UB Ventures

SaaS Annual
Report 2021

Introduction

Perspectives on Japan’s Evolving
SaaS Ecosystem
SaaS business is in a period of transition.
There are several companies with ARR (annual subscription sales) exceeding JPY 10bn, being invested
in or acquired by listed SaaS companies. The amountof funds raised by unlisted SaaS companies has alsoreached a record high of JPY 146.5bn.
2021 will be remembered as a year where the trend
fully manifested itself across markets.

Osamu Iwasawa
UB Ventures
Managing Partner & CEOOSAMU IWASAWA is a Managing
Partner and CEO of UB Ventures. Prior
to founding UB Ventures, Osamu
worked as an equity research at
Lehman Brothers and Barclays Capital.
He was later a management consultant at Nomura Research Instituteand joined Uzabase in 2011. As an
executive officer, Osamu was in chargeof business development at SPEEDA,
before moving to Hong Kong in 2013
to help establish SPEEDA’s Asia business. After serving as Head of the Asia
business, he returned to Tokyo andfounded UB Ventures in 2018. He has
a M.E. in Civil Engineering from Keio
University.

Meanwhile, in public markets, it appears that
excessive valuations are coming to an end, and weare entering a phase in which the true strength ofeach company’s business is being tested, and competition between SaaS companies is intensifying.
As new trends such as Vertical SaaS and ProductLed Growth begin to emerge in the market, howwill SaaS evolve next? Will this just be a transient
trend or will it have an indelible, permanent impact on industries in Japan?
We believe that the turning point of SaaS is happening right now.
This report is comprised of 4 segments: ‘Overview’,
which summarizes the latest data on the SaaS
market; ‘Playbook’, which describes the key points
in SaaS so far; ‘Trends’, which looks ahead to what
is in store for SaaS in 2022; and ‘China SaaS’, whichanalyzes the SaaS market of China, where SaaS
adoption is greatly accelerating.
By identifying the key trends and deriving our hypothesis from the market data available, we seek
to propose a vision of the future we hope to build this is our identity and our vision at UB Ventures.
We thank our team who have worked tirelessly tobring this report together, and we hope that thiswill contribute in any and every manner to theoverall industrialization of SaaS in Japan.

Index4

Overview

16

Year 2022
Trend
Product-Led Growth
Vertical SaaS10

UB Ventures
SaaS Playbook
3 Key Metrics for Post-PMF
SaaS Startups

MRR Velocity
NRR
Mendoza Line23

China SaaS
The Advent of the Golden Age
for China SaaS

Growth of Japan SaaS as players scale rapidly

ARR● Horizontal SaaS
▼ Vertical SaaS

Company

DetailARR ARR Growth
Rate (%/YoY)

Company[SaaS Business Line](JPY bn)

Business Card Management

��.�

��.�

��th

�nd Cybozu

Groupware

��.�

��.�

��th

�rd Rakus

Expense Reimbursement,
Invoice

��.�

��.�

Accounting / ERP

��.�

��.�

��th

�st

Sansan● Company-Wide● Cloud-Related Business

4

Link and
Motivation

�th

��th

Ordering

�.�

��.�

��th

Money
Forward

Accounting / ERP

�.�

��.�

��th

Top SaaS reaching
ARR of JPY 20bn
More diverse SaaS
startups are going publicfollowing the maturity ofhorizontal SaaS

* Although stock sales are prioritized
and recorded, they are not necessarilyof the same standard. Data is mainly for
BtoB SaaS.

�th
�th
��th
��th
��th

* Group ARR including Home Premium
disclosed by Money Forward is JPY
10.25bn.

��th* Group ARR including NewsPicks
business as announced by Uzabase is
JPY 11.64bn.

��th* Aggregated from data available as ofthe end-November 2021.

● Business (Sole Proprietors +Corporations) + X

�thVertical SaaS, AI, Hardware* If ARR is not disclosed, it is calculated
by quarterly non-consolidated sales x 4(CloudSign includes metered amount).

