Titanium Media Note: Everyone's experience is building history, and the "Heroes of the Wind" column launched by the Titanium Media App includes two special reports: "Founder of Fengyun" and "Investor of Fengyun". "Investors of the Wind" are the keen catchers behind the wave of innovation, passing on their market insights and investment values.
When the Internet dividend is no longer there, there has been no "outlet" story in the market for too long. In the era of consumer Internet, Jinshajiang Venture Capital, which has discovered Didi, Ele.me and Xiaohongshu, has long been in the field of science and technology and the layout of enterprise service tracks for a long time.
Today, Blue Lake, an online collaboration platform known as the first PRG unicorn in China, has completed a C+ round of financing of 1 billion yuan. As an early investor of "Blue Lake", Zhu Xiaohu, the head partner of GSR Venture Capital, appeared at the scene of the C+ round of financing conference in October this year. In his speech at the same press conference, he revealed that GSR Ventures currently has "more than 50% of its investments have shifted to the To B model".
As early as June 2020, Zhu Xiaohu met founder Ren Yanghui in the Blue Lake office on the 42nd floor of SOHO in Wangjing, personally saw the Blue Lake products, and talked for 20 minutes before finalizing the investment - "After seeing the product, I invested." Companies that make good products are scarce in China. Zhu Xiaohu explained the reason for being optimistic about the Blue Lake in one sentence.
In April this year, GSR Ventures led the Blue Lagoon B Round of RMB 300 million financing. According to the Titanium Media App, in the latest C+ round of financing, Zhu Xiaohu also firmly followed Blue Lake again.
How did Zhu Xiaohu unearth the Chinese PLG unicorn? What is his underlying logic? At the end of 2021, Zhu Xiaohu, the managing partner of GSR Ventures, was interviewed exclusively by Titanium Media App, sharing his understanding and layout of industrial digitalization.
Blue Lake completed 1 billion yuan C+ round of financing, becoming a new unicorn in the "cloud software" track (source: provided by the interviewee)
Find a "PLG Template" in China
Basically, the well-known domestic Internet companies that you can say are using the Blue Lagoon collaboration platform. Since its establishment more than four years ago, Blue Lagoon has achieved a penetration rate of 98% among the top Internet enterprises.
In the early days, through the Freemium model, a large number of design and development users were accumulated, and in June 2020, Blue Lagoon officially launched a paid version, with considerable revenue data. According to the data released at the financing conference in October this year, as of now, the number of registration teams in Blue Lake has exceeded 500,000.
Zhu Xiaohu encountered Blue Lake, just before the official release of its commercial version. "Why do everyone use Blue Lagoon?" Because it is really inseparable from this product, the product is very easy to use, so it is necessary to buy. Zhu Xiaohu told the Titanium Media App.
Blue Lagoon has undergone a commercialization process from free to paid. The Freemium model was once the core model of China's Internet dividend period, and direct payment to developers is an important step taken by Blue Lake and an important step in the software industry, which has become one of the first enterprises to grow from the C-end and finally complete the commercial verification on the B-side.
Zhu Xiaohu's core logic is that he has identified a segment that is crucial to China's cloud software market: enterprise services software under the PLG (Product-led Growth) model.
What is PPG mode?
Simply put, this type of software product relies on the product itself as the main driver of user acquisition, conversion and expansion. This product-oriented growth is a bottom-up growth model centered on end users, that is, product "word-of-mouth" communication growth. Customers can use and experience most of the value of the product on their own before they are actively exposed to the company's sales purchases.
The concept of PLG was first proposed by the American venture capital firm OpenView, which believes that the important factors for the success and development of a software are four aspects: the infrastructure used to install and purchase software; the cost of building and purchasing software; evaluating the buyer who chooses software products; and how software distribution hits customer pain points and can continuously adapt to new market patterns.
The above factors are interrelated and promote each other, through good product reputation to achieve user growth, and ultimately form a paid conversion. Users buy PPG software or products out of the pursuit of efficiency, just as Apple users pay for apps in the App Store.
"In the past, there were very few companies in China's local software market that really focused on making a good product. In other words, a software company can achieve all the updates in a unified product version, such a company is rare. Therefore, software products like the one represented by Blue Lagoon, the barriers are actually very high. Zhu Xiaohu told Titanium Media App.
However, not everyone can understand the high barriers of the Blue Lagoon.
This is due to the fact that the domestic SaaS service market, and even the entire To B enterprise service industry, is still in the era of "sales growth is king", customized software is the mainstream, and sales-driven business revenue growth (SLG) is a matter of course.
In fact, in the US market on the other side of the ocean, the PLG model has long been a consensus in the software and To B markets. Slack, a globally renowned social software acquired by Salesforce this year for up to $27.7 billion, is a typical PPG enterprise, which describes in its prospectus, "Initially many organizations adopted Slack as part of our self-service GTM (go-to-market) approach. When users realize the benefits of Slack, natural growth occurs. ”
Similar to the Slack model, Companies such as Zoom, Figma, Twilio, and Dropbox are emphasizing that their products are achieving revenue growth through the PPG model.
