China tech last year: SaaS remained favored, with low-code platforms picking up...

China tech last year: SaaS remained favored, with low-code platforms picking up steam

China tech last year: SaaS remained favored, with low-code platforms picking up steam

Rebbeca Ren

posted on December 23, 2021 8:51 pm

The participation of non-technical personnel in R&D has become an irreversible trend.

Although a series of crackdowns by the Chinese authorities this year has slashed the market value of publicly-traded tech companies, investing in SaaS remains the most appealing option for investors. 

According to a report by asset management group CapitalLink, startups in the SaaS field raised more than 30 billion yuan in 2021, greatly above the amount raised in 2019. Top-tier institutional investors are constantly on the lookout for new investment possibilities: Sequoia China made 17 investments, Matrix Partners China made 11 investments, and GGV Capital made 9 investments. 

So far, 22 SaaS startups are valued at more than $1 billion, and nearly 34 SaaS providers are valued at $500 million to 1 billion, consulting firm Analysys International said in its latest research. These companies' businesses range from taxation to human resources management, marketing, customer relationship management, logistics, and so on.

It is worth noting that with the acceleration of digitization and the increasing shortage of software developers, low-code has emerged as an eye-catching niche SaaS market among entrepreneurs and investors in China.

Low-code is a software development method that can build applications and processes with little coding or even no coding. By transforming the programming process into a visual interface with simple logic and drag-and-drop functions, the low-code development platform allows users without formal computer science knowledge to create applications or websites for multiple purposes. 

Attributed to its abilities in improving delivery efficiency and reducing operating costs, low-code has become a key strategy for companies to act more swiftly when facing changes and dynamics in the market.

Over the past 18 months, low-code platforms have become a major trend in China where organizations use these platforms to improve customer experiences, accelerate application delivery, build bespoke systems at a lower cost, foster operational efficiency, and integrate AI capabilities for digitalization, Forrester pointed out in its report The State Of Low-Code Platforms In China.

According to the report, 58% of the software technology and business decision-makers in China are leveraging low-code platforms in their application development process while 16% of them are planning to do so.

In 2021, the size of China's low-code market is predicted to reach 2.9 billion yuan, up more than 50% from the previous year, and it will continue to expand. The growth in demand is reflected in the investment: as of the first half, 11 low-code startups had secured funding, predominantly in the pre-A, A, and B rounds. By comparison, from 2018 to the first half of 2021, there were a total of 32 investments in the low-code field.

At present, there are about 86 low-code platforms in China, but most of them are in a relatively early stage and haven't been listed. Top startups include BAI Capital and SIG China-backed ClickPaas, GGV Capital-backed TreeLab, Sequoia China-supported SmartData (数睿数据) & Huobanyun (伙伴云), and Hillhouse Capital-supported Vika. All of them received financing in the first half.

Despite the fact that Alibaba and Tencent, the two major cloud computing providers in China, have their own low-code offerings, they have invested in CloudToGo and Qingflow respectively this year to raise their bets in the sector.

Companies specializing in low-code services are highly sought after in the secondary market as well. The share prices of Yonyou and Kingdee, two publicly-traded SaaS companies offering low-code services, have remained resilient, however, the market capitalization of Internet giants including Alibaba, Tencent, and Meituan has been dramatically cut owing to regulatory tightening.

According to the survey on China's low-code development market in 2021, the participation of non-technical personnel in R&D has become an irreversible trend. Users, mainly small and medium-sized enterprises, prefer annual or monthly billing and hope that the cost can be controlled between 20,000 to 50,000 yuan per year, the survey suggested.

Compared with the US, China's low-code industry is still in its infancy, but as the country vigorously develops the digital economy, the gap between it and the US will gradually narrow. With a growing number of enterprises and government departments generating more digital demands, opportunities for low-code development providers are multiplying in the country.

According to ResearchAndMarkets, China's low-code market is forecast to reach a projected market size of $20.2 billion by the year 2027 trailing a CAGR of 36.5% over the analysis period 2020 to 2027. It is estimated that the market scale stood at $3.9 billion in 2020.

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