“Our investment strategy remains unchanged: We continue to focus on technology-driven enterprise service companies, particularly SaaS firms.” Jing Hong stated this softly in an interview with NetEase Tech’s Attitude AGI column. Yet her words stand out starkly in today’s climate, where SaaS (Software as a Service) faces widespread pessimism.
Jing Hong, Founding Partner of Gaocheng Capital, boasts two decades of experience in primary market investments and is hailed as one of China’s most successful female investors. Her track record includes early investments in Alibaba (2009), Meituan, DiDi, and Wind Information (2014), making her one of the rare investors to achieve multiple single-deal returns exceeding $1 billion.
Under her leadership, Gaocheng Capital has become a dominant force in China’s SaaS sector, with over 30 portfolio companies spanning verticals such as enterprise software, AI, and industrial digitization. Notable investments include Bairong, Tuya, Beisen, Youzan, Mingyuan Cloud, Chanjet, DerbySoft, Xiaoe Tech, Zixun, eVAT Master, Flux, UMU, and ABC Cloud.
“Many claim China’s SaaS model is dead, unprofitable, or unsustainable—but we’re more confident now than ever,’ she asserts. ‘In fact, six to seven of our portfolio companies already achieved over ¥100 million in net profit last year, with more to follow this year.”
To Jing, technological innovation is the fundamental driver of societal progress but represents only a “necessary yet insufficient condition” for value creation. She argues that enduring competitive barriers lie not solely in technology but in deep integration with client workflows, continuous data accumulation, closed-loop business processes, and enabling data-driven decision-making.
“The essence of SaaS,” she explains, “is the ability to solve real-world business problems through technology iteratively, ensuring clients willingly renew, not merely delivering one-off technical upgrades.”
Amid the AI wave, Jing Hong openly acknowledges AI’s disruptive impact on SaaS while emphasizing its structural opportunities for the industry. She states, “AI will displace simplistic software tools but significantly empower SaaS companies deeply rooted in vertical sectors or specialized functions.” At the same time, AI is propelling ‘Software as a Service’ into a new era—’ AI as a Service’ (AIaaS)—shifting from tool delivery to outcome-driven operations, thereby unlocking access to the vastly broader operational services market.
“We’re thrilled to see leading SaaS companies not just surviving but thriving and pioneering AI adoption,” she told NetEase Tech.
Below is an edited transcript of NetEase Tech’s conversation with Jing Hong, condensed for clarity without altering original intent.
The SaaS Industry is Entering the “Slope of Enlightenment”
NetEase Tech: As one of the few firms consistently investing in SaaS, how does Gaocheng Capital view the claim that “SaaS is dead”?
Jing Hong: When people talk about SaaS (“Software as a Service”), they typically refer to cloud-delivered, subscription-based enterprise software services.
From a technology lifecycle perspective, enterprise software has evolved from “Client-Server” architectures to “Browser-Server” architectures.
The former involves deploying software on a client’s servers or local infrastructure, where the client manages hardware, software, and data. The latter delivers software as a cloud-based service, with users accessing it via subscriptions. The provider handles maintenance, updates, and data management here—this is SaaS.
Companies must rapidly adopt new technologies to stay competitive in today’s fast-paced technological landscape. From an efficiency standpoint, migrating enterprise software to the cloud is an inevitable trend, regardless of personal preferences.
While China’s market faces challenges, such as large enterprises favoring customized solutions and SMEs resisting software spending, this mirrors the trajectory of global software development. Before 2000, developed markets were also dominated by custom software, much like China today.
This is a natural phase of evolution. What happened next?
After the dot-com bubble burst in 2001, companies realized that in-house software development was time-consuming and costly, and their “unique practices” weren’t necessarily industry best practices. This drove a shift toward standardized software for efficiency gains.
The core question became: Who better embodies industry best practices—the company itself or a third-party vendor specializing in a specific vertical or function?
After the 2008 financial crisis, cloud infrastructure catalyzed the rise of SaaS. Its advantages—lower costs, faster deployment, rapid iteration, and reduced client burden—answered a critical question: Should enterprise software remain a static fixed asset or evolve into a dynamic operational expense?
China’s economic growth over the past 30 years was “breakneck,” often relying on follow-the-leader innovation. For example, if others made TVs, we made bigger, sharper ones; if others built EVs, we made them cheaper and smarter.
When growth paths were clear and markets were vast, speed trumped management. Many fast-growing firms mistook velocity for success, assuming they represented best practices.
