Recently, ONES, an enterprise-class R&D management tool, acquired Tower, a well-known collaboration tool, completing one of the few integrated acquisitions in the ToB field in China this year. Why do ONES and Tower, who have been working in the field of collaboration for many years, choose to merge at this time? Do they have the opportunity to become China’s “Jira+Trello” after the merger? Liu Kai, partner of Wuyuan Capital, the co-investor of the two companies, talked with Wang Yingqi, founder of ONES, and Shen Xueliang, founder of Tower. Talk about the merger behind the story and ToB entrepreneurs thinking on the way.
At the same time, the closer ONES and Tower
Liu Kai: what is the entrepreneurial course that we talk about two first?
Lao Shen: I’m the founder of Tower. Everyone calls me Lao Shen. Since 2012, I started to build Tower, and in eight years, I managed to turn Xiao Shen into Lao Shen. In this process, Tower was lucky to get the support of some investors and, more importantly, customers. We have served nearly a million teams and won a good reputation among users, which is also what we are proud of in the process of building Tower.
Wang Yingqi: I am Wang Yingqi, the founder of ONES. I worked in kingsoft office for 7 years at the earliest. My first startup, the punctual alarm clock, gained 100 million users. Later, he joined Five Sources Capital (Morningside Capital) as an EIR. In 2015, I started to make R&D management tools for ONES, which is also my second startup.
My background has been in personal and corporate tools, and in 2015 I also thought about making lightweight collaboration tools. But we found that there were already many good products in China, such as Tower. At the time, it was hard to do better than Tower. Therefore, I decided to become a professional RESEARCH and development management tool that I am good at, with the goal of serving a software research and development team of more than 100 people. We still have the original idea. Although r&d management seems to be a niche market, the market size is getting larger and ONES has accumulated a lot of customers in this vertical professional field.
Liu Kai: You all made synergy by coincidence. Did you have any feeling and reflection in the process?
Shen: The original purpose of building Tower was to help small and micro enterprises, and make a universal collaboration tool as common and easy to use as Word and Excel. So we’ve been polishing our user experience, and that’s been a big part of how we’ve been able to build word-of-mouth. At that time, Tower had the largest number of users in the Domestic industry. However, due to our low business complexity, we can only meet the needs of a small team of 20-30 people. When the customer team grows, it needs to be suitable for a larger scale of professional products, which Tower does not have. The loss of such customers leads to our disadvantage in revenue construction.
The lesson for us is whether the growth curve should be based on “users” or “revenue.” This is a question that startups, especially ToB companies, need to think about from the start. Tower had a few wobbles along the way. If Tower had wanted to grow from the start, it would have partnered with Nail in 2015. In fact, nail in 2015 brought us 3 million users that year. If we choose to do revenue growth, then we should dig deep into specialized R&D management solutions like ONES did.
Therefore, I still admire ONES for firmly choosing to make domestic R&D management tools to replace Jira at the very beginning, insisting on doing r&d management scenarios with more than 100 people, and doing very well in service. Because the goal is clear, the execution is clear. Tower is in the golden age of user growth from 2013 to 2016, and we should seize this period and make it a real barrier to competition. This is my first reflection.
The second reflection is entrepreneurship or to have faith, must focus. From 2016 to 2018, we made a HR software, so we were operating two products at the same time. As a result of this episode, money was spent, but power was not in one place.
But there was also an important takeaway. Tower covers horizontal products. Our users include products, RESEARCH and development, operation, designers, new media, etc. Its business coverage is very wide. Tower is also very good at renewals and word of mouth, so all of our traffic comes from word of mouth. We started out as a design company, and we’ve been able to get this far by sticking to the user experience. This is also the inspiration in the process of entrepreneurship. To today’s stage, we must consider the combination of strong, can not go it alone. Scale determines the speed of growth, and the market has evolved beyond experience alone, so we decided to go with ONES.
Wang Yingqi: We do ONES is actually a deliberate choice, in the direction of the time, we also looked at a large number of light collaboration products, but in consideration of product renewal and customer unit price eventually chose to bypass the problem. Although the unit price of in-depth products is high, we underestimated the difficulty of research and development of professional products in the early stage. We thought we’d be ready for market by the end of 2016, but it took us more than two years to actually commercialize. There is another difficulty in professional products. As product functions become more and more rich, users have a higher and higher threshold of recognition for professional products. We have been thinking about how to reduce the cost of customer acquisition. If there is a hole in the startup, one is that we underestimated the r&d cycle of deep products, and the other is the acquisition of small customers or customers with low threshold. Of course, this is part of the problem before the merger of Tower.
Liu Kai: You started off in different directions, but eventually you got together.
