The Harbinger interviews Dr. Fan Ling, founder and CEO of Tezign. We had our initial conversation with Dr. Fan back in fall 2017, and his company has since grown from 30 to nearly 200 people, so we’re quite excited to dig in and understand what’s changed at Tezign and in the broader China market since that time. As a refresher – Tezign is a digital platform for creative talent and content resources based in Shanghai. It provides two primary solutions for large global brands: Creative Supplier Platform (match projects and companies with the right creatives) as well as Data Intelligence Solution (featured with a Digital Asset Management system and a Design and Artificial Intelligence solution). With Dr. Fan, we discuss Tezign’s growth, evolution in its business model, key client pain points, a competitive landscape ranging from freelance platforms and SaaS solutions to agency models, the importance of culture and talent development, and more.
Edited by Matt Hu (linkedin);
Link to SoundCloud (here), also available via Apple Podcasts, Google Play, etc.
[Editor's note: this interview has been edited and condensed for clarity. The opinions expressed in this article are Dr. Fan's own and do not reflect the views of Tezign; Adam Bao is an investor at Cherubic Ventures, the fund is a seed investor in Tezign]
Introduction
Hi there professor. It’s been about 18 months since our last conversation, and there’s clearly been a number of developments. What’s new?
Dr. Fan: Good to catch up Adam. We have three major developments at Tezign. The first development is that we've been very much focusing on serving larger enterprises. Right now, 90 percent of our revenue comes from larger enterprises like Alibaba, Tencent, Unilever, and Starbucks. We proved that a startup like us could actually work well with large enterprises.
And the second development is that we have multiple product lines. Before we only had a matching platform, and now, we have a Digital Asset Management and also artificial intelligence capabilities. Digital Asset Management means that we help our clients to manage all their creative and marketing vendors as well as their creative and marketing contents. As for the AI capabilities, by using the content data our clients put on the platform, we are able to reuse those data to generate multiple creative outcomes. These engines have developed very quickly in the past few months and have already been used by some pilot clients.
Thirdly – team wise, we have now grown to almost 200 people, and every eight months we double our team. We built software sales team, AI R&D team from scratch. This means that more and more opportunities are coming to the company and it is more and more challenging in terms of managing a company that grows this quickly.
Wow, when I visited last time, there were about 30 people at Tezign, and now it’s 200, with a couple of office moves in between. In terms of your business, you mentioned that you're not just a matching platform, but more of a DAM, with AI elements. Again, for our audience’s benefit, can you tell us a little bit more about how you service your current clients? What does the solution or service look like?
Dr Fan: One of the big changes in the past two years in the Chinese business landscape, is that a lot of the clients that we work for are either 2C platform or 2C brands such as Alibaba and Starbucks respectively, and they are challenged by the decreasing growth of the Chinese market. So, they started to develop more internally. They see hot technology, hot data, hot artificial intelligence, and hot business intelligence. We help them run their business more effectively. They invest more not just on doing digital transformation strategy, but actually implementing digital transformation. So, for instance, a company like Unilever, they build this internal digital asset management system that manages all their decision making in terms of marketing, and also all their product development in order to have better product development cycles.
I think all these provide a lot of opportunities to us. When they are really adapting digital transformation instead of just a digital transformation strategy, they want quick iteration. They want partners with a growth mindset. They want partners willing to take a risk with them and change flexibly with them. So that gives a start-up company like us a lot of opportunities. I think that's a very big shift. They want us to take more responsibility and go deeper into their core business. If all these big players are hard to change, then they want us, naturally agile and fast, to change the way they used to be.
Tezign Solution
You’re right that the consumer side was very hot. But as you know traffic got more expensive and some the low-hanging fruit become less obvious, there's a lot more emphasis even from an investor perspective on SaaS. OK, now let’s dig a bit deeper on your product and solution. So, for a team at Alibaba or Starbucks, what is the exact solution they use? What does that dashboard or some of the other tools you mentioned look like?
Dr. Fan: For Starbucks and Unilever or other brands, we’re mainly working with three departments. One is their marketing department. All these companies spend a lot on marketing. Even the product development process like developing avocado flavor shampoo is driven by marketing people. So, the marketing department works with us very deeply. And the second is that we work very closely with the procurement team. The procurement team sets up the rules around what kind of vendors can come in and how to choose them. And the third is that we normally would work with the innovation team as well. The innovation team is in charge of how to aggregate data for all these brands. Aggregate data in terms of internal data or consumer data. So normally we would need to leverage and work with all three teams together.
What we help them is really to build infrastructure for growth. These three departments tend to communicate very little. And with the right infrastructure that centralizes all the information on the same platform, they will be able to actually talk to each other. This would be something that we offer – a Digital Asset Management platform that make data more transparent among the teams.
So, with the help of our DAM, their decision making could be more efficient. And now, they could quickly respond to changes in the market.
