YC-Incubated Chinese Startup Team SXL Announces Financing

摘要: SXL (Shangxianle) claims that it has achieved profiting for four consecutive years after the angel round. So how exactly does the startup cash in with its tools?

(Chinese Version)

SXL (Shangxianle) claims that it has achieved profiting for four consecutive years after the angel round. So how exactly does the startup cash in with its tools?

Similar to Facebook’s founder Mark Zuckerberg, the entrepreneurial story of the website building tool Strikingly’s founders, Chen Haisha, Bao Teng and Guo Dafeng, is also about all coincidences.

In 2011, Chen Haisha and the others kickstarted their first startup project, a crowdfunding platform for students, JoinStart, which eventually failed. And after talking to a few friends from their university, the learned another increasing demand: Fast and easy development of personal websites.

Two years later in 2013, Strikingly passed Y Combinator’s assessment interview thanks to its experience accumulated from its practice and failures, as well as its creative idea of building a website in 10 minutes. Y Combinator is a global leader in incubating startups. After passing the assessment, Strikingly received an angel investment of ¥1.5 million from investment organizations including Combinator, Index Ventures Capital, and Sinovation Ventures etc.

In April 2016, three years after the three founders brought Strikingly’s team back to Shanghai, a local version of the application was launched, naming as SXL.cn.

Y Combinator has quite a reputation in China. This Silicon-Valley-based incubator’s investment list goes on and on with a series of unicorn company names, such as Airbnb, Dropbox, and Reddit etc. With Y Combinator’s support, Strikingly would definitely enjoy the spotlight for a very long time.

As a matter of fact, Strikingly’s founder Chen Haisha had doubted himself before during the long entrepreneurial journey when running the site builder. During an interview with Forbs, Chen said that at that time he only wanted to make his project work and see what would happen next. “Then I can continue to do projects that will have a profound impact on the world,” he said.

But now, Chen Haisha doesn’t have such doubts anymore. On August 16th, SXL announced to have completed its series A financing at $6 million. The financing was led by Cash Capital and followed by Innovation Ventures, Y Combinator, and IVC etc.

SXL’s CEO Chen Haisha said he had been pushed by the investors during the past four years, but the reality is SXL now generates an income of over one million each month. “The company has already reached profitability,” he said.

A To-B product that offers To-C user experience

In the earliest stage, many SaaS startups would face the cost of client acquisition and the unpredictable conversion rate. In addition to that, it’s not easy for enterprises to achieve profitability with only one SaaS tool product as the limitations from the monthly-charge/yearly-charge charging mechanism and the resources invested.

However, SXL evaded this issue in its starting phase. From Chen’s perspective, SXL targets the To-B sector, while providing a To-C user experience. “This is the core reason for SXL’s success in achieving profitability,” he said. To optimize the user experience, SXL’s team spent nearly three years in localizing and adjusting the application after returning to China

“Technically speaking, a tool that allows you to DIY a website in ten minutes has incredibly high demands for the product, front end, and UI,” SXL’s CTO Guo Dafeng told TMTPost.

Ultimately SXL was able to achieve a low threshold for website building with this To-C level technical modification. When we look through SXL’s user cases, we discovered that these users include an old person in his eighties, a young kid at the age of four, and even Walter, a user with visual impairment. These people, who apparently know little about technologies, are able to create a decent company website even with e-commerce functions. The entire process, from choosing a template, entering the content, and launching the website, takes no more than ten minutes.

Various templates and the drag-and-drop operation allow people to build a website in ten minutes

Various templates and the drag-and-drop operation allow people to build a website in ten minutes

When trying out SXL, TMTPost found that this product, in fact, shares many similarities with another popular Chinese Internet product, QQ Zone. Around ten years ago, users were able to build a personal page by drag-and-drop, uploading photos, adding texts, and even posting videos and music on QQ Zone. QQ then started to commercialize this social product based on the sales of accessories of QQ Zone and memberships.

Similarly, when SXL achieved the To-C user experience, it has to think about cashing in.

Currently, SXL adopts a subscription model comprised of four different modes: Free subscription, Basics (¥500/year), Professional (¥800/year), Enterprise (¥2800/year). According to SXL, the company now has enterprise-level clients like Starbucks and Ant Financial etc., while the majority of its users are startups, we media, and Internet brands etc.

It’s not uncommon for SaaS product providers to offer a freemium subscription to its clients and charge them for add-ups.  But how did SXL make it exactly?

Firstly, DIY website development tool is still quite rare in the Chinese market. With the advantages the product itself provides, SXL can reach more users as its reputation spreads, attracting users at a lower cost.  On SXL’s platform, many individual users, or small business users, can make payment decision fast while the user retention rate is maintained.

SXL’s team hasn’t published the exact number of users on their platform but revealed that the retention rate is around 85% - 90%.

Secondly, SXL’s overseas version Strikingly is still operating and has helped users create over one million websites, serving over 200 countries. Compared with the Chinese market, overseas users are more willing to pay for a software or service. This is a very important reason for SXL’s success in profiting during the past four years.

Betting on the mini app sector

If we were to say SXL’s DIY website development is an extension of the world wide web, then SXL’s next goal would be sectors like the mini app sector.

It’s worth noting that SXL not only enables fast DIY website development, but also presents a self-adjusting website development standard. In other words, after creating a website with SXL’s tool, the website can adjust itself to a mobile version fitted for the screen size of users’ phone, ensuring the user experience.

This standard matches the current mobile scene, where users use smartphones with different screen sizes. The front-end design’s demand is met, but what about the back-end?

From Chen’s perspective, as WeChat, Alipay, Xiaomi, and Baidu start to launch their own interactive system on their platforms, a self-adjusting system editor will be provided for individual users or businesses. This is the next trend they predict. Because of that, SXL launched a brand new product named Mini App Editor 1.0. The Mini App Editor 1.0 is a mini app development solution that covers ten industries, such as e-commerce, takeout, hotel, ticketing and media etc.

 “At present, WeChat has an enormous user base that is hard to come by,” Chen Haisha said, explaining why they made the mini app sector their first target in their all-platform strategy. “For Chinese users, WeChat is like an Internet infrastructure. Furthermore, mini apps empower offline brands and use scenes, naturally meeting SXL’s individual and business users’ demands.”

That said, SXL is wishing that homestay runners or restaurant managers that have used their service before would be able to develop a mini app equipped with takeout ordering and ticket booking functions in a short time. These seemingly scattered user demands will also back up the company’s profitability.

The mini app sector has become a red ocean. In some specific sectors, we are already seeing retail and content service tools like Youzan and Qingmang etc. Even WeChat itself is saying that it would lower the threshold for mini app development and subsequently provide redirect means like QR code and subscription page.

 “You will understand it once you try out their products,” Chen Haisha said when talking about their rivals. “Their templates are unchangeable. You can’t choose the color or the layout.” In Chen Haisha’s opinion, SXL’s biggest strength in mini app editor lies in the product itself. However, without the paying advantages in the overseas market, SXL has only initiated the early exploration of the SaaS mini app market as rivals are rising up.

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The article is published with authorization from the author @Li Chengcheng, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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