Deal focus: China’s data-enabled Workday

In the space of six years, Workday went from nothing to an IPO at a valuation of $9.5 billion. Another six years have passed since then and the US-based specialist provider of software to the human resources industry is now worth about $43 billion. It generates $2.8 billion in annual revenue, but profitability has yet to be achieved due to aggressive customer acquisition and product development efforts.

Herry Han, a partner at Lightspeed China Partners, believes that IfChange can become the Workday of China. “They are a top-three SaaS [software-as-a-service] company in China and I think they are the most artificial intelligence-driven SaaS company,” he says. “IfChange started from an AI angle, but Workday has a larger customer base and more mature product coverage. IfChange wants to learn from that. They are looking to expand product coverage and become a full AI platform.”

The company broke even last year and is on track to post a profit in 2019, but discussions are ongoing as to whether it should forgo profitability for the time being and accelerate growth. According to Han, IfChange has 4,000 paying corporate customers – the likes of Alibaba Group, Tencent Holdings and China Vanke, as well as a long tail of mid-size businesses – and revenue is already increasing 2-3x a year.

Lightspeed has backed the company almost since its inception in 2013. Last week, the firm’s US-based parent, Lightspeed Venture Partners, led a Series C round of $80 million alongside Sunshine Life Insurance. IfChange is now nearing unicorn status.

The company – also known as eCheng Technology – was established by Youhong Zou, an experienced headhunter in the IT space who recognized the pain points facing the industry. A Chinese HR manager looking to fill a position might download 200 resumes from a portal like 51Job, narrow the field to 50 candidates who are interviewed by phone, and then pick a handful for further examination. IfChange’s algorithm identifies that handful of candidates from the 200, cutting out the steps in between.

“It makes calculations by correlating information on existing staff with that on the candidates, and with the typical career paths for top performers,” says Han. “It dramatically increases the efficiency of headhunters and HR managers. No one had thought about the data-plus-AI angle before.”

The next stage of product innovation includes the digitization of HR consulting, which involves feeding consulting know-how into the algorithm, presenting clients with a more efficient alternative to having outside experts come in and spend two months on staff evaluations. This combination of AI and industry knowledge is expected to keep IfChange a step ahead of its rivals.

“IfChange has a team of 50 computer scientists focusing on data – other HR companies don’t have that,” says Han. “Its genes are like those of Toutiao, which matches readers with content. Those data companies could be competitors in the long run, but I don’t think they will quickly step into this market because it needs a lot of industry expertise.”

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• Topics
• Greater China
• Expansion
• Technology
• China
• Lightspeed Venture Partners
• Cathay Capital Private Equity
• Adveq Management AG
• TMT
• Growth capital