▼ Company-Wide��th

UZABASE
SMS

Company / Industry Analysis● SPEEDA + Other B2B

Long-Term Care Management▼ Long-Term Care Business (Kaipoke)

��th

�.�

�.�

��.�

App Development

�.�

��.�

Electronic Contract

�.�

��.�

AI inside

Cloud Recording OCR

�.�

-��.�

TeamSpirit

ERP

�.�

��.�

Online Medical Care

�.�

���.�

Site Analysis

�.�

��.�

POS Cash Register

�.�

��.�

Cloud Service Monthly
Usage Fee

�.�

��.�

Marketing Automation

�.�

��.�

YappliBengo4.com

Human Resources Management

�.�

��.�

PLAID

Customer Analysis

�.�

��.�

● SaaS Business

User Local
Smaregi

��.�

Plus Alpha
Consulting● Company-Wide

MEDLEY

��.�
��th

�.�

ARR ARR Growth
Rate (%/YoY)(JPY bn)● Motivation Cloud Series● App Management Platform

Business

Infomart

The State of SaaS in Japan�th● Company-Wide

Overview

Employee Engagement● Cloud Business Sales

ARR
�th freee
JPY 10bn

Detail[SaaS Business Line]

SaaS Annual Report 2021

● CloudSign● Recurring● Company-Wide▼ Medical Platform● Company-Wide▼ Cloud Service Monthly Usage

Fee

��th

SPIDERPLUS▼ ICT Division

��thStartia
Holdings● Digital Marketing Business

Safie

Cloud Recording

�.�

��.�

��th

Cyber Security Web Security● Company-Wide
Cloud

�.�

��.�

HENNGEID Management

�.�

��.�

��th

oRo

ERP

�.�

��.�

Entry / Exit Management

�.�

��.�

Inventory Control

�.�

�.�

Workﬂow�.�

��.�

kaonavi
Wantedly
Chatwork● Company-Wide● HENNGE ONE Business

Human Resources Management● Stock Earnings

Recruitment● Stock Earnings

Collaboration● ChatWork Business

Source: Consolidated from each company’s financial statements and materials

�.�
�.�
�.�

��.�
��.�
��.�

��th
��th
��th

Photosynth
Logizard
rakumo● Cloud Solution Business● Company-Wide● Cloud Service● SaaS Service Sales©UB Ventures, Inc.

ARR
Growth Rate

Top SaaS companies continue to maintaingrowth rate of over 20% after achieving JPY 10bn ARR

5SaaS Annual Report 2021

Overview

Growth of 4 Companies exceeding JPY 10bn ARR

Growth after achieving JPY 10bn ARR

80

Top SaaS companies with over JPY 10bn ARR
are still growing at a rate of at least 20%. This is
not based on a one-off single product growth,
but a sustained growth across a series of products, such as RAKUS’ Raku Raku series andfreee’s ERP service integrations - all of whichhave scaled via increasing the no. of accounts aswell as unit price.

ARR Growth Rate (%)

70

60

What are the key factors driving these growth rates?

50

Sansan’s Unit Price Increase
Bill ONE’s Invoice System
Rapid Growth40

Migration of Group’s Services
to the Cloud

30

Kintone’s Rapid Growth
Product Group Growth ofover JPY 1bn ARR

20

Rakuraku Meisai’s Rapid
Growth after Rakuraku
Seisan’s Success
10

40% Growth by
Customer Acquisition
0

FY2018FY2019FY2020

FY2021

Source: UB Ventures materials referring each company’s financial statements; Sansan data is based on their sales figures,
Cybozu and Rakus are based on their monthly cloud sales figures; FY2021 data are based on each company’s full-year forecasts.

Growth from higher ARPU
accounts via expansion of
ERP offerings©UB Ventures, Inc.