Previously, companies had ample resources to fund large in-house IT teams for custom systems. But today, innovation has entered an “uncharted phase.” To overcome bottlenecks and achieve leapfrog progress amid economic shifts—whether in apparel or automotive—businesses must focus resources on core competencies. Do they need to build their HR software?
NetEase Tech: This reflects a process of “scientification of management.”
Jing Hong: Exactly. This “scientification of management” process likely unfolds in two phases: standardization and subscription-based adoption.
Regarding standardization, a joke says, “China doesn’t need CRM (Customer Relationship Management software) because we have Maotai.” This might have held in the breakneck growth era—business relationships were often sealed over drinks. But in today’s hypercompetitive landscape, relying solely on traditional networking tactics like ganbei toasts is no longer sufficient. Companies must now embrace digital, scientific management to boost efficiency in lead management, customer segmentation, or quantifiable sales conversion metrics. This is where CRM finally proves its worth.
The scientification of management is an inevitable stage of corporate maturity, universal across geographies. Huawei’s three-step mantra of “first rigidity, then optimization, and finally solidification” offers a blueprint for success. Routine and standardization of management processes are critical to progress.
As for subscription-based adoption, we view this as a historical inevitability. Traditional enterprise software was treated as a one-time “fixed asset”—like a factory or equipment—depreciated over time. However, in the digital age, where technology evolves daily and best practices shift rapidly, software should be seen as an ongoing operational expense (OPEX), not a capital expenditure (CAPEX). Every dollar of revenue should be paired with proportional investments in digital and intelligent IT. Companies should leverage specialized vendors offering continuously updated services instead of splurging on in-house systems that become obsolete in two to three years. For example, outsourcing HR software to a firm like Beisen is far more efficient than developing it internally. Focus on core competencies—this is the first-principles approach.
The rise of AI further amplifies this logic. Generative AI is inherently cloud-native. Large language models (LLMs) operate on a token-based economy—cost and value hinge on token usage. With their inherent scalability and rapid iteration, cloud-native architectures vastly outperform private deployments in training, inference, and model updates. If security is a concern, companies should invest in robust data safeguards rather than clinging to outdated on-premise systems under the guise of risk aversion.
In the U.S.-China AI race, Chinese firms must leverage their unique strengths: full-industry-chain integration, diverse application scenarios, and hyper-scalable innovation. These align perfectly with cloud-centric strategies. By capitalizing on the agility and scalability of cloud-model integration, we can avoid repeating the pitfalls of fragmented, project-based AI deployments that plagued earlier technologies.
So why do some claim “SaaS is dead” or “unprofitable in China”? First, development is stage-dependent. We must acknowledge SaaS’s long-term trajectory while addressing near-term challenges. Second, past overhype distorted expectations. Excessive valuations, overfunding, and premature scaling burned many firms before they validated sustainable business models.
However, we’ve seen tangible success as a fund laser-focused on enterprise services. Eighty percent of our portfolio companies are already profitable. Last year, six to seven achieved net profits exceeding ¥100 million, with more expected in 2025.
NetEase Tech: Are these profitable companies primarily focused on the domestic market?
Jing Hong: Most of our portfolio companies are domestically focused, though five or six generate over 50% of their overseas revenue. Regardless of their market focus, their profitability has improved significantly. When we first invested, only about 20% of these companies were profitable; today, 80% of the same cohort have achieved profitability. By 2025, we expect 90% of them to be profitable. Over the past two years, while investor interest in enterprise services has waned, our portfolio leaders have thrived, benefiting from a phase of “steady demand growth and rapid supply-side consolidation.”
China’s SaaS industry has followed a classic development cycle: from the “Peak of Inflated Expectations,” when valuations soared amid claims that Chinese SaaS would “surpass the West in SaaS adoption overnight,” to the “Trough of Disillusionment,” marked by declarations that “SaaS is dead.” We believe the industry is ascending the “Slope of Enlightenment”—a stage where many underestimate the compounded growth potential.
As a patient growth-stage fund dedicated to enterprise services, we remain committed to doubling down during this “Slope of Enlightenment,” supporting these companies in achieving incremental progress and long-term compounded growth.
NetEase Tech: Could you share additional industry metrics?
Jing Hong: Among our 30+ portfolio companies, the median revenue growth rate and gross margin have risen steadily over time. This signals a growing willingness to pay for standardized products.
