Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<p>Driven by world-changing modern technologies such as artificial intelligence (AI), big data, cloud services, and smartphones, one of the most interesting industry sectors globally is China’s enterprise SaaS sector. China accounts for less than 5% of the global SaaS sector but is enjoying <strong>nearly double the global growth rate in this sector of nearly 30-35% per year. This pace is expected to continue </strong>over the next couple of years. </p>
<p>There are some major barriers that have prevented SaaS from enjoying even higher growth rates in the past decade, including low labor costs, concerns about storing business information on the cloud, concerns about the lack of adequate protection of intellectual property/software, and requirement of highly rigorous customization for vertically integrated SaaS products. Nonetheless, it is becoming increasingly clear that the benefits are outweighing the negatives of adopting SaaS in China, especially among the millions of small and medium-sized enterprises (SMEs) in China that have greater cash constraints and who are more willing to adopt SaaS systems. Furthermore, the COVID-19 pandemic has accelerated the growth of the SaaS sector in China.</p>
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<p><em><strong>This report was commissioned by the next-generation investment platform iSTOX, which puts previously out-of-reach opportunities like private equity, hedge funds and private debt in the hands of more investors. To learn more, go to <a href="http://istox.com/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://istox.com&amp;source=gmail&amp;ust=1609850951389000&amp;usg=AFQjCNHoQs_JK6S7mrQE5v_VMz3A-kJwpA" rel="noopener">istox.com</a>. </strong></em></p>
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Driven by world-changing modern technologies such as artificial intelligence (AI), big data, cloud services, and smartphones, one of the most interesting industry sectors globally is China’s enterprise SaaS sector. China accounts for less than 5% of the global SaaS sector but is enjoying nearly double the global growth rate in this sector of nearly 30-35% per year. This pace is expected to continue over the next couple of years. 
There are some major barriers that have prevented SaaS from enjoying even higher growth rates in the past decade, including low labor costs, concerns about storing business information on the cloud, concerns about the lack of adequate protection of intellectual property/software, and requirement of highly rigorous customization for vertically integrated SaaS products. Nonetheless, it is becoming increasingly clear that the benefits are outweighing the negatives of adopting SaaS in China, especially among the millions of small and medium-sized enterprises (SMEs) in China that have greater cash constraints and who are more willing to adopt SaaS systems. Furthermore, the COVID-19 pandemic has accelerated the growth of the SaaS sector in China.

This report was commissioned by the next-generation investment platform iSTOX, which puts previously out-of-reach opportunities like private equity, hedge funds and private debt in the hands of more investors. To learn more, go to istox.com. 


China Tech: Emerging Enterprise SaaS Companies

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<div class="content-highlight"><h2><strong>What You Need to Know</strong></h2></div><ul>
<li>
<strong>Corporate debt plays a key role in capital markets. </strong>In general, corporate debt ‒ as compared to other asset classes ‒ generates more consistent returns, represents lower investment risk, and provides reliable cash payouts in set intervals. Instruments such as corporate bonds, notes, and commercial papers make corporate debt a preferred option for more risk-averse investors while acting as a unique tool in diversifying one’s portfolio in the event of economic fluctuations.</li>
<li>
<strong>The corporate debt market remains inaccessible for many investors and companies. </strong>Despite its key role in capital markets, the corporate debt market prices out many investors, start-ups, and small-to-medium enterprises (SMEs) due to its over-the-counter nature, high minimum investment sizes, and hefty issuance &amp; transaction costs.</li>
<li>
<strong>Distributed Ledger Technology (DLT) can drastically lower debt investment sizes, providing more investors with access. </strong>For example, by leveraging smart contracts, corporate bonds at S$200,000 tranches could potentially be broken down and traded in smaller slices of S$10,000. This allows more people, including lower-end accredited investors (AIs), greater access to corporate bonds while potentially paving the way for higher interest debt issued by start-up and SMEs who are now able to issue debt at lower sizes.</li>
<li>
<strong>DLT can dramatically reduce debt issuance costs by up to 97% and allows more companies to access debt financing. </strong>According to a <a href="https://www.sustainablefinance.hsbc.com/mobilising-finance/blockchain-gateway-for-sustainability-linked-bonds" target="_blank" rel="noopener">2019 Blockchain Report</a> by HSBC and the Sustainable Digital Finance Alliance, full DLT automation could reduce the total issuance cost of a US$100million bond from US$3.6 million to US$127,000 ‒ effectively a 97% cost reduction. This enables more companies ‒ particularly start-ups and SMEs ‒ to tap debt capital markets for financing.</li>
</ul><p></p><p><strong>Important Note: </strong></p><p><em>This research is commissioned by iSTOX in collaboration with Zero One. </em><em>iSTOX is a next-generation private capital markets platform that provides accredited investors with access to previously out-of-reach investment opportunities. Click <a href="https://istox.com/" target="_blank" rel="noopener">here</a> to learn more.</em></p>

What You Need to Know

Corporate debt plays a key role in capital markets. In general, corporate debt ‒ as compared to other asset classes ‒ generates more consistent returns, represents lower investment risk, and provides reliable cash payouts in set intervals. Instruments such as corporate bonds, notes, and commercial papers make corporate debt a preferred option for more risk-averse investors while acting as a unique tool in diversifying one’s portfolio in the event of economic fluctuations.