2021: The Adjustment Phase for SaaS

Valuation
Multiples

6

SaaS Annual Report 2021

Overview

SaaS valuations are
becoming polarized

EV / Revenue based on forecasts of top SaaS companies
60

With aggressive capital raising to thestructural shift to remote work due
to the pandemic, multiples rose to a
new high in 2020. In 2021, the market
recalibrated itself and re-evaluatedsuch multiples, leading to a possible
polarization of multiples. Companies
that are expected to continue growing rapidly within a large TAM are
likely to maintain their valuation,
while those with lower growth appear to be significantly declining.

(x)

50

40

30

EV/ Revenue (x)As of 31 December 2021

27.3x

20

21.3x
14.9x

10

10.3x

Average of
17 companies
0

2020.1
Source: UB Ventures materials aggregating corporate and financial datafrom the Tokyo Stock Exchange and each company’s published materials

2021.12021.1210.8x©UB Ventures, Inc.

IPO

The IPO of large SaaS companies and emergence of more
JPY 10bn SaaS companies staying private

7

SaaS Annual Report 2021

Overview

New Listings

2016

2017

2018

2019

2020

2021

2022

Private companies
with est. valuation ofover JPY 10bn at time oflast financing

IPOs of SaaS companies will continue even after 2022
Over the last few years, the equity market has seen IPOs of large
SaaS companies with market capitalizations over JPY 100bn.
Additionally, there has been an underlying emergence of SaaS
start-ups valued over JPY 10bn, largely due to the increased
deployments of venture capital.
Large-scale IPOs are expected to continue after 2022, in part due
to a rise in private equity available from growth and crossoverinvestors.

Source: UB Ventures materials aggregated from JPX and INITIAL.

©UB Ventures, Inc.

Fundraising Trends of SaaS Startups in Japan

StartupFunding

150(JPY bn)

267

Total
Fundraised

250(JPY m)(Left Axis)

252
120

200

232

228

90

91.1

No. of Startups
Funded

174

194
172

150

76.7
65.0

60

Median Funding per Startup

Total Funding

146.5

8

SaaS Annual Report 2021

Overview

30% of all venture capital
went into SaaS startups
Total funding of the SaaS ecosystem reached a record high of JPY
146.5bn. This comprised 30% of total
fundraising of the startup ecosystem at JPY 500bn.
Median funding had doubled fromthe previous year to JPY 200m.
The number of startups funded
dropped from the peak in 2019 forthe second consecutive year, signaling limited new entrants as wellas greater concentration of funds inexisting SaaS startups.

100

Median Fundraised
per Startup(Right Axis)

35.1
30

50

26.3
24.2

0

0

2015

2016

2017

2018

2019

Source: UB Ventures materials aggregated based on figures taken from INITIAL as of 27 December 2021

2020

2021

[Note 1] Yearly figures are true asof the date the historical data is
consolidated.
[Note 2] Due to the characteristics of the data, figures may
fluctuate depending on survey
methodology. The smaller the
figure, the greater the possibility
for a change in figures.
[Note 3] 2021 figured are true asof reference date.

©UB Ventures, Inc.

With acquisitions by 9 major SaaS companies,
M&A activity is on the rise

M&A

9

Major M&A by SaaS Companies
Announcement
Date

Acquirer

Target2021.11.30

Money Forward HiTTO

2021.11.9

Infomart

2021.8.27

SaaS Annual Report 2021

Overview

Domestic M&A trends
Share
Ownership (%)

Amt

In-House AI Chatbot

100

1,999

TAM Expansion with
Wider Product Offerings

Deepwork

Invoice Receipt

N/A

N/A

e.g. freee’s Acquisition of SiGHTViSiT(E-Contracts)