For context, the median gross margin for U.S.-listed software companies hovers around 74–75%, while for Chinese A-share software firms, it’s roughly 50%. This gap reflects China’s lingering reliance on customized project-based models—essentially “selling labor hours”—rather than subscription-driven solutions.
When we first invested in these companies around 2018–2019, their median gross margin was 60–61%. Today, the same cohort has achieved 67–68%.
SaaS Companies Are Best Positioned to Achieve Rapid Commercialization in the AI Era
NetEase Tech: Focusing on AI, which investment opportunities do you find most promising?
Jing Hong: At this historical juncture, we are particularly optimistic about vertical AI applications.
Technical entrepreneurs must specialize. They shouldn’t wander the world with a technological “hammer” looking for “nails.” Instead, they must first define their target customer base. Can their technology solve common pain points for these clients in specific scenarios? Are customers willing to pay for it? Can the product be delivered cost-effectively? These are the critical questions.
Take Beisen, for example. A 20-year veteran in human resources, it has evolved from PC-era personnel management to mobile-driven HR solutions and now AI-powered, employee-centric platforms. Beisen recently launched an AI product suite comprising seven specialized agents—including AI interviewers, recruitment assistants, and training coaches—already achieving large-scale commercialization.
Previously, interviewing 1,000 candidates for a major company cost ¥300 per initial screening and took weeks. Beisen’s AI interviewer slashes costs to 1/10th of traditional methods while directly delivering actionable results. Its accuracy surpasses junior human interviewers, avoids fatigue or bias, and precisely aligns with role-specific skill requirements. This expertise isn’t replicable by general-purpose LLMs, which rely on open internet data, whereas Beisen leverages decades of industry-specific client knowledge.
Another example is Bairong, which serves 7,000 banks and financial institutions. Already a leader in big data risk control with annual revenues exceeding ¥1 billion, it has expanded from “Model as a Service” to “Business as a Service,” deploying generative AI-powered text and voice agents that integrate into core banking operations like customer acquisition and sales—charging based on actual business outcomes.
Its AI customer service now achieves “human-like” multi-turn dialogues, where users remain unaware they’re interacting with a machine even after dozens of exchanges. This stems from Bairong’s deep understanding of financial jargon and client needs.
We’ve also invested in ABC Cloud, which serves grassroots healthcare providers like community hospitals and clinics. With a footprint across tens of thousands of institutions, ABC doesn’t just offer hospital management systems but also AI-assisted diagnosis. Its “Medical Brain” enables clinicians to prescribe at the level of top-tier specialists, transforming from a tool into a clinical competency partner.
We strongly favor vertical AI applications rooted in industry expertise, real-world data, and closed-loop value delivery.
Some describe today’s AI value chain through the “smile curve”: high value at either end (chips/compute and industry applications) with commoditized LLMs squeezed in the middle. This mirrors traditional manufacturing, where upstream R&D and downstream branding capture value, while midstream production faces margin compression.
Many of our SaaS portfolio companies—”Young Incumbents” in vertical sectors—are primed to thrive in this AI wave. With customer networks, proprietary data, and domain mastery, they’re leveraging incumbency advantages to rapidly deploy AI solutions that create tangible value, positioning them as first-movers in commercialization.
NetEase Tech: Following DeepSeek’s rise, we’ve noticed a rebound in cloud service providers’ valuations.
Jing Hong: True, but DeepSeek’s success has also sparked a countertrend: some firms now favor private deployments. However, the industry must stay committed to cloud adoption in the long term. Enterprises will gradually embrace paying for cloud-based intelligent services. If China’s SaaS sector stagnates, widespread enterprise AI adoption will struggle to accelerate.
NetEase Tech: Many cite data security as a reason for avoiding the cloud.
Jing Hong: Addressing security concerns requires investing in safeguards, not retreating to private deployments out of bureaucratic inertia. Overcaution risks falling behind cloud-native AI’s rapid evolution. Pure private setups can’t match the pace of technological advancement or iterative benefits.
This is why policymakers now advocate embracing the cloud’s scalability and agility while ensuring data security, avoiding regression to fragmented, customized deployments.
Security remains paramount, so we’re actively investing in cloud security, AI safeguards, and data governance firms. This proactive approach aligns with a healthier technological future.
NetEase Tech: How does AI impact SaaS companies?
Jing Hong: We believe AI will impact SaaS companies across three distinct tiers of influence.
The first tier is displacement. For lightweight, single-purpose software tools, AI could directly “replace” them, as it can more efficiently achieve the same functionalities.
