Deal focus: Sensors Data finds meaning in compromise

Amid all the excitement around China’s software-as-a-service (SaaS) space, there is one lingering question: Can these start-ups deliver truly standardised products like their US brethren, or will they remain in the less scalable and lucrative project-driven segment?

Sensors Data appears to have found the right balance if its recent fundraising activity is anything to go by. The company closed a USD 200m Series D last week led by Tiger Global Management and The Carlyle Group. All existing investors re-upped, including Future Capital, DCM, Linear Venture, Sequoia Capital China, Warburg Pincus, Xiang He Capital, 5Y Capital, and GGV Capital.

"There are two main reasons for the strong investor support. First, growth has been very fast. In just a few years, we’ve gone from new entrant to sub-sector leader, helped by a renewal rate of more than 100%. Second, we are benchmarking Adobe Experience Cloud and there is scope to breed large companies in this track,” said Wenfeng Sang (pictured), founder and CEO of Sensors Data.

Established in 2015, Sensors Data initially leveraged its big data capabilities to collect and analyse customer behaviour data. A well-positioned product enabled the company to carve out a market-leading position, but the ceiling for further expansion within this vertical was low. Sensors Data responded by widening its offering to include marketing technology.

“We found that it wasn’t enough to help customers build a data foundation and provide data analysis tools. Some customers didn’t know how to drive business growth using such data and tools. We realised we needed to help them do this, especially in the marketing domain, and this led to the creation of a closed-loop service,” said Sang.

The company operates a "two clouds and one platform" product matrix. A data foundation platform collects and connects data from channels such as WeChat, Tmall, and in-house membership schemes; the analytics cloud analyses the activity of individual users, including retention and conversion, across different channels; and the marketing cloud conceives automated and accurate marketing strategies based on this analysis.

Growing pains

Introducing the closed loop increased customer numbers and widened the customer scope. Sensors Data now works with more than 2,000 enterprises, from e-commerce platforms to traditional corporates pursuing digital transformation.

However, expansion presented new challenges – prompting Sang to describe 2020 as his “most anxious year” to date. Specifically, larger customers started asking for customised solutions and implementation services rather than a standardised product. Sensors Data’s resolution to “never change a single line of code” came under threat.

“This transformation brought us to a stage that most Chinese enterprises will go through, where we felt we had entered a ‘no man's land,’ one that had been heard and seen before, but never felt,” Sang explained, adding that the prospect of compromising his philosophy brought him to tears.

The standardised versus customised debate elicits such a visceral response among SaaS developers because customisation typically means lower profit margins. But Sensors Data moved from anxiety to clarity by recognising the nuances in strategy.

Sang noted that he previously regarded service as a useful complement to standardised products, rather than part of the intrinsic value proposition. Once this obstacle was removed, standardisation versus customisation was no longer viewed in a binary context. Even for large customers, solutions can be 70-80% standardised and 20-30% customised.

Sensors Data is pushing ahead with customised product development, establishing dedicated units to better serve customers in specific industries. An automotive industry edition is set for launch this year.

This points to a broader change in philosophy. Having previously focused on rapid iteration to meet customer needs - driven by a belief that if iteration is fast enough, targets will eventually be met - the company is looking to replicate the more considered approaches of the likes of SAP and Huawei Technologies.

“We thought we could solve problems through our own breakthroughs and innovations, but we were stuck in a trap by relying on our own iterations," said Sang.

"We respect scientific methods, so we must use them. The scientific method is that when there's no existing example, iteration works; but when there is already a 'right answer,' we must follow the examples set by industry pioneers."

Benchmarking the company against top global software players is part of this effort, and Sensors Data has recruited people from SAP and Adobe to work on it.

Sang remains resolute in his ambition to help 30m Chinese enterprises “reconstruct their data foundation and realize digital operations.” And he recognises that excellence in service is as integral to getting there as excellence in product.

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• Topics
• Greater China
• Technology
• Expansion
• China
• enterprise software
• Growth capital
• Tiger Global Management
• The Carlyle Group