PLAID

Emotion Tech

Customer Experience Management

64

1,676

2021.6.22

Chatwork

Chatwork Storage Technologies

Cloud Storage

51

459

2021.5.19

SansanFringe81

Peer Bonus

3.07

3,800

2021.3.23

KAKEHASHI

Pharmarket

Secondary Drug Distribution

100

N/A

2021.3.10

freee

SiGHTViSiTE-Contracts

70

2,788

2021.2.4

Infomart

TANOMUF&B Wholesale

N/A

N/A

Startup Investments into
Related Businesses

2020.9.18

Money Forward R&AC

Payment Management

100

450

ex. Infomart’s investments into
TANOMU and Deepwork

2020.8.26

Sansanlogmi

Transcriptions

70.1

N/A

2020.4.17

UZABASE

MIMIR

Expert Network

100

N/A

2020.4.3

SansanSATORI

Marketing Automation

27.4

N/A

2019.11.11

Money Forward SMARTCAMP

SaaS Marketing Platform

72.3

1,998

2019.11.1

SansanForm Management

11.4

4,998

2018.7.5

Money Forward Knowledge LaboBusiness Analysis

51.4

198

2018.1.18

Rakus

Mail Delivery System

100

1,575

2017.11.2

Money Forward KLAVIS

Automatic Bookkeeping

100

800

2016.12.16

UZABASE

Startup Database

100

122

WingArc1st

blayn mailJapan Venture Research

Source: Data is aggregated from each company’s public information

Target Business(JPY m)Business Expansion via
Synergies with
Existing Businesses
e.g. KAKEHASHI’s Acquisition of
Pharmarket(secondary drug distribution)

With the entry of PE funds andother large-scale deployments,
M&A activity is set to accelerate
as competition increases in
the capital markets.

©UB Ventures, Inc.

10UB Ventures
SaaS Playbook
3 Key Metrics UB Ventures Use
for Post-PMF SaaS Startups

MRR Velocity
NRR
Mendoza Line

SaaS Annual Report2021

Achieving JPY 10m MRR within 12 months
Post-PMF as Proof of Execution

MRR
Velocity

11

SaaS Annual Report 2021

SaaS Playbook

ARR

MRR Velocity

7.8JPY bn

Velocity from
Product Launch toachieving JPY 10m MRR

ARR

5.2JPY bn

The initial speed upon productlaunch strongly influences
the sustained rate of growth until IPO.
Benchmark would be exceeding
JPY 10m MRR after product launch
Future growth can be calculated by the no. ofmonths taken to achieve JPY 10m MRR.
A difference of 4 months will meana difference of JPY 1bn ARR 8 years later.

ARR

3.9JPY bn

From Product launch
to JPY 10m MRR

ARR

3.1 JPY bn

8mths
12mths16mths20mthsAssumptions
ARPU
NRR

JPY 100k/mth
140%

Customer Growth Rate 150%
Churn Rate

1%/mthSource: Calculations by UB Ventures

Product launch

1Yearslater

2Yearslater

3Yearslater

4Yearslater

5Yearslater

6Yearslater

7Yearslater

8Yearslater©UB Ventures, Inc.

Improve NRR early for sustained growth

Net Revenue
Retention

12

A difference of 20% NRR
means a difference of
JPY 1bn after 8 years

SaaS Annual Report 2021

SaaS Playbook

7.6JPY bn

For SaaS companies, after reachinga certain phase of growth, it is important to focus on not only new
accounts but also to upsell existingaccounts.

6.6JPY bn

By increasing the no. of accounts, aswell as unit price per account due to
new additional features, cross-selling these one-stop solutions willallow for sustained, diversified
growth.

5.6JPY bn

NRR

140%
120%
100%

Assumptions
ARPU
MRR Velocity

JPY 100k/mth
8mths

Customer Growth Rate 150%
Churn Rate

1%/mth

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

©UB Ventures, Inc.

Revenue growth of Japan SaaS companies
slow down to 80% in subsequent years

GrowthPersistence

13

How to deal withdecreasing growth rates

Revenue Growth Rate (Current Year vs Next Year)

120%

80%

Similar to US SaaS companies, thegrowth rate of Japan SaaS companies that have reached a certain
scale tends to gradually decrease to
80% year on year.

