云服务（Cloud）以及其中所包含的SaaS (Software-as-a-Service), PaaS (Platform-as-a-Serive), IaaS (Infrastructure-as-a-Service)。我们认为，SaaS企业，在现阶段对中国创投与产业互联网的研究最具有价值。其一，阿里云、腾讯云、网易云把持了中国的公有云市场，阿里云更是在2019年第一季度以66%的增速讲其在中国市场的份额扩大至47.3%，另外，阿里提出了SaaS Accelerator战略，将与中国的SaaS企业共建生态系统。其二，SaaS企业在2016年经历了投资的高峰期后，市场逐步回调，进入稳步发展阶段。
我们根据KeyBanc Capital所跟踪的SaaS公司（截止今年1月），并补充了部分今年IPO的企业，共计覆盖66家SaaS上市公司。这些公司平均已上市4.56年，平均为其投资人带来4.59倍的投资回报，累计市值达到6100亿美金。有4家公司投资回报超过12倍: Shopify (SHOP), Paycom (PAYC), ServiceNow (NOW),以及Salesforce (CRM)。
亿欧国际EqualOcean将于本周日9月8日举办WIM X Beijing系列沙龙第二场《产业互联网——中国互联网的下半场Industry Internet – the Second Half of Internet Era》沙龙，祥峰投资助理投资总监姜煦女士将与来自百度风投的投资副总裁⽅鑫先生、弘玑Cyclone科技副总裁高煜丰先生，腾讯云副总裁及腾讯企点总经理张晔先生共话此命题。
Surf’s up! Riding on the second wave of Internet in China
To what extent an enterprise serves or B2B marketplace company influencing the industry can be considered as an Industry Internet player? The answer to that is the holy grail of China’s 2B market.
Consumer-focused business retained its cachet for the past decades in China, but technology startups that cater to businesses are the hottest topic now. Between 2000 and 2017, Chinese GDP reached to USD 12.2 trillion from USD 1.2 trillion. Along the way, China witnessed the successes of juggernauts such as Alibaba, Tencent, Baidu, JD.com, Meituan Dianping, Xiaomi, and NetEase; Chinese consumers gained the reputation of adopting new technologies with incredible speed and reshape Chinese consumers’ lives significantly. The country is transforming, especially driven by consumer internet.
It will continue to do so in the era of Industry Internet – a term initiated by Tencent’s founder Pony Ma in 2018 and shows the most valuable social network firm’s ambitions on leveraging internet capabilities across Chinese industries.
Industry Internet is a concept that involves most of 2B opportunities
Defining ”Industry Internet,” however, has become complicated- and more vital- as the combination of industry and internet can be too broad if we include all the to-business innovations here.
To achieve a better understanding of the impact of Industry Internet, EqualOcean conduct interviews with dozens of leading investors that devoted more than average 10 years across the industry to learn how they see the topic.
It has a couple of implications. One is SaaS (Software-as-a-Service), a relatively new business model with a premise that a piece of software is hosted on a cloud infrastructure, and businesses pay a monthly/annually fee to get access to this software. Business owners do not have to spend huge sums of capex in IT infrastructure while getting access to software that is incredibly integral with their businesses. Ever since Salesforce went public in 2004, almost other 70 purely-play SaaS companies followed to be listed. Cloud-based CRM and ERP software, and other vertically focused business software have seen opportunities in transforming industries. By saying that, it is inevitable to bring up cloud market because SaaS is built on the cloud infrastructure. The cloud market involves SaaS, IaaS (Infrastructure-as-a-Service), PaaS (Platform-as-a-service), and etc.
Another implication is that all the enterprises involved in the merchandise circulation of commodities should possess strong supply chain capabilities. Companies that connect upstream suppliers and downstream buyers such as e-commerce enterprises and retail stores can be defined as B2B marketplace players. Supply chain players also make presences here.
They use digital and mobile channels to guide the purchase journeys; E-commerce giants are digitizing essential processes along the supply chain, which can be defined as S2C (JD.com, Alibaba); Retail chains that buy excess inventory from manufacturers and stores at bottom price and pass on the savings the customers, speeding up turnover and improving industry efficiency can be defined as S2B2C (Aikucun, a counterpart of TJ Maxx). They need to invest in technology, data, and analytics to improve insights into supply chain management, warehouses, logistics, and even customer behaviors.
