KOL video E-commerce platform Hua Juan, as well as a Ventech China portfolio company, completed USD40 million Series B financing recently. The investment was led by Sinovation Ventures, and Ventech China followed the investment. As one of the earliest investors, Ventech China led Hua Juan’s Series Angel financing in 2016, and followed the company’s Series A and A+ financing.

Headquartered in Beijing, Hua Juan is an E-commerce platform featured with advertising short videos performed by KOLs, targeting mainly at female customers from tier 2 to 4 cities in China. For each SKU on the platform (currently mainly cosmetics), Hua Juan will attach one or two short videos, usually 1-3 minutes long, showing KOLs introducing and selling the product.

Incepted in June 2016, Hua Juan accumulated over 100,000 registered users within one quarter since its establishment. By 2017Q2, Hua Juan had over 100,000 DAU and around 70% monthly repurchase rate. The company also realized an ARPU of around RMB 280. The company’s fast growth comes from its solid business model leveraging the advantages of short advertising videos, numerous medium-level KOLs, and proper SKU selection.

Short video has now become an essential media form in China’s internet recently. Short videos are convenient to produce, watch, share and spread, and therefore possess rich advertising value. Compared with residents in tier 1 and leading tier 2 cities, people in tier 2 to 4 cities in China are less informed about fashion trends and new products, and have to rely heavily on salespeople and offline store experience to make purchasing decisions. However, short videos that have natural and educative selling contents, can efficiently help users to know about new products and encourage them to buy. With strict quality control and customized training, Hua Juan enables KOLs to produce short advertising videos that are interesting, persuasive and natural, and can therefore effectively direct viewers to buy the products.

Seizing short video as a powerful marketing tool, Hua Juan also choose to cultivate numerous KOLs with medium-level influence rather than focusing on a few head KOLs. By mastering more KOLs, the company can cover users of more preference areas, and it is also easier for each KOL to deeply interact with followers and acquire their trust.

In addition, proper SKU selection also contributes to the company’s fast-growing business. Current SKUs are mainly cosmetics of long-tail brands, because compared to more popular brands that users may already be familiar with, pricing on such brands can be more flexible to generate decent profit margin, and KOL’s opinions are significantly more important for users to make buying decisions. After acquiring enough early-stage users, Hua Juan is now enlarging SKU range to include healthcare products and wine, who have similar advantages as long-tail brand cosmetics.

The successful business strategy was created by an experienced team. Ms. Han Hui, CEO & founder of the company, used to be marketing director for high-end men’s wear brand Masa Maso and car-dealing website Autohome.com.cn. She also founded career community Wolonge.com.

Ventech China fully recognizes Hua Juan’s strategy to combine short videos and KOLs with E-commerce. Eric Huet, Managing Partner of Ventech China points out that as the trend of consumption upgrade continues, Hua Juan will embrace broad business potential in its target market.