Growth Rate (Next Year)

100%

SaaS Annual Report 2021

SaaS Playbook

On the other hand, there are cases where growth is accelerated
through strategies such as creating
new products, diversifying sales
through partnerships, and M&A
activities.
In the future, it is possible that thesustainability of growth rates would
become a factor that influences
valuation.

60%

40%

20%

Growth Rate (Current Year)
0%

20%

40%

60%

Source: FY2017-2020 Growth Rates of 18 public Japan SaaS companies referenced from public materials

80%

100%

120%

©UB Ventures, Inc.

Mendoza
Line

What is the growth rate to aim forin order to achieve JPY 10bn ARR?

120%

14

SaaS Annual Report 2021

SaaS Playbook

ARR Line Growth Rate Comparison

ARR Growth Rate

ARR

JPY 1bn

JPY 2bn

JPY 3bn

JPY 5bn

JPY 7bn

JPY 10bn

JPY 13bn

Growth Rate

90 %

71 %

60 %

47 %

40 %

30 %

24 %

100%

80%

60%

Is your growth on track
to outperformthe Mendoza Line?
This Mendoza Line – based on
30% growth at JPY 10bn ARR – isderived by applying the annual decrease in sales growth ofJapan SaaS companies.
Whether strong MRR velocity isachieved at an early stage andexceeds the Mendoza Line determines how fast they can reach
JPY 10bn ARR and scale beyond.

Source: UB Ventures materials

40%

20%

ARR (JPY bn)

0%
0

2

4

6

8

10

12

14

16

18

©UB Ventures, Inc.

Gross Margin

70%+ Gross Profit Margin is
a Pre-requisite for SaaS

15

SaaS Annual Report 2021

SaaS Playbook

Costs to be included in COGS for SaaS

Hosting CostEngineer Cost

Account Management Cost

Server Costs for Product Delivery

Labor expenses involved in product delivery

HR expenses for the opening andmaintenance of accounts.

E.g. AWS/GCP/Azure Usage Fees,
Company Server Costs

Engineers involved in the main productand infrastructure.
Engineers involved in the developmentof new products are not included.

E.g. Sales Support Team etc.

Customer Success Cost

Software Cost

Licensing Cost

HR expenses involved in productonboarding and inquiries

3rd-Party expenses involved in
product delivery

API and other data licenses required for product delivery.

E.g. Customer Success Team, Etc.
Upsell / Cross-sell Sales Team are notincluded.

E.g. Salesforce, Zendesk, Gainsight

E.g. Twillio, Square, Shopify.
Includes license and content usage fees.

Source: UB Ventures materials referencing Redpoint Ventures©UB Ventures, Inc.

16

SaaS Annual Report
2021

Product-Led Growth
Vertical SaaS

Year 2022
Trend

SaaS Trends

From 2022 onwards
2 Key Shifts in Japan SaaS

17

Trend until Now

SaaS Annual Report 2021

Year 2022 Trend

2022 Onwards

Shift toCloud-Based Software

Business Model
Transformation

IndustryFocused SaaS

On-Premise ➡ Cloud

Diversification and
Optimization of Billing Plans

Expansion Across Industries(Construction, Healthcare etc.)

Adjacent Expansion to
Fintech and Marketplaces

Hardware X SaaS

Development Cost ➡ Subscription
Establishment of a Direct Sales Team
within the Organization

AI Adoption in SaaS
Partnership Strategy Development

Collaborative Software Utilization(CRM, Accounting etc.)

Digitalization of Legacy SMBs

©UB Ventures, Inc.

PLG - The Accelerated
Growth Strategy for SaaS

Product-Led
Growth

PLG

vs

18

SaaS Annual Report 2021

Year 2022 Trend

Revenue Trend of 3 Companies with PLG Strategies

SaaS

3000

PLG

SaaS

Revenue
Growth Rate

27.5 %

21.2 %

Gross Profit
Margin76.7 %

71.9 %

Valuation(USD M)

14,420

6,079(USD M)

2500

2000

Source: PRODUCT-LED GROWTH INDEX,OpenView Venture Partners (As of 1 September 2021)

1500

Rapid Growth based onUser Experience
Global SaaS players such as Zoom and Shopify
have continued to rapidly grow even after
achieving scale by incorporating PLG (ProductLed Growth) into their growth strategy.
In PLG, the users themselves decide to pay forthe subscription by experiencing the productfirst-hand. In fact, companies that adopt PLG
have outperformed the average SaaS in termsof growth potential, profitability, and corporate
value.

