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中国SaaS行业的明日之星

2020-03-12

“疫情让每个中国公司意识到,数据对于促进业务运转的重要性。”在The Information关于中国SaaS领域新趋势的报道中,泰合资本董事总经理梅林表示,在疫情前只关注消费领域的投资人,都开始咨询哪个企业软件公司更值得投资。

Sensors Data CEO, Sang Wenfeng. Photo by Sensors Data.


So far, China hasn’t spawned any breakout enterprise software companies as successful as Salesforce.com and others of its kind. But venture capitalists and entrepreneurs in the country are more determined than ever to build one.

The weekslong lockdown prompted by the coronavirus forced millions of people in China to work remotely in February, a first for many employers in the country, where it is unusual to operate entirely online. That has turbocharged the quest for investors to find promising homegrown enterprise software startups, especially in the category of software as a service, which many investors see as the sector’s future. The list below includes five companies that could be among the winners.

The Takeaway

China hasn’t yet produced a breakout enterprise software company on the order of Salesforce.com, but the coronavirus lockdown has prompted investors to step up their efforts to find companies in the sector that could get big.

“Every business owner realized how important it is to have an online system to keep their business running,” said Rachel Mei, a managing director at Taihecap, an investment bank headquartered in Beijing and formerly known as TH Capital. She said startup investors who prior to the coronavirus were only looking at consumer deals are now asking for advice about which enterprise software companies to invest in.

Chinese enterprise software companies still face unique challenges to their growth. While business customers in the country have shown a willingness to use free messaging and collaboration tools from the country’s tech giants—including Alibaba’s DingTalk and Tencent’s Enterprise WeChat—their appetite for spending money on such applications isn’t as great as that of their American peers. Mei said spending on information technology in China last year was about 2.9% of gross domestic product compared to 4.3% globally.

Furthermore, Chinese companies generally haven’t embraced the trendy SaaS business model, preferring instead to buy software through one-time purchases, according to Jixun Foo, a managing partner based in Shanghai for GGV Capital, a venture firm.

“Chinese enterprises are more willing to pay for software [products] that increase revenue and reduce costs rather than those that increase efficiency,” said Hou Jiechao, founder and CEO of 100Summit, an enterprise-focused boutique investment bank.

Still, given the enormous size of China’s economy, even niche enterprise software companies could grow to become very large, investors say. This handful of companies in the category has a shot at reaching scale.

Moka

Co-founder and CEO: Zhao Oulun

Equity funding raised: $31.05 million

Investors: Hillhouse Capital, GGV Capital, GSR Ventures, Xiang He Capital, Frees Fund

Co-founded by Zhao Oulun and Li Guoxing in the fall of 2015, Moka is a SaaS recruitment software company that helps track job applicants for more than 10,000 recruiters. The company, which Zhao likens to Workday, had $10 million in revenue last year. About 60% of Moka’s existing clients are from the internet sector, while the rest hail from areas including retail and financial services.

Zhao—who studied at the University of California, Berkeley, and worked at Turo, a car-rental startup in the U.S.—formed Moka after finding it difficult to navigate the job-hunting process when he came back to China. “Some companies were trying to build software for an HR system but there wasn’t a strong brand in the market then,” Zhao said.

After quizzing roughly 300 recruiters, he built a prototype of Moka with his co-founder, Li, who had just finished his master’s degree in computer science at Stanford University. “Moka’s revenue is [purely] product driven,” said Zhang Yutong, a partner with GSR Ventures and an investor in Moka. “They don’t build private clouds or customized products for different companies, which is very rare that a SaaS company can do that in China.”

While Zhang said Moka was late to the market, its product is much easier to use than competing software. “When we did surveys with recruiters who have used Moka’s products, they told us using Moka is like using the iOS operating system, while using other products is like using Windows,” Zhang said.

One potential risk for investors are widespread reports that Moka’s founder was detained in connection to an investigation into a sexual assault. The current status of the investigation couldn’t be learned. Zhao has denied the allegations to Chinese media and declined to comment on the matter.

Sensors Data

Co-founder and CEO: Sang Wenfeng

Equity funding raised: at least $59 million

Investors: Warburg Pincus, Sequoia Capital China, DCM Ventures, Morningside Venture Capital, Xiang He Capital, Linear Venture, Future Capital

Sensors Data, founded in 2015, is a big data analytics company that recently closed a new round of fundraising at a valuation of more than $400 million. It now serves more than 1,000 companies—including marquee clients such as smartphone maker Xiaomi and search giant Baidu—and made more than 100 million yuan (about $14 million) in revenue last year, according to Sang Wenfeng, the startup’s co-founder and CEO. He wants to build the company into China’s version of Adobe Systems, he said.

Sang previously spent eight years at Baidu, where he helped the company build a data analytics and business intelligence platform. When he formed Sensors Data, he initially thought he could charge business customers 200,000 yuan (around $28,000) a year for access to its product. But his first paying customer was a startup founded by a former colleague from Baidu, which said it could only afford to pay 5,000 yuan (about $700) per year. Sang agreed to that price, though he now charges business customers 100,000 yuan (approximately $1,400) a year on average, he said.

Sang said China’s SaaS market is still in the early stages compared to the U.S. Sensors Data discovered it had to provide a very high level of consulting services to help onboard new clients, especially large ones from traditional industries such as retail and financial services. Sang said staff at those companies tended not to read the user guides Sensors Data had prepared.

