Deal focus: Affine builds software for an office beyond Office

Selloffs of listed tech stocks last year took their toll on previously buyout software-as-a-service (SaaS) players. US-based Snowflake, Shopify, and Atlassian, subscription software companies in name but with different business models, are trading at discounts of 60%, 75%, and 63% to their November 2021 highs.

Valuation uncertainty has filtered into private markets, in China as well as in the US, resulting in a near-freeze in new investment activity. Nevertheless, Affine, a China-founded and Singapore-based collaborative software start-up, recently closed a USD 10m in pre-Series A funding led by Redpoint China, China Growth Capital, and Sinovation Ventures. Existing investor Miracle Plus re-upped.

“It was tough for any company to raise money last year, but Affine received several term sheets with a valuation much higher than its previous round,” said Jake Xie, a vice president at China Growth Capital.

Support for the start-up can be linked to its strong growth curve. Affine launched in the open-source community GitHub in August 2022 and within five months the website version had accumulated 40,000 monthly users. Of these, 70% were based overseas.

It is a compelling story because marketing spend was virtually non-existent. Rather, growth was product-led or community-led, driven by a loyal following among developers in software communities who were drawn to the open-source model. The sizeable overseas user base prompted Affine to position itself as a global player and establish its headquarters in Singapore.

The company’s objective is to build next-generation collaborative software for knowledge workers. Microsoft represents the default option in this space with its “three-piece suite” of Word, Excel, and PowerPoint. Many start-ups are looking to modernise this toolbox with an emphasis on collaboration.

For the new Word, look no further than note-taking web app Notion, which achieved a valuation of USD 10bn following a Series C round in 2021. Miro bettered that last year by hitting USD 17.5bn. It offers whiteboards or visual collaboration tools designed as a more flexible alternative to PowerPoint. As for Excel, Monday.com offers table functionality as part of its project management solution.

Affine wants to unify all these three tools under a single basic unit called a block. More importantly, as an open-source solution, it enables developers to modify the codes and generate their own apps.

“Notion and Miro are finished products. You can download them and use them, but you can’t develop them beyond what they are. Affine is open source, so it effectively becomes part of the infrastructure, creating a framework for developers to make their own applications. The development process is simple because all features are under a unified set of protocols and data structure,” said Xie.

Jiachen He, the company’s founder, came up with the idea for a collaborative tool that could process data, write articles, and run code when working in university research labs. He is relatively young for a start-up founder but has built a strong team around him. “He quickly identifies the people he wants, approaches them in his own way, and sells the concept to them,” Xie added.

Chi Zhang, a serial entrepreneur who previously led SaaS projects at short video platform Kuaishou, including the enduringly popular Qingque collaborative software suite, was among the first recruits. He is a co-founder and chief technology officer. The other co-founder is known by his username, Sprite. He is chief architecture officer and an authority on JavaScript, the main programming language for the web.

Affine is betting that infrastructure will become the biggest opportunity in B2B services. Once companies reach a certain scale, they typically need to develop their own software or purchase automation tools. Otherwise, they would use multiple SaaS products for a single task, which would impede data flow and workflow.

“As Affine furthers its R&D into collaborative tools, the SaaS industry’s demand for infrastructure is getting stronger and stronger. If we can provide developers with a set of tools out of the box, SaaS start-ups can avoid the pain that I am going through,” Jiachen He said in a statement.

The pre-Series A comes roughly coincides with the soaring popularity of ChatGPT, an artificial intelligence-enabled chatbot based on large language model (LLM) technology. It has sent shockwaves through China’s VC community even though ChatGPT, especially those who perceive threats to existing technology business models.

Contemplating the implications for SaaS, Xie noted that ChatGPT might be able to write code but it doesn’t have deep-level thinking capabilities. “What Affine does best is define a framework,” he said. “If ChatGPT could work on top of Affine’s infrastructure that could be a good combination.”

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• Topics
• Greater China
• Southeast Asia
• Early-stage
• Technology
• China
• Singapore
• enterprise software
• China Growth Capital
• Sinovation Ventures
• Redpoint China Ventures