Source: IR materials from each company

1000

500

0

2015

2016

2017

2018

2019

2020
©UB Ventures, Inc.

PLG
Growth Cycle

The PLG Growth Cycle:
Active users bring new users to the product19

Conversion

SaaS Annual Report 2021

Year 2022 Trend

Activation

Registration of interested viral user

RegisteredUser

Product’s full value is presented
User proactively uses
Zoom’s web
conferencing features

User who joinsa Zoom call signs up

Engaged
User

Potential
Users

Virality

Retention

Spread to other potential users

Value is continuously provided

User conveys value toother colleagues
in the Zoom call

User regularly uses
Zoom in work andother settings

Active User

©UB Ventures, Inc.

PLG vs SLG

Product-Led Growth (PLG) and Sales-Led Growth (SLG)
are adopted in tandem by many companies

20

SaaS Annual Report 2021

Year 2022 Trend

Many companies adopt PLG + SLG

Source: Andreessen Horowitz, “Growth+Sales:
The New Era of Enterprise Go-to-Market"

The appropriate strategy depends on various
factors, such as the ease of understanding the
product, or the target customer base.
Ultimately, the decision of whether PLG or SLG
is optimal depends on the environment that thestartup is operating within.
Globally, even companies that have adopted
PLG often adopt a PLG+SLG hybrid model, suchas when the sales team holds business negotiations when acquiring a corporate contract.

Source: UB Ventures, “New SaaS strategy: Product-Led Growth”, Taiju Takano

PLG

SLG

Product-Led Growth

Sales-Led Growth

Conveys value via products

Conveys value via sales

Product-intensive

Labor-intensive

Suitable for low unit price

Suitable for high unit priceTech-driven onboarding

Personnel-driven onboarding

Low CACHigh CAC

Simple-to-understandproduct

Complex product requiringexplanation©UB Ventures, Inc.

The market of vertical SaaS is
1/3 that of horizontal SaaS in Japan

Vertical SaaS
/ Listed Companies

21

SaaS Annual Report 2021

Year 2022 Trend

Horizontal / Vertical SaaS by Total Market Capitalization

Horizontal:
22 companies

Vertical:

10 companies

JPY

2.5 tnJPY

921 bnRapid Growth of Vertical SaaS
Amongst the 10 major vertical SaaS in
Japan, the total market capitalization has
exceeded JPY 900bn.
Following in the footsteps of Infomart,
we are beginning to see other industry-focused startups like SpiderPlus and
ENECHANGE also starting to go public.

Source: Tokyo Stock Exchange, public data from each company

After 2022, the number of vertical SaaS
IPOs may even exceed those of horizontal
SaaS, as we are now witnessing a rapid acceleration of digitalization processes happening within each industry across Japan.

©UB Ventures, Inc.

Vertical SaaS
/ Private Companies

JPY 8bn was raised in 2021
led by the Healthcare industry

22

SaaS Annual Report 2021

Year 2022 Trend

Amount fundraised by vertical SaaS (by Industry)

Healthcare
Travel / F&B
Wholesale / Retail
Logistics
Education
Construction
Real Estate / Leasing
Series A
Series B
Series C
Series D

Consumer / Entertainment
Manufacturing
Finance / Insurance
0

5

10

15

20

25

30

35

40 (JPY bn)* Total fundraised since Series A in the last 5 years by industry.
* Company logo represents the top fundraiser in each industry category.

Startup Funding differs largely by Industry
By aggregate funding amount after Series A, we
see that healthcare is the leading sector of choicefor investments. This is led by late-stage startups
like Linc’well, Allm, and UniFa who have raised
billions of yen so far.

