By MA Yue

JIN Yu spends most of his time traveling around China. Jin is the investment director of Cyanhill Capital and spends his days meeting people. He attends investment events, drinks a lot of coffee, and generally makes himself available to meet anyone who might have a good idea to sell.

“What would have been a small coffeehouse gathering among two or three last year?is now a party of at least 20,” he said. “We are emerging from hibernation.”

Comfort in uncertain times

Over the past three months, financiers and investors in the consumption sector have been in full swing. Since December nearly 40 companies –bakeries, pre-made dishes, seasonings – have secured investment from venture capitalists. Tiger Attitude Chartered Pastry Bank, the bakery startup that was struggling to pay its employees, secured tens of millions of yuan from GGV Capital and Sequoia Capital in late December.

But after three years in a frozen economic wilderness, investors are cautious. Most of the ventures that received funding either had several rounds before the pandemic or had truly remarkable numbers despite the bleak midwinter of the market.

Cafes, teahouses and bakeries - popular before the pandemic - are recovering first. They are all standardized businesses with strong attributes. Many focus on local markets which is more manageable. In uncertain times, investors tend to choose comfort projects, sticking with what they know.

AoTiger, a Hangzhou-based?coffeehouse, recently received an angel injection from Plum Ventures. The operation is only four cafes in the city, each occupying less than 50 square meters. It sells basically beverages for around 10 yuan (US$1.50).?

AoTiger is founded by the team that created The Alley, a bubble tea chain that flourished about five years ago but was an early casualty in the price war. AoTiger is basically another bubble tea shop but sells coffee instead.

Resilient, but not immortal

“Coffee shops and teahouses are surprisingly resilient,” said Jin. “Even if 99 out of 100 stores close, you survive as long as you have one shop that reopens after the pandemic.”

But apart from the catering business, investment firms are firing their consumption teams and turning to hardcore technology or agriculture, which are thought to be more promising in the long run.

“If one comes to me and says he wants to start a consumption business, I’ll advise him to think twice,” said Jin. “It won’t be easy for newcomers to get funding.”