Deal focus: Ekuaibao’s PaaS plus SaaS proposition

Future Capital has broadened its scope from China’s early-stage enterprise technology space to include growth rounds as well. In this context, the venture capital firm recently re-upped in Ekuaibao, a software-as-a-service (SaaS) start-up that specializes in corporate reimbursement.

It took part – as the second-largest investor – in a RMB1 billion ($155 million) Series D round led by SoftBank Vision Fund 2. Tiger Global Management and Sequoia Capital China were among the other participants. Future Capital's contribution came from its debut growth fund, which closed several months after the firm's fourth US dollar-denominated vehicle.

“We first invested in Ekuaibao in 2015 in the pre-Series A round when it had yet to launch a product, and then we re-upped in the following rounds. Now that we have our growth fund, we can write larger equity checks,” says Mingming Huang, Future Capital's founding partner.

Established in 2014, Ekuaibao helps companies manage procurement costs and facilitate employee reimbursement requests via an online platform and a mobile app. The system integrates purchasing, reimbursement, payment, and bookkeeping functions.

Enterprise payment and expense management has become a popular area among China technology investors, with the likes of Xforceplus, Fenbeitong, and Huilianyi receiving funding. According to Huang, Ekuaibao is the only one that, from the outset, sought to create a cloud-native platform-as-a-service (PaaS) infrastructure to support its SaaS products.

To borrow a home renovation analogy, PaaS is the basic utilities such as water and electricity, while SaaS applications are the fine decoration. For Ekuaibao, PaaS means greater scalability and flexibly in the business model. The company can add new functional modules or develop existing ones quickly and easily. However, PaaS implementation is also expensive and time-consuming.

Ekuaibao recruited a large R&D team to build this infrastructure, effectively pushing up its costs and pushing out the product delivery cycle. With limited sales revenue, the company faced serious liquidity issues in 2017, but Future Capital stayed the course.

“Venture capital firms often talk about long-term vision and value-add services,” says Huang. “A simple test of that is whether they truly believe in their portfolio companies’ long term potential and stay with them in times of difficulty.”

Ekuaibao's latest offering is a one-stop aggregator for consumption and payments. It has built an e-commerce platform that integrates with hotel booking app Ctrip, ride-hailing platform Didi, and more than 600,000 restaurants nationwide. Employees complete transactions via the app, and their employers will make payments directly while issuing an invoice. There is no need for advance payments, billing, and reimbursement.

In addition, the company has launched an online tool for accounts management, an area that typically incurs high storage and labor costs. It uses digital certifications to automate processing and avoid forgery. This is described as a key step towards the digital transformation of corporate finance.

Huang believes that a real SaaS has no boundaries – start-ups can choose different entry points and then expand horizontally, following the needs of customers. “Ekuaibao started in cost controls and gradually added electronic accounting and corporate payment features,” he says. “We believe it will become a standard configuration for the financial digitization of every China enterprise.”

Salesforce is highlighted as the standout example of a boundaryless platform. The company is constantly expanding its product lines through M&A and integration. Its PaaS business – Force.com –now hosts more than 100,000 different custom applications.

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• Topics
• Greater China
• Expansion
• Technology
• China
• enterprise software
• Future Venture Capital
• Softbank
• Tiger Global Management
• Sequoia Capital