In the Chinese market, the blue lake of the PLG model makes Zhu Xiaohu hate each other late. Zhu Xiaohu even said that cloud software is gradually forming a new technology investment outlet in the Chinese market, and Blue Lake has the opportunity to become an industry leader of tens of billions of DOLLARs.
According to Bessemer Venture Partners (BVP), PLG is becoming a mainstream growth model in the US To B market. The total market capitalization of such companies in 2020 is already close to $600 billion. In the list of Forbes Cloud 100 in 2021, more than 65-70% of the companies are PPG model companies (this figure was less than 35% 5 years ago), and the market value of listed companies created by them has grown from $21 billion to $687 billion in just 5 years.
In the Chinese market, Zhu Xiaohu's judgment is that PLG has entered a period of rapid development.
PLG opens the era of cloud software in China
Since the birth of the world's first computer in 1946, enterprise software has gone through three main eras: the CIO (Chief Information Officer) era, the Exec (operating system) era, and the end-user era.
Back in the 80s and 90s of the last century, software was the product of users taking out of the actual "disc box" to install, and the cost of building and purchasing deployment software was high. From the perspective of enterprises, cioos in this period dominated software procurement and decision-making. "Sales-oriented growth" became a key decision-making criterion in this era, driving the IT industry to evolve in terms of compatibility. For example, IBM, Intel, Oracle and other companies have grown up in this model.
By the early 2000s, with the advent of Windows XP and the mobile Internet era, "cloud operation" became one of the new needs of enterprise procurement software. Moving software from the data center to the cloud, customers can rent it for a fraction of a fee, ushering in the Exec (operating system) era. During this period, the business distribution model of SaaS companies or enterprise service companies became "marketing-led growth", constantly running Internet advertising, building on search engine marketing (SEM), and pulling new ones by paying the platform party to display ads to relevant user groups. Alibaba Cloud, Tencent Cloud, and Baidu Cloud are typical companies of this model.
The outbreak of COVID-19 in 2020 has become a new variable in the software industry. Starting in 2020, the human office model and collaborative approach have been completely reshaped, and infrastructure is more important than ever.
In 2020, Zoom founder Yuan Zheng once again brought the PRG concept to the Chinese startup market.
Thanks to the pain points and roles solved by the product itself, through the accessible cloud web software products, users only need to click a few clicks or tap a few clicks to get software access, and under the same tool can complete the work, do not need to switch tools frequently, so that the purchase and use of end users are more "universal", so as to attract and convert a large number of individual end users to try and buy products through "viral word-of-mouth transmission", and replace paid marketing and sales-oriented growth with bottom-up PPG distribution model.
The choice of PPG model has allowed the newly emerging software companies to achieve rapid and benign growth in customer scale and market reputation, which is also directly reflected in the capital market: in July 2020, the market value of SaaS service platform Salesforce successfully surpassed that of the former giant Oracle, and then in September 2020, the office conferencing platform Zoom company was listed for less than two years, and its market value exceeded that of ibm, the traditional IT giant, for the first time.
According to Alexa, the world's largest traffic website ranking platform, more than half of the more than 300 PPG model companies in the United States rank higher in the traffic detected by Alexa. This means that they get a lot of user traffic than the average SLG platform-based website.
Zhu Xiaohu told Titanium Media App in an interview, "The industry has been saying that China's SaaS started less than a decade later than the United States, so China has half the chance of benchmarking the United States." In the study of GSR's research on the U.S. PRG model company, there are 100 companies with more than 10 billion US dollars, covering the sales of CRM, collaborative office, database, network security and other tracks, from which it seems that the order of magnitude of the US PRG model company is very large. This represents an important direction for the future, and it is necessary to find benchmarking types of companies in China. Blue Lagoon is very much of a chance. ”
But at that time, domestic cloud software was still "waiting for the wind to come". Until Zhu Xiaohu decided to invest in Blue Lake, he realized that the excellent domestic PRG company was in front of him.
Zhu Xiaohu said bluntly, "The key advantage of Blue Lake is to know where the pain points of users are. ”
On the left is Zhu Xiaohu, and on the right is Ren Yanghui, founder and CEO of Blue Lake (Source: Provided by the interviewee)
Customized development was once the mainstream path in the field of software enterprise services in China, and this type of enterprise represents the SLG (Sales Driven Growth) model. In the early stage, it can serve large customers through sales growth, with low gross profit margin and higher customer unit price, which can make the scale of large customers. But the pain point is that the product is not universal enough and not standardized enough. "Once the customer service team changed, no one said clearly what happened to the previous customer versions. This pain point is actually very painful, and it is also a great challenge to the enterprise service industry. Zhu Xiaohu told Titanium Media App.
The PPG model can fundamentally solve this pain point. Zhu Xiaohu said that the criteria for judging the PPG model are simple, that is, whether the software and services provided are "iterated on a unified version." Another industry technologist interviewed by titanium media app summarized the four standards of PPG products:
1, the product is "out of the box" state;
2. The product function is complete, and it can smoothly "let the target user complete the complete workflow in some scenarios";
3. The main functional entrance of the product, especially the advanced rights and interests for value-added, can be easily found by users;
4. Advanced requirements: The product has the ability to flexibly configure, or the ability to be developed for the second time.