The corporate debt market remains inaccessible for many investors and companies. Despite its key role in capital markets, the corporate debt market prices out many investors, start-ups, and small-to-medium enterprises (SMEs) due to its over-the-counter nature, high minimum investment sizes, and hefty issuance &amp; transaction costs.

Distributed Ledger Technology (DLT) can drastically lower debt investment sizes, providing more investors with access. For example, by leveraging smart contracts, corporate bonds at S$200,000 tranches could potentially be broken down and traded in smaller slices of S$10,000. This allows more people, including lower-end accredited investors (AIs), greater access to corporate bonds while potentially paving the way for higher interest debt issued by start-up and SMEs who are now able to issue debt at lower sizes.

DLT can dramatically reduce debt issuance costs by up to 97% and allows more companies to access debt financing. According to a 2019 Blockchain Report by HSBC and the Sustainable Digital Finance Alliance, full DLT automation could reduce the total issuance cost of a US$100million bond from US$3.6 million to US$127,000 ‒ effectively a 97% cost reduction. This enables more companies ‒ particularly start-ups and SMEs ‒ to tap debt capital markets for financing.
Important Note: This research is commissioned by iSTOX in collaboration with Zero One. iSTOX is a next-generation private capital markets platform that provides accredited investors with access to previously out-of-reach investment opportunities. Click here to learn more.

Private Capital Markets

<div class="content-highlight"><h2>What You Need to Know</h2></div><ul>
<li>
<strong>Private equity returns have outperformed public equity in the last decade.</strong> From March 2010 to 2020, private equity has generated an average annual return of 13.2% per year as compared to public equity at 6.6%. To put this into perspective, the implied compounded returns of PE over the last 10-year period was 246% versus 89% for public equity. This is partially attributed to the increasing number of unicorn companies - privately held startups reaching a valuation of over US$1 billion - most of which experience their highest growth and return periods in the private market rather than in the IPO stage.</li>
<li>
<strong>COVID-19 has upheaved the business and operating landscape for unicorns.</strong> Lockdown measures, heightened hygiene awareness, and increased travel restrictions are the realities faced by unicorn companies in the new normal, on top of a global recession hampering consumption.</li>
<li>
<strong>Unicorns supercharged by the pandemic: e-Commerce, FinTech, and Remote Work/Study.</strong> Digital platforms have experienced massive adoption as consumers and businesses alike are realizing that they don’t need a physical space in order to interact and transact.</li>
<li>
<strong>Unicorns forced to pivot by the pandemic: Travel &amp; Hospitality, Ride-hailing.</strong> Fear of infection and travel restrictions have hampered the bread-and-butter businesses of many unicorns, forcing them to offer new products &amp; services in the interim. Super-app unicorns (or apps that house a range of sub-apps serving many different functions) have proven more resilient, as they are easily able to switch to other businesses like on-demand delivery and fintech.</li>
</ul><p></p><p><em>Note: This research is commissioned by iSTOX in collaboration with Zero One. iSTOX, a next-generation private capital markets platform, provides accredited investors with access to previously out-of-reach investment opportunities, including exposure to unicorn companies. Click <a href="https://istox.com/" target="_blank" rel="noopener">here</a> to learn more.</em></p>

What You Need to Know

Private equity returns have outperformed public equity in the last decade. From March 2010 to 2020, private equity has generated an average annual return of 13.2% per year as compared to public equity at 6.6%. To put this into perspective, the implied compounded returns of PE over the last 10-year period was 246% versus 89% for public equity. This is partially attributed to the increasing number of unicorn companies - privately held startups reaching a valuation of over US$1 billion - most of which experience their highest growth and return periods in the private market rather than in the IPO stage.

COVID-19 has upheaved the business and operating landscape for unicorns. Lockdown measures, heightened hygiene awareness, and increased travel restrictions are the realities faced by unicorn companies in the new normal, on top of a global recession hampering consumption.

Unicorns supercharged by the pandemic: e-Commerce, FinTech, and Remote Work/Study. Digital platforms have experienced massive adoption as consumers and businesses alike are realizing that they don’t need a physical space in order to interact and transact.

Unicorns forced to pivot by the pandemic: Travel &amp; Hospitality, Ride-hailing. Fear of infection and travel restrictions have hampered the bread-and-butter businesses of many unicorns, forcing them to offer new products &amp; services in the interim. Super-app unicorns (or apps that house a range of sub-apps serving many different functions) have proven more resilient, as they are easily able to switch to other businesses like on-demand delivery and fintech.
Note: This research is commissioned by iSTOX in collaboration with Zero One. iSTOX, a next-generation private capital markets platform, provides accredited investors with access to previously out-of-reach investment opportunities, including exposure to unicorn companies. Click here to learn more.

The Future of Private Market Unicorns in a Post-Pandemic World

Singapore

Redefining Capital Markets. Next Generation Issuance And Investment For 21st Century Investors.

iSTOX (ISTOX SP)

China Tech: Emerging Enterprise SaaS Companies

One of the most intriguing sectors globally with excellent potential for long-term, high growth is the Enterprise SaaS sector in China.

Douglas Kim

Unlocking the Potential of Digital Debt

Distributed ledger technology (DLT) can drastically lower debt investment sizes, providing more investors with access. For issuers, DLT can reduce...

Vincent Fernando, CFA

The Future of Private Market Unicorns in a Post-Pandemic World

As a result of COVID-19, some unicorn companies have had to re-engineer their business model entirely, while other unicorn companies reap the...

Vincent Fernando, CFA