In 2016, the landscape of investment in China took on an intriguing turn when Bubble Mart — a company known for its collectible toys — found itself at a critical junctureFounder Wang Ning participated in a reality show aiming to secure funding for his companyThere, he encountered Wang Cen, a partner at Sequoia Capital China, and their instant camaraderie culminated in an on-the-spot agreement for investment, valuing the company at a staggering 1 billion yuan for a 15% stakeHowever, despite the apparent chemistry on stage, the deal never materialized, highlighting an enigmatic divide between perceived value and actual engagement in the venture capital world.

As time progressed, Bubble Mart went on to achieve an initial public offering, skyrocketing in valuation to 100 billion yuan, a development that left Wang Cen regretting his earlier shortsightedness regarding the burgeoning market for trendy toys, particularly in appealing to Generation ZThis phenomena of failed investments and subsequent regret was not isolated; it was reflective of a broader misjudgment among influential venture capitalists and private equity firmsMany in the industry witnessed this epic miscalculation with disbelief as Bubble Mart's trajectory took the form of a pronounced "U," resulting in profound consequences for lesser-acquainted investors in the secondary market.

The situation was further complicated by investors such as Zhang Kun, a prominent fund manager, who absorbed the stock collapse during the initial phase of the "U" and made astute decisions at the trough of the downturn, ultimately enabling him to cut losses right at the nadir of both Bubble Mart's stock price and its dismal performance metrics.

By the end of the last year, Bubble Mart's market cap rebounded to the 100 billion level, offering an unintentional investment lesson to all who had previously held shares in liquor giants like Guizhou MoutaiThis resurgence revealed the often fickle nature of market confidence and sentiment — and compelled one to echo the sentiments of the ancient Greek philosopher Heraclitus, who posited that one cannot step into the same river twice

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Had he invested in Bubble Mart, perhaps he would have reconsidered this notion.

The backdrop against which Bubble Mart emerged involved an ecosystem captivated by cash flows from Generation Z consumers, a market that had witnessed its archetypal totemic figure in the form of Bilibili, a platform that underwent its own explosive IPO in 2018. With a user base marked by engagement and a vibrant community atmosphere enhanced through features such as bullet comments, Bilibili became the flagbearer for the so-called Generation Z stocksDespite the expansive losses it faced, the three years following its market debut saw its valuation multiply by over 885%. This contradiction encapsulated a market fever as unabashed capitalists rallied around the idea of youth-driven entertainment.

As the May Fourth Youth Day approached in 2020, the influential actor He Bing inadvertently became a casualty of Bilibili's viral expansionHis misstep of reciting someone else's words left him exposed, painting the smirking capitalists in a light that saw Bilibili ascend to rarefied valuation heightsNot long after, Bubble Mart followed suit with its IPO and witnessed a rapid climb to nearly 130 billion yuan, achieving a zenith that set a precedent in the valuation of consumer-facing companiesThis dizzying pace showcased a primal anxiety in the capital market, driven by "FOMO" — the fear of missing out on the next big investment opportunity in a youthful market narrative, where Bubble Mart emerged as a notably scarce commodity.

The exorbitant valuations assigned to both Bilibili and Bubble Mart weren't merely the result of excitement and anxiety but also were fueled by investors seeking to make up for a perceived oversightBilibili had raised an impressive 184 billion yuan during the three years leading to its IPO, while Bubble Mart's earlier fundraising efforts were a pittance, totaling only 80 to 90 millionInvestment managers, conditioned to believe that collectible toys didn’t hold any traction as a market, couldn’t see past its brick-and-mortar business model.

However, by 2017, Bubble Mart's fortunes shifted; they found themselves flush with capital thanks to a growing array of investors, including the high-profile backers from Sequoia Capital, who held less than 5% by the time of their IPO

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In this context, market scarcity played a major role as demand began to outpace supply, invariably triggering a chaotic surge in investments.

Similarly, the wave of consumer goods entered a new renaissance, where the count of new brands prepared to hit the stock market rivaled the number of aspirants on Douyin (the Chinese version of TikTok). This era saw a handful of brands emerge successful, while many floundered amidst the shifting tides of consumer sentiment, only Bubble Mart and Beitaini demonstrated distinct profitability and robust repeat purchase rates.

Bubble Mart's unique model, thriving on the enticing gamble of blind boxes — wherein consumers are tantalized by the spontaneity and thrill of the unknown — tapped into a dopamine-fueled demand reminiscent of gamblingWhile Beitaini struggled with lower customer re-purchase numbers, Bubble Mart’s success was clearly rooted in its ability to offer experiences that blurred the line between traditional consumption and playful distraction.

However, 2022 marked a tumultuous pivot for Bubble Mart, as its profit nearly halved amid declining growth and mounting inventory challengesInvestors faced a challenging dilemma as they navigated through an economic landscape marked by downfall, particularly in sectors reliant on brick-and-mortar salesThe sentiment in the market vacillated between optimism and pessimism, revealing an erratic trend in the exposure of business entities forming expectations in line with market conditions.

By September of that same year, Bubble Mart’s valuation had plummeted by nearly 90%, leaving a despondent Zhang Kun with a harsh initiation into the volatile dynamics of Generation Z investmentsNevertheless, despite observed declines, Bubble Mart maintained a relatively robust position boasting significant cash reserves and profitability–a stark contrast to competitors whose valuations had been decimated.

Wang Ning's assertion post its IPO centered on the unpredictable nature of investor sentiment, denoting that the same investors oscillated between blind optimism and pronounced pessimism

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Various challenges plagued Bubble Mart, chiefly its over-reliance on its flagship product line, Molly, an imbalance in sales channels, and lingering debates surrounding the size of the trendy toy marketSuch uncertainties mirrored the conversations around whether Tesla was merely a car company or rather an artificial intelligence powerhouse at its core.

Bubble Mart responded to these challenges by diversifying its product lineup, targeting expansions beyond its erstwhile Moly-centric investments while growing newer IPs like Skull Panda, successfully reducing Molly's revenue proportion from over 40% in 2018 to approximately 17% in 2022. It also adeptly navigated an uncertain regulatory landscape involving the blind box trend, thereby pursuing new product types and sources of revenue.

Furthermore, by enhancing its channel balance and dramatically increasing its online sales, Bubble Mart pivoted from a previous reliance on physical retail locations and solidified a digital strategy that saw profits yield through popular platforms like Tmall and DouyinBy 2022, online channels contributed to a staggering 43% of total revenues from a mere 10% in 2017. The once-static model began to flourish, suggesting healthy growth potential.

Amidst all, the new challenge remained the size of the trendy toy market itselfDue to their high discretionary purchase nature heavily reliant on loyal players, Bubble Mart’s membership sought to understand and optimize its outreach, unveiling considerable market potential yet to be harnessedFreshly armed with lessons and reformations, Wang Ning steered his company toward new horizons with an optimistic outlook on repurchases, spirited by rhetoric that the most arduous year was behind them.

By the end of last year, with favorable trends emerging from successful new IP launches, such as Labubu in foreign markets, Bubble Mart began to recover and exceed previous performance metrics, translating to promising profits

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