies, such as Unilever, Element Fresh, and Uber China. So he has a deep understanding of consumer products. At the first meeting, Mars left a strong impression on Sky9 Capital. “We were impressed at the first meeting by Mars’ strong startup mentality, deep industry knowledge, and his tight and cohesive team. We had a great chat and thought highly of each other,” Cao said, adding that Sky9 Capital became more determined to invest after observing the company’s data management system. “The first time I visited [Energy Monster’s office], I was very impressed. The company introduced their comprehensive digital management system with big data analysis, which enabled them to monitor operational details down to each point of interest. Considering the data system, team members, company culture and other aspects, there is no doubt that this is a highly qualified team.”

Two months later, Energy Monster announced that it had completed its Series A round of financing of RMB100 million. Sky9 Capital appeared on the shareholder list for the first time. However, power bank sharing at that time was no longer a new thing, and Energy Monster faced many competitors. “Energy Monster was the last mainstream player to enter the market. When it was founded, the other companies already had large volumes and huge financing rounds. But we believed the market still had a lot of upside, so being a few months late to market was nothing for Energy Monster,” Ron recalled.

With the same confidence as its investors, this rising star quickly expanded across the country. Mars and his team set their sights on the underdeveloped markets and soon reached hundreds of cities and more coverage than many of his competitors. How does Energy Monster do it? “This team believes in a development philosophy that by leading the competition by 5-10% in every aspect, it will magnify and result in huge advantages, and that’s what they did,” Ron analyzed. “Based on their understanding of product design, core technology, operations, and funding, Energy Monster has built a well-established team to run wildly on the track with the lowest cost.”

“Charging” the company—how investors supported the company

The journey for  Energy Monster was not all smooth sailing.

In the second half of 2017, with the collapse of several bicycle sharing companies, the sharing economy bubble began to burst, which also affected power bank sharing. To make matters worse, the venture capital market was entering a “capital winter” where investors became very conservative, making it even harder for power bank sharing startups to raise funds.

Given this situation, Sky9 Capital took the lead in expressing its firm support for Energy Monster, and told Mars that it would go against the trend and invest again. Sky9 Capital guided Mars to meet the existing Series A shareholders , and finally several old shareholders came together to support the company. In November 2017, Energy Monster received RMB200 million in a new round of financing. Thanks to this financing round, the company was able to further scale its business.

Meanwhile, Sky9 Capital also supported the company with recruiting, product strategy, and corporate strategy. “We had discussed how Energy Monster can seek strategic cooperation while also maintaining independence. The timing of a strategic partnership is very critical, because the right timing can help the company develop sustainably and healthily,” Ron said.

The pandemic was the biggest crisis faced by Energy Monster since its establishment. There was almost no cash flow for several months.“The emotional weight we carried this year was greater than all the previous years combined,” said Mars. To help overcome this difficult time, Sky9 Capital supported the company in numerous ways. “At that time, we helped the company improve its liquidity, supplementing cash flow through debt financing, which not only helped it survive the pandemic, but also prepared the company for expansion post-pandemic. We also assisted the company in setting operations strategy, like how to optimize site efficiency and personnel efficiency.” Ron said.

“After easing out of the pandemic, Energy Monster clearly runs faster.” According to the prospectus, the adjusted net profit of the company was RMB112.6 million in 2020, of which revenue in the second half of the year reached RMB1.851 billion, an increase of 38% year-on-year. Its non-GAAP net profit was RMB205 million, an increase of 56% year-on-year.

After four years of partnership and three rounds of financing, Sky9 Capital ushered another listed company in to its portfolio with Energy Monster’s IPO. Energy Monster was officially listed on the NASDAQ stock exchange on April 1st with an issue price of $8.50/ADS and an opening price of $10/ADS, giving the company a total market capitalization of $2.3 billion. This marked the birth of the “number one power bank sharing stock.” This was Sky9 Capital’s second portfolio company listing publicly this year, after Qingcloud Technology listed on the A-shares market earlier this year.

Reflecting on the journey so far, Cao said,“Becoming a unicorn in three years and going public in four years, the company has developed rapidly. As an Energy Monster investor, during this time my primary emotions have been excitement and peace of mind. The company was very disciplined at regularly providing detailed business forecasts, and with the exception of the pandemic, the company is basically growing as planned, which reflects the team’s deep understanding of the business.”