Source: UB Ventures materials, company data from INITIAL

Large-scale investments is also seen in Travel / F&B,
Wholesale / Retail, which are industries facing labor
shortages. On the other hand, we are seeing relatively
fewer investments in sectors such as Manufacturing
where digitalization is more complex.

©UB Ventures, Inc.

23

SaaS Annual Report
2021

China SaaS
The Advent of the Golden Age for China SaaS

Chiamin Lai
Managing Partner

Prior to joining UB Ventures, Chiaminworked on corporate digitization andoperational transformation projects
across Japan and Europe at Intentia. She
then worked for Monitor Group, overseeing business strategy planning andAsian expansion projects, before joining
DCM Ventures as a venture capitalist,
where she was in charge of investments into startups such as freee andCoubic, etc. In 2014, she joined Happy
Elements, a Chinese startup, serving as
Representative Director of Japan as well
as board member of the group company,
overseeing Metaverse/XR businesses inJapan and China. Chiamin has an MBAfrom IE Business School.

Why
China SaaS?

5 Reasons why SaaS in China is Booming

Policy-Driven
by the 5-Year Plan

1

In the 13th Five-Year Plan announced in 2016,“The proliferation of 4G”, “Cloud-based technology”, “AI” were clearly mentioned, and real-world implementation is expected to rapidly
progress in the coming years.

24

Changes in Management
due to Economic Slowdown
and Rising Labor Cost

SaaS Annual Report 2021

China SaaS

4

China’s average annual income has risen by 1.6x
over 10 years from 2010. Due to the slowdown ingrowth and rising labor costs, companies havebeen required to shift from labor-intensive management to a more efficient productivity-driven
model based on technological improvements.

2

Maturity of
Cloud-based Technology
Chinese cloud technology continues to rapidly
grow. Alibaba Cloud, the 3rd largest global IaaS
provider in 2020, provides extensive cloud computing services to many companies wordwide.
Technologies such as artificial intelligence, IoT,
and 5G are making great strides, with low cost
digital solutions also becoming widely accessible to the general public.

Active Incentivization
to Switch to Domestic
Technologies

3

The Chinese government is trying to transform
itself into a manufacturing powerhouse thatemphasizes the quality and technology of domestic products under the “Made in China 2025”
policy. In its priority sectors, there is a target fordomestic production ratio, as well as measures
such as financial support for adjacent industries
and support for improving basic technologicaladoption. Within ERP, foreign capital took top
share in 2008, but Yonyou, a domestic SaaS
company, has since taken 31% share as of 2018.

Changes inPayment Awareness5

Historically, software licensing had faced low
adoption in China, where companies were notincentivized to invest in software. However,with the proliferation of 4G and the change inmindset towards software copyright ownershipamongst the younger generation, paying forsoftware usage fees has gradually progressed.
The number of paying users of SaaS companies
was estimated to have grown from 13,000 in2013 to 550,000 in 2019.

©UB Ventures, Inc.

Investment into Chinese software could riseby 10x compared to the US

SoftwareInvestment

25

SaaS Annual Report 2021

China SaaS

Software Investment as % of GDP (2020)

1.2
（%）

1.10 %

1.10 %

1.0

1.00 %

0.8

0.6

0.60 %
0.50 %
0.4

0.30 %

0.30 %

0.2

0.10 %
0US

Singapore

Source: Gartner and J.P. Morgan

UK

Germany

Japan

South Korea

India

China

In 2020, software investment accounts for 0.1% of GDP in China, but
1.1% in the US and 0.5% in Japan. If
China, the world’s second-largest
economy, invests in software at thesame level as the United States, we
can expect the SaaS market in China
to rapidly scale further.

©UB Ventures, Inc.