The second tier is augmentation. AI will significantly enhance the capabilities of vertical SaaS platforms, such as the companies I previously mentioned—Bairong, Beisen, and ABC Cloud. These firms are already strengthening their products and services with AI, launching new AI-driven modules, and seeing rapid growth in AI-related revenue.
The third tier is transformation, marked by the evolution from “Software as a Service” to “AI as a Service” (AIaaS). Many AI products no longer merely deliver tools—they deliver outcomes. This means that they cut into more than just the original software tools market, and are even able to penetrate the larger operational services market. For example, in the U.S., software is a $2 trillion market, but services are a $20 trillion market. AI can extend software to operational services, creating results and value directly.
Take our portfolio company, Youzan, as an example. They are developing AI-powered e-commerce operation specialists that directly assist merchants with sales conversion, marketing strategy, and customer service operations. This goes beyond just a software tool – it essentially functions as an “AI-managed service” that delivers tangible business outcomes.
Whether it’s standardized software, SaaS, or today’s AI Agents, they all fall under the broader umbrella of “enterprise services.” Enterprise service software represents the abstraction and institutionalization of management best practices adapted to new technological cycles.
The AI era will continuously give rise to new intelligent management best practices. There will always be numerous operational areas where third-party specialists can deliver greater efficiency than in-house execution – this constitutes the value creation space for enterprise services. Companies should focus on their core competencies in running their businesses, as ecosystem partners can more efficiently handle many operational tasks.
NetEase Tech: What other sectors are you watching?
Jing Hong: We’re eyeing high-margin, software-defined hardware innovations.
China is entering a new phase of convergence between “bit” (digital world) and “atom” (physical world) innovation. Over the past 20-30 years, U.S. innovation has primarily focused on the digital realm, including the Internet, AR/VR, Bitcoin, blockchain, and AI, as it outsourced manufacturing. Meanwhile, China has steadily advanced physical-world innovation, transitioning from being a “follower” to becoming a “creator.”
China is evolving from the “world’s factory” into a “global innovation hub,” with world-class innovations increasingly emerging, particularly in smart manufacturing. These breakthroughs typically combine software and hardware into integrated “software-defined hardware” solutions.
While delivered as physical products, they often adopt subscription-based pricing models, with their core value deriving from software-enabled capabilities and efficiency. Such companies frequently achieve high gross margins of 50-60% or more, reflecting both their value creation and competitive moats.
Commoditized products inevitably face margin erosion. In contrast, the SaaS leaders in our portfolio have demonstrated steadily rising gross margins, well above the average of A-share software companies, proving their ability to deliver differentiated value and sustain user willingness to pay for standardized, high-quality services.
NetEase Tech: What’s Gaocheng’s focus for 2025?
Jing Hong: Our investment strategy remains unchanged – we continue to dedicate ourselves to the technology-driven enterprise services sector, and this year is no exception.
We will deepen our expertise in enterprise software, particularly vertical-specific solutions, concentrating on companies with long-term growth potential. Our goal is to build what could be called the “China Blue Chip SaaS Index” – a portfolio of leading SaaS innovators that represent the best of China’s enterprise technology landscape. Additionally, we remain committed to high-margin, software-defined hardware projects that blend physical and digital innovation.
At the same time, we are strongly bullish on Chinese software and AI companies going global. We primarily aim to support entrepreneurs who target worldwide markets from day one, helping them build truly world-class software firms.
This goes beyond just “going global,” a term that implies perfecting products domestically before expanding abroad. The new generation of entrepreneurs we back is global from Day One, building products designed to compete worldwide from inception. These aren’t just Chinese companies expanding overseas—they’re born-global enterprises with worldwide customer bases embedded in their DNA.
Many of our portfolio companies have made remarkable achievements in overseas markets, and five or six of them have already generated more than 50% or even 90% of their revenues from overseas, including Europe, the United States, Japan, South Korea, and Southeast Asia.
In addition, we hope that with the power of patient capital, we can promote industry consolidation and accelerate the formation of scale competitiveness of outstanding enterprises so as to better provide customers with complete products and services. The enterprise software industry usually has strong customer stickiness, good cash flow, and a high success rate of mergers and acquisitions, which is very suitable for realizing the rapid growth of enterprises through mergers and acquisitions.