Shen: Yes, we were just doing it, getting closer and closer. At that time, Tower’s business complexity and expansion ability became much stronger. After the product department was used, operation, RESEARCH and development, design and customer service would be brought in. The customer team was gradually expanded after a single point of entry. However, when we want to serve customers with higher unit prices, the business support ability should go up again, because price and value are linked. “ONES” is to get through the bottom, and “Tower” is to go up. So doing it, we’re going in the same direction.
Since most of Tower’s customers use product development scenarios, we are also repeatedly discussing internally whether to develop solutions for RESEARCH and development management, so as to retain customers with high customer price. However, if we put our energy into doing what ONES has been doing for several years, it would be difficult to move without sufficient manpower and funds. The main development path of Tower should be from customer acquisition to free user experience, and then fast penetration, and with the deepening of use, complex business can be supported by all levels of products, which is also the original intention of our cooperation with ONES.
Wang Yingqi: In our communication, we also found that What Tower wanted to do when serving major clients was what ONES did in 2018, such as the management of the organizational structure of large teams. The merger is a kind of product efficiency, social efficiency of the reorganization, there is no need to repeat the development. This also shows that customer demand is still very rigid.
Product rule for ToB m&a
Liu Kai: You both mentioned that the merger of ToB enterprises is to do addition, which is very rare in the ToC field, so what is your outlook after the merger?
Mr. Shen: We chose ONES because we do best with continuity of responsibility to our customers. Tower customers will have access to richer solutions than they would have had Tower alone. If you’re in a development scenario, you don’t have to scrap Tower and spend a lot of money migrating to Jira, you can use Tower and ONES at the same time.
In the complex R&D scenario of R&D department, ONES can be used, while other departments such as product operation can continue to use Tower. The cooperation between the two can get through, and the customer value generated by it is higher than that generated by purchasing two products separately. Therefore, I am looking forward to the future integration of the two sides at the product level, as well as the cross-departmental collaboration between the R&D team using ONES through Tower, and the chemical reaction generated by it and the value brought to customers. Of course, we also need to do more thinking in the product and operation, bring the power of merger into play, and turn addition into multiplication.
Wang Yingqi: Our merger for customers, one is that customers can get consistency of service, in one place can do what they want to do; The second is continuity of service for Tower’s regular customers. The real impact of the merger on the industry, in the end, will be in customer value. Old customers and customers we will face in the future when making selection, because we can cover more scenarios, more employees and continuous update iteration and service, the choice of “ONES+Tower” is more determined. Therefore, I think the true success of a merger is reflected in the customer value, which is the most fundamental problem. Only when ToB customers are truly willing to recognize you can there be customer value.
Shen: Yes, as the customer value increases, we can definitely see in the data that customer retention will be better after the merger. It must complement each other. In addition, there will be two brands after the acquisition, because the two products correspond to different user levels and different brand perceptions.
Wang Yingqi: Yes, after The acquisition of Tower, ONES will not only retain the two brands, but also continue to strengthen customer awareness. We think Tower should be the best brand in lightweight collaboration and small team, while ONES is the most professional brand in r&d management in China. In terms of product capabilities, we may have data breakthrough and access breakthrough, which we may have to do in the future, while in terms of brand, we need to develop completely independently. In this respect, some large companies at home and abroad have set a good example for us in the acquisition process. For example, the merger of Jira’s company Atlassian and Trello has brought very high business value and customer growth. We are very confident about this.
Mr. Shen: It will also have a positive effect on cost reduction for customers. I’m looking forward to the future.
ToB makes it through the “Dark Tunnel”
Liu Kai: How do you view the future ecology of domestic ToB? Will there be more deals?
Mr. Shen: Before the epidemic, the whole DOMESTIC ToB industry would have a certain growth every year as long as the products were not bad. But during the pandemic, high demand led to “high growth” in ToB’s business, including Tower. At the same time, dafang’s various platforms are also expanding rapidly. Typically, this year Tencent conferences have grown hundreds of times. I believe that in the future it will complement more collaborations and acquisitions around the conference collaboration business, so I think the mergers and acquisitions of the big platforms will be more aggressive and aggressive than before.
For SaaS companies like ONES and Tower, we have business relevance, and products that can be cross-marketed should be bundled as soon as possible. As domestic platforms become more aggressive, customer retention becomes more important. If the customer hears a big factory a product is free to lose words, can only prove that its product does not do a good job of customer value. Tower is still growing this year, even though a lot of its products are free. I think there will be two positive effects of m&a in the ToB industry. The first is that the m&a of the platform will become more aggressive, and the second is that there will be more business cooperation and m&a between the industry. The benefit of business combination 1+1>2 is not obvious in ToC, but it is particularly obvious in ToB. Our business is typical. Tower’s business is not deep, but it is broad. One’s business is a vertical business, so it is just a plus, so the business together, the stability is very high.