By 2023, the China SaaS Market is set to growby 34% yearly to JPY 2.3tn, triple that of Japan

Market Size

26

SaaS Annual Report 2021

China SaaS

China SaaS Market Size

2.5

50

（ JPY tn ）

（%）

2.0

40

1.5

30

Annual Growth Rate

1.0

20

0.5

10

Market Size

0

2016

2017

Source: I-Research, Fuji Chimera Research Institute

2018

2019

2020

2021

2022

2023

0

The China SaaS market reached
JPY 957.6bn in 2020, with forecastsof JPY 1.3tn for 2021, and JPY 2.3tn
for 2023 - a 34% CAGR. This is equivalent to about 3x of the Japan SaaS
market, which has been forecast toreach JPY 817.4bn in 2023.

©UB Ventures, Inc.

Players

Horizontal SaaS in China

Communication

CRM

27

Data analytics / Risk management / AI

Open Source/Blockchain

Office automation

Finance / Tax management

HRM

Low Coding

Cloud Storage

Supply Chain Management

In China, the penetration rates of CRM and
ERP products are highest amongst SaaS, withseveral companies listed on the Chineseand Hong Kong stock markets. Under ERP,
Yonyou and Kingdee at valued at JPY 1.6tn
and JPY 1.1tn respectively.

Source: UB Ventures materials aggregated from public data

Recently, HRM SaaS has also demonstrated
growth due to an increase in demand fortalent acquisition and retention. In fact,
Boss Zhipin was listed on NASDAQ in June
2021 valued at JPY 1.6tn. Privately, we also
see companies such as Beisen, which raised

SaaS Annual Report 2021

China SaaSERP

IoT / Smart Family

Maintenance & Security

E-Signature

a JPY 28bn Series F in May 2021, rapidly
achieving scale and sustaining growth.

©UB Ventures, Inc.

Company Name
Fund Strategy
ThemesNo. of Portfolio Companies
Investment Region
Address

Date of Establishment

UB Ventures, Inc.
Venture Capital
SaaS, Media, Metaverse, AIoT
21
Japan & Asia
1-16-6 Dogenzaka,
Shibuya-ku, Tokyo
Futaba Building 1F GUILD
Dogenzaka
16 Feb 2018

Experiences

Contents

Community

To build a new startup ecosystem model that integrates
growth support, community, and contents.

Experiences

Contents

Community

We are venture capitalists withextensive experience in building startups andmanaging teams, and we are always
excited to support new founders.

We produce research on the latest andemerging trends, providing deep analysis on
the macro landscape through our proprietary
access to data assets, together with unique insights
our own business experience.

We organize regular meetups through Thinka,
our very own exclusive community,
for founders to come together, share theirstartup stories, and learn from each other’s
experiences.

Our Team at UB Ventures

Insights from our experience with startups

Executive Officer /Managing Director of Asia Office
Managing Partner

Osamu Iwasawa

Bringing Global Trends to Japan

Managing Partner

Representative Director (Japan) and
Board Member /Head of Metaverse Division

Chiamin Lai

Founder and CEO

Venture Partner

Yoichi Aso

Executive Officer

Launched the Japanesetranslation of“Product-Led Growth:
How to Build a Productthat Sells Itself” by Wes BushUB Ventures was primarily involvedin the project planning, negotiations ofbringing the contents over, as well as
editorial and proofreading forspecialized SaaS terminologies.
Translation of ‘Product-Led Growth’(Original English by Wes Bush)

Brought together acommunity of 40 founders
over the last 3 batches

UB Ventures
SaaS Annual Report 2021

Overall Direction

Representative Director Managing Partner

Osamu Iwasawa
Chief Analyst

Akio Hayafune
Content Direction

Representative Director Managing Partner

Osamu Iwasawa
Managing Partner

Chiamin Lai
Principal

Takuya Oshika
Chief Analyst

Akio Hayafune
EditorResearcher

DesignHajime Aomatsu (sukku)

Production / Translation

Data references

Takaki Nishitani

Jorel Chan
Shinya Iwashita
INITIALhttps://initial.inc/

Aggregate Corporate Data
https://note.com/_funeo

Inquiries

contact@ubv.vc