For example, we facilitated DerbySoft’s acquisition of PKFARE (combined revenue nearing $200 million) and Beisen’s purchase of KuXueYuan to enhance product lines. We expect more such deals this year. Of course, AI is definitely a key element of our focus. Not only does it fit in with our optimistic SaaS, hardware, and software combination, industry integration, and globalization strategy, but it is also rapidly changing the enterprise service industry itself: SaaS integration with AI and AI upgrading of SaaS are the general trend.
In fact, we are willing to share with you now because we have found that a group of Chinese SaaS companies have not only become profitable, but are also leading some of the global technology innovation trends, and it’s time to “wave the flag” for these companies.
In the past two years, many voices have said that the SaaS model is not valid and not worth investing in, and the market sentiment has also been very low. But we remain optimistic and continue to support these entrepreneurs. We will share our profitable cases with other portfolio companies that are still growing, creating a positive internal cycle.
This is what we understand by “patient capital”—not simply putting money in the bank but truly empowering entrepreneurs in the long term. Only in this way can we create value for our LPs (limited partners).
“Patience” in Capital Isn’t an Outcome—It’s a Skill
NetEase Tech: When discussing “patient capital,” do you think investors still embody this quality today?
Jing Hong: At Gaocheng, we firmly believe we are “patient capital.”
Take Bairong and Youzan, for example. I began investing in them as early as 2014 at my previous firm and have continued to increase our stakes since founding Gaocheng.
2018–2019, when the market ignored SaaS, we launched dedicated funds to focus on the sector. When hype drove P/S valuations to 10x or 20x, we maintained discipline. When the tide receded, we held firm and doubled down on leading companies.
“Patient capital” demands conviction and a long-term vision. We operate on three principles: expertise, focus, and patience. Patience isn’t passive—it’s an active skill, the ability to stand by companies during unpopular phases.
This resilience stems not just from faith in technological trends or demand-side potential but also from certainty about long-term supply-side barriers, the latter of which is far harder to assess.
Many conflate “entry barriers” with “incumbent advantages.” For instance, when computer vision first outperformed human experts, it seemed only overseas Ph. D.s could lead such ventures—a high entry barrier. But if technology is a one-off breakthrough without evolving into sustainable advantages, it risks replication or oversupply.
In this sense, technology is “time’s enemy.” During the last computer vision wave, the biggest winners were incumbents like Hikvision, which deeply understood client needs and rapidly integrated new tech. Thus, while innovation drives progress, it’s a necessary yet insufficient condition for value creation.
We focus more on companies that can quickly solidify their technological leadership into business barriers. The so-called business barriers are self-reinforcing and may be the cost effect of economies of scale, the cumulative effect of data flywheels, or the iterative effect of third-party best practices with cross-customer insights, which need to be analyzed industry-specifically.
Technical founders must immerse themselves in industry scenarios, grasp client pain points, accumulate high-quality data, and build enduring loyalty. When technological edges erode, can they rely on other moats? That’s the key to lasting value.
A sector joke captures this well: “If one person can do it, it’s ‘hard tech.’ If two can, it’s manufacturing. If three can, it’s overcapacity.” Our role is to help founders transform fleeting tech advantages into enduring incumbent strengths.
If we can turn our technology advantage into an incumbent advantage, we will become a “friend of time.” That’s why, even though many people quit the SaaS track, we will continue to invest. Friends around me asked me, “You are still investing in SaaS?” But my answer was: “I see the momentum of our portfolio companies is very good; I do not invest in it because it is counterintuitive.”
Therefore, “patient capital” is not just lip service, nor is it simply extending the holding period; it comes from a deep understanding of the industry’s nature and the certainty of the long-term barriers.
Enterprise services, especially the To B model, are a slow track. It will not grow hundreds of times in the short term, but it has the benefit of self-reinforcing compounding. Experienced LPs also understand the slowness of this type of asset – a slow start, but long slopes and thick snow, with long-term compound interest.
In terms of project selection, we also insist on picking entrepreneurs who do not chase the buzz or cater to the hotspots—they are more concerned about real customer needs and are willing to work deeply in the industry. We believe that we can do more with less than we have done. This consistency in belief is the root of our investment philosophy and the founder’s values, which can resonate and be held patiently for an extended period of time.
China encourages “patient capital”, which is a very significant benefit to both entrepreneurs and GPs, so that more funds can cross the market cycle to support and help those entrepreneurial enterprises and important tracks that create value with technological innovation and can compound interest in the long term, and to promote the transformation of society from “earning quick money” to “planning for the long term”. This will encourage the transformation of society from “making quick money” to “long-term planning”.