In many foreign cases, Salesforce buys Slack and Quip, Jira buys Trello, and Microsoft buys Wunderlist. But the domestic ToB SaaS company, the history has not appeared particularly strong, this year there are relatively strong but the scale is not large. So I think it’s still very early in the market. When Tower and ONES were combined, the problem was relatively simple. In the worst case we can add. If we do it well, we can turn the plus sign around and multiply. The premise of this merger is that it is only necessary when the businesses of ONES and Tower are highly integrated. If you used to work in HR, it is not necessary for you to buy CRM.
Liu Kai: In fact, what you said is a good question, that is, for ToB company, how to build bigger barriers and achieve the next step of growth.
Wang Yingqi: And our merger still has many opportunities, the same concept, complementary products, common investors, these are not available. There are many cases of mergers and acquisitions of large domestic and foreign platforms. The success of mergers and acquisitions is not only the success of the transaction, but also the better development of the product on the platform and the business in the large system. So far I’ve seen very few successful ones.
Why did ToB merge? Acquisitions are needed because ToB’s customers are difficult to acquire or expensive to migrate. You get renewal rates, historical customers, plus products and teams. ToC can spend money to acquire customers, but ToB can’t, because a good product must take a long time, including product polishing, team polishing, and building customer awareness, which need to be solved by acquisition. So I think there will be more and more ToB m&a in China in the future. But can mergers and acquisitions by big companies really succeed? In fact, there is no really large ToB company in China. All companies started from ToC Internet do ToB business and launch mergers and acquisitions due to business needs. Ideally, domestic ToB SaaS companies have enough knowledge of the industry, know the value of small and medium-sized startups in a certain area, and the business can still grow very healthy after the merger, which is a healthy merger, and I think this may not be very common in the next five years.
Of course, there are also financial mergers and acquisitions and business mergers. I would like to see a real ToB company solve its business problems through capital acquisition, which seems to be relatively few at the moment, and everyone is still in the early stages of ToB.
Kc: I’m curious about the new low-code, no-code products that are coming out in the market. How do you see their relationship with you?
Mr. Shen: Low code, no code opens up a whole new business area, and it’s a symbiotic relationship with us, not a head-on competitive relationship. Take, for example, the Gantt chart for Airtable, which is essentially an online database, and then you can form a Gantt chart. But in Tower and ONES, the breakdown of tasks is naturally there, and users don’t need to ride a Gantt chart. Both the ONES and the Tower are standard products, out of the box, and that’s the fundamental difference. No code opens up a whole new model of software delivery. For very fragmented, non-scaleable requirements, zero code is where it comes in, so the two are not in conflict.
Wang Yingqi: I share the same view with Lao Shen. The core point is that if an industry proves to be in great demand, there will be professional products. Unless the industry is a very small industry, then use general tools and even work together with forms and emails. These products must be professional products. In principle, CRM cannot be spelled out through Airtable. The so-called “Mini ERP” is also a false proposition. Using vertical SaaS for just needed areas, the long tail needs to be pieced together with these low code or more generic tools. It was this industry judgment that led us to invest more time, people and money into “ONES+Tower.”
Liu Kai: Last question, what would you do if you had the chance to start your own business again?
Mr. Shen: I’m still going to be Tower. I’m going to be more focused. I’m going to be more determined to choose between users and revenue.
Wang Yingqi: I will still choose to do ONES, second entrepreneurship choose ONES must be right. But Shen and I may still have a choice between users and revenue growth. So if I had to do it all over again, I would probably have put the revenue back on the table and maybe grow faster as the product matures. But every step counts. Let’s do it again. Me and Shen, we’re gonna have to do it again.
Liu Kai: In fact, what you two said is to “insist”, adhere to any one thing, do ToB software, do SaaS must insist to go through the “dark tunnel” in front.
Brief Introduction of guest speaker
Dialogue host:
Liu Kai is a partner of Wuyuan Capital. He joined Wuyuan Capital (formerly Morningside Capital) in 2014 and started ToB, including investment in industrial upgrading, cloud service, artificial intelligence and other fields. He has successively invested in a number of projects such as ONES, Tower, PingCAP, Shence Data and Dipu.
Guest speaker:
Shen Xueliang, founder of Tower. Founded in 2010, Colorway Design is one of the earliest professional user experience design companies in China. In 2012, Tower, a team collaboration tool, was launched and has served nearly one million teams.
Wang Yingqi, founder of ONES. Participated in the core development of kingsoft SOFTWARE WPS, Kingsoft Drug Bully and other large softwares; In 2011, founded the time technology, its products time alarm clock, time calendar in the global users of more than 100 million; Served as a well-known fund EIR; In 2015, Wang Founded ONES, which is dedicated to providing enterprise-level R&D management tools and solutions.