The last one is digital factory/industrial internet. Industrial leaders are introducing innovative, data-based services to digitize essential functions within their internal vertical manufacturing process. These enterprises will work for that internally, also with suppliers in industrial digital ecosystems.
This complexity makes it is hard to measure and understand the whole picture of Industry Internet. To what extent an enterprise serves or B2B marketplace company influencing the industry can be considered as an Industry Internet player? The answer to that is the holy grail of China’s 2B market.
EqualOcean focuses mainly on vertical-specific SaaS and S2B players in the research, as their businesses have significantly influenced industries and crack the code of the industries, directly. Still, considering China’ SaaS market is in its nascent, we introduce several horizontal SaaS firms in the investigation, not too much.
In this article, we talk about SaaS opportunities.
History of SaaS public firms: stock, returns, and valuations
Salesforce went public in 2004 and the era of cloud starts. More than 70 other pure-play SaaS companies followed the pace in the public markets. Some got acquired before got listing (i.e. Responsys) or after that (i.e. MINDBODY, Inc.). This year we saw seven star SaaS companies such as CrowdStrike Holdings, Slack, Zoom Video Communications filed for IPOs and proved their successes in the secondary market.
Zoom is now trading at 64.13 times revenues as of 8/28/2019. Given all the recent IPOs and their high trading multiples, it is imperative to look at the past one-year performance of public SaaS companies. The SPY index was trampling around 100% along the past year and stopped at 95.08% this month. SaaS stocks, on the other hand, picked up momentum after 2018 ended and grew right through the market volatility. A basket of public SaaS stocks trades at a median multiple of 10.86 revenues. Salesforce (CRM: NYSE) has grown to be a USD 129.97 billion market cap company in 15 years and we will continue to see more small players to follow, with the support from primary markets and secondary markets.
EqualOcean looked into 66 publicly traded SaaS companies and tracked the trading history from IPO to date. The returns for them are impressive: on average this group of companies has been trading for 4.56 years and the average return is 4.59x. Those companies have created around USD 610 billion market cap.
Most of the companies in the group concentrate on the left-below part of the chart and we see a common trend: larger public SaaS companies record higher multiple returns compared to smaller ones.
After digging into the individual performance of companies that had share price returns of 12x+, we found four companies here – Shopify (SHOP), Paycom (PAYC), ServiceNow (NOW), and Salesforce (CRM). Shopify, the youngest public company among the four, has the greatest share price return from IPO price -23x.
The impact of revenue growth on the valuation multiple has long been considered as significant. Some investors said that they had never seen any other indicators that could determine a SaaS company’s valuation as the growth rate. The chart below is based on the previous 66 SaaS company’s performance and spreads growth rate against their revenue multiples.
The logic is that a higher growth business generates more cash in the future relative to its size today than a slow growth company of the same size. The correlation, however, is stronger for medium-and large-sized players than for smaller players. Shopify, with 34.8x revenue multiple, has been growing at a 72% CAGR of revenue and recorded 55.33% revenue growth last year; Salesforce has grown revenue at almost 40% CAGR for 15+ year. It’s an established player and moved into a mature stage, is now traded at 9.27x revenue multiple. Twilio, has been traded for ~3 years in the public market, grew its business by 53% last year. Its value is now as 21 times as revenue.
EqualOcean is going to host a WIM Salon talking about the concept this Sunday in Beijing, which was in cooperation with Mydream+, Chinaccelerator, ZhugeIO.com, Pipiban, Startup Grind, Nordic-China Startup Forum.
WIM Salon的合作伙伴有：Mydream+, Chinaccelerator, 诸葛IO, 皮皮班, Startup Grind, Nordic-China Startup Forum。
For any inquires or suggestions, please feel free to contact us: Aysen@EqualOcean.com; Contact@EqualOcean.com
Register the “Industry Internet – the Second Half of Internet Era” Salon on September 08 by clicking “Read More”