In Zhu Xiaohu's view, the PLG model is a very scarce enterprise ability in the Chinese market, and it is also the key to the growth of innovative enterprises into giants.
"Chinese software companies are good at doing projects, and the advantage driven by the SLG model is that the early growth is very fast, but the lack of ability to manage product iterations, the later growth will be very difficult; and the product-driven software companies will be very slow to do at the beginning, but after the product is built, they can achieve nearly ten times the growth every year." Zhu Xiaohu told the Titanium Media App.
The rise of blue lagoon is also the rise of user value
The common denominator of PLG mode software is that the first users are reached. Or rather, during its commercialization phase, the purchase of software is often driven by "end users", not business owners. In fact, from the corporate office to the field of architectural design, there have been typical PRG enterprises.
The rise of enterprise office software has greatly improved the collaborative efficiency of the workplace population; Cool Jiale (group core technology) in the field of home and space design is also a typical enterprise driven by the PPG model, in the early growth stage, standardized general design software can shorten the rendering time of an rendering map from a few hours to 10 seconds, and greatly shorten the cycle of making a set of design schemes.
From creators to designers, Tens of millions of cloud software users in China are voting for the PPG model through their paid purchases, setting off a "cloud software" revolution.
As Ren Yanghui, founder and CEO of Blue Lake, said at the financing conference, collaborative office has brought China's software industry to an era of "end-user value rise".
Blue Lagoon, which focuses on the market of production and research tools, provides an excellent entrepreneurial sample under the dividends of the synergistic era.
Ren Yanghui reviewed the entrepreneurial process and said that in the first month, Blue Lake products only had a few hundred users and 100 registration teams, but everyone on the team was very focused on communicating with users and building products. During this period, blue lagoon was established as a user-driven, product-driven company.1
In 2019, Blue Lake's important one-stop product design tool product MasterGo was officially launched and officially launched at the financing conference in October this year. This product is positioned as a "one-stop product design collaboration tool", which can be used directly online, does not require installation, whether it is a Windows computer or a Mac computer, it can be quickly accessed, and it also supports the import of Sketch files, which is very convenient from the convenience of access, team collaboration and cloud resources.
MasterGo's product presentation (Source: Provided by the interviewee)
When Zhu Xiaohu invested in Blue Lake, MasterGo had not yet been officially launched, but he very much agreed with the founder Ren Yanghui's "diversified product strategy".
Blue Lake's imagination space is not limited to design tools, and the Blue Lagoon team is laying out the working methods and scenarios of three types of characters around products, design, and research and development, including the Blue Lagoon Collaboration Platform, MasterGo, DDS (Code Automation), and Blue Lagoon Super Documents.
At the end of 2020, Blue Lake also set up a space and horizon project at the same time, and Blue Lake has not yet publicly released products, which are expected to be launched in Q1 and Q2 next year.
"If you string together all the production and research-related system software, from the earliest project design, development, process management to code submission, testing, etc., you can also (build) a company of 100 billion US dollars." But it is not easy to make all modules into a product that is easy to use. In fact, the thickness of tool-based software can be very thick. Zhu Xiaohu told Titanium Media App.
The cloud software market has broad prospects, but in the future, Blue Lake is still facing huge challenges in the global market competition. Zhu Xiaohu believes that "brand, user barriers, product innovation, and user operation capabilities are not the biggest challenges, the biggest challenge is how to quickly internationalize." ”
Ren Yanghui, founder of Blue Lake, showed two numbers at the fundraising conference: 50 million and 20 million. 50 million is the number of Chinese operating enterprises, and 20 million is the number of American operating enterprises. "From the perspective of enterprise scale, China's cloud software industry has more space and possibilities."
Statistics from the Chinese Academy of Information and Communications Technology show that China's digital economy currently accounts for 38.6% of GDP, about 5.7 trillion US dollars - China is becoming the world's largest fertile soil for digital demand, more than 50 million small and medium-sized enterprises, the future needs to improve operational efficiency, enterprise organizational efficiency and reduce management costs on the basis of existing business through digital means.
As end users and managers, as people who are increasingly influential in the digital development of enterprises, they will determine the trillion-dollar market, which is a tempting cake for China's cloud software and even digital service providers.
Another trend that cannot be ignored is that the young people of the Internet cloud native generation are becoming the core backbone of enterprises, and their value as end users will determine how China's To B market will grow in the future.
Zhu Xiaohu's investment logic in the enterprise service track also confirms this insight. He believes that "software companies must first do a good job in the product, and secondly, they must look at what the position is, whether it is the most important part of the chain." All industries in China have now reached the stage of digital empowerment, not only through omni-channel access, but also to achieve digital decision-making, and PPG enterprises with good software systems such as Blue Lagoon will definitely run out. (This article was first published on titanium media App, author/Lin Zhijia, editor/onion)