“We soon realized we have to send our people to help them and walk them through the process step by step,” he said.

Kujiale

Co-founders: Chen Hang, Zhu Hao and Huang Xiaohuang

Equity funding raised: $110 million

Investors: Hillhouse Capital, Shunwei Capital, GGV Capital, Hearst Ventures

Kujiale, also known as Coohom, offers software that enables architects and interior designers to create 3D models. Founded in 2011 by three industry veterans who had worked at U.S. tech firms including Nvidia, the SaaS provider is among the first Chinese SaaS firms to reach unicorn status, with a goal of tapping into China’s huge construction and decoration market, worth 4 trillion yuan (around $565 billion) a year.

Kujiale’s cloud-based software allows 3D rendering of plans and designs in minutes, a process that could otherwise take hours. Unlike in the U.S., Chinese homes are typically sold as empty shells—often with unfinished floors and no bathroom fixtures—which homebuyers customize themselves. Using the app, designers can show clients what a finished home will look like and calculate quantities of floor tiles and other products they’ll need.

Kujiale has built a database of floor plans representing 90% of the existing urban housing in China, which it collected from government and property developer websites. Using the database, renovators can quickly call up the plans of a customer’s home and create a virtual model of the finished product. The company says it has 16,000 enterprise customers and 28 million active users of its website.

Its revenue model is similar to that of Zoom and other SaaS companies, with a simple version of the software available for free and a more sophisticated version for an annual fee. The company said 90% of its revenue is from providing subscription software, an unusual accomplishment for an enterprise services provider in China. In February, during China’s lockdown, when most businesses came to a standstill, Kujiale saw growth in usage over the year-earlier period as people conducted more business online.

Kujiale has set its sights beyond China’s borders, opening offices in Singapore, Malaysia and Silicon Valley, and wants to expand to offer design services for commercial spaces, not just homes. Last month, it announced the acquisition of Boston-based online design collaboration tool Modelo. “Our goal is to become a global web-based 3D design company,” said Shen Bei, Kujiale’s chief financial officer.

inDeco

Co-founder and CEO: Randy Wan

Equity funding raised: $22.14 million

Investors: Eight Roads, Source Code Capital, BASF Venture Capital, Saint-Gobain and ZhenFund

Founded in 2018, inDeco provides office space design and renovation services for enterprises, mostly tech companies such as ByteDance, Meituan and Xiaomi, the company says. Founder and CEO Randy Wan said the company made 200 million yuan (about $28 million) in revenue last year, a number it expects to rise to more than 500 million yuan (around $70 million) this year. The company plans to license its own software to other office-decorating companies next year for an annual subscription fee, Wan told The Information.

Wan’s experience with the challenges and frustrations of renovating the co-working spaces of his previous startup, Woo Space, inspired him to create inDeco (Ucommune, a Chinese rival to WeWork, bought Woo Space). “He knows the pain points in this process better than the others due to his previous experience,” said Source Code Capital’s Zhang Xingchen, who made an early investment in inDeco.

Office renovation in China is another highly fragmented industry with many small enterprises still tracking and managing projects on paper, which makes it difficult for their clients to monitor and check their work. Larger companies have more-advanced systems but also charge much higher prices. Wan wants to provide an option in between.

Wan, a Chinese American who moved to the U.S. with his family at the age of eight and went back to China to work at Boston Consulting Group after graduating from Cornell University, said he wants to enter the overseas market as well, starting with Singapore next year.

Zaihui

Co-founder and CEO: Li Xiaojie

Equity funding raised: $71 million

Investors: Yunfeng Capital, Lightspeed China Partners, DCM Ventures, Blue Lake Capital, ZhenFund, Bertelsmann Asia Investments, Ceyuan Ventures

Headquartered in Shanghai, Zaihui was founded five years ago to provide customer relationship management and marketing software for small- to medium-size restaurants in China. Li Xiaojie, co-founder and CEO, said the company serves some 10,000 stores and made 140 million yuan (about $19 million) in revenue last year. “We want to be the Shopify of the restaurant industry in China,” said Li, a seven-year veteran of Dianping.

Zaihui built its software on WeChat, the ubiquitous messaging app from Tencent. Zaihui’s software allows customers to order food, pay bills and receive coupons and notifications from restaurants. The restaurants it serves aren’t big chains and generally don’t have the skills to build such software on their own. China’s restaurant market is highly fragmented, with the top 100 largest chain restaurants accounting for only about 5% of the total.

Li said Zaihui addresses a need created by the 2015 merger of Dianping and Meituan, China’s equivalents, at the time, of Yelp and Groupon, respectively. Years of customer subsidies, free delivery services and other enticements for restaurants and other merchants ended with the merger. Li’s startup seeks to offer a cheaper and more direct way for restaurants to reach their customers.

Zaihui, which charges restaurants annual fees for using its software, also helps them manage their online presence on meal delivery apps. The software also tells restaurants how much they should charge for each dish, what discounts they should offer and how to get the notice of customers online.

Li said the Covid-19 outbreak has hurt his business, prompting the company to lower its initial goal of 300 million yuan (about $42 million) in revenue for the year to 200 million yuan (around $28 million).

Zaihui has raised a total of $71 million. An earlier version of this article relied on funding data from PitchBook that overstated the amount the company has raised, according to Zaihui.

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