However, for companies like Alibaba and Tencent, things are slightly different. Since they’re tech companies, they are not looking for a solution that would change their existing IT infrastructure. They're looking for a designer and creative resource pool that can adapt to the diverse needs on one platform. They basically handle more than half of the Chinese population, a very diverse group. Previously, individual suppliers probably focus on one specific expertise. By tapping into the resource pool like we have, they will actually able to find more precise suppliers for their various needs. It is more like connecting the two platforms together.
I really like a quote that Alibaba’s CMO Chris used to describe Tezign: he said a platform like Taobao or TMall presents a problem that needs another platform like us to solve. And then ecosystems like Alibaba ecosystem, needs another ecosystem like us to sustain. So, I guess for a platform client, they need another platform to solve the problem and sustain their needs. That's the second way that we work with large enterprises.
So it seems Alibaba really values your resource pool of creative creators and designers. Currently, how many creators are within that resource pool and how are they spread out across the world?
Dr. Fan: Because we're working with a lot of large enterprises, our resource pool includes designers, creative marketers etc. We normally would not include part-time individuals. So, our resource pool consists of pre-qualified smaller suppliers focusing on their specific expertise. We have more than 40,000 suppliers globally. We work with very famous marketers. We have people who actually are top graphic designers or graphic design studios, including someone who did the first eight minutes show for the last Winter Olympics. Also, we have long-term suppliers that can handle daily jobs of managing over a thousand e-commerce banners. This is really a diverse group of suppliers. About 80% of them currently locate in China or can speak Chinese and 20% are abroad. Their geography covers Europe, Asia, United States, and Australia.
So you have this large resource pool and you have the digital asset management piece that you guys have been developing. You’re addressing large companies, including FMCG or tech companies. So, there's a lot that you're working with. I’m curious that as you build increasingly more of a SaaS solution, how much hand-holding is there when you work with a large client, vs. using a self-service tool? What does customer service look like from your end?
Dr. Fan: Let’s zoom out a little bit first. Giving one client as an example, we started working with Alibaba in 2017 on one or two projects. That was when they were first exposed to our model. And in 2018, we began working systematically with them. The revenue we generated from Alibaba in 2018 increased 20 times compared to that of 2017. This year we expect that number to increase another five times. This means that Alibaba now collaborates with us on more than a thousand projects every year. With one thousand projects, we probably need to leverage thousands of suppliers. Alibaba then starts to become curious about how we can manage all those projects and suppliers at the same time. So, they start to ask a lot questions about our system, data structure, IT infrastructure, our SaaS model, the modular part. And in that sense, they go deeper not just by working with us on project-based but adapting to the SaaS model or buying our modules. This is why we extend our service from providing a solution for project to providing a SaaS model. That's the reason. Since 2017, we now have about 10 clients who’ve worked with us on more than a thousand projects.
The core for us is that we have all the supplier data and engines that can process the data, so we know who these suppliers are, what kind of work they can do, and what kind of business problems they can solve. As a result, we can match the right suppliers to the right clients. On top of that, the engine empowers all these kind of applications on our website. For some of the clients, we package the whole thing and deliver the final result to them. So, we compete with traditional service providers like the advertising agencies. Sometimes after working with us for a thousand projects, companies like Alibaba and Unilever would be curious about the whole system so they would buy the SaaS into their companies. And to use our SaaS solution to actually not just managing the resources on our platform but also all the resources they have in the sector.
How we serve these clients really depends on the level of collaboration that the clients trust us with. For our project-based model, we need to deliver at least as well as traditional services. We have an account team that uses our platform and delivers about four times more efficiency as a traditional service provider. You can handle four times more projects than traditional service providers. But for the SaaS model. We have one customer manager serving an entire group of clients. It really depends on which solution they adapt to.
Tezign vs. Agencies
That makes sense. I was curious as to how your project based model competes against the large agencies like WPP. I’d imagine that the marketing team doesn’t always talk to the designers directly, and need account managers to help with comms and project management. So, it seems that you do have an account management team, which is still smaller than the typical agency because they're actually using your tools internally to do this more efficiently. Is that the correct understanding?
Dr. Fan: Not necessarily small but yes more efficient. About one-third of our staff relate directly to our clients’ needs. However, this team does not scale proportionally to our revenue, as in fact our solution’s efficiency at least doubles every year. Last year, our teams are probably three times more efficient than traditional solutions, and this year we are aiming to become six to eight times more efficient than the traditional solutions. And our revenue grows 4x every year. If we factor in the efficiency increase of our solution, it means we don’t need to scale the team proportionally to our revenue growth.
So you mentioned large clients from FMCG and internet sectors. What about the large creative or advertising agencies, can they also buy your SaaS solutions as well? It seems you guys use it internally so they should use it and increase their efficiency too.
Dr. Fan: I respect companies like WPP. They have been the standard in this industry for over half a century. However, I have to say that although a lot of them are experts in digital marketing, if you look at their financial report, they do not allocate too much resources to IT or R&D. So even though they know our technology would be able to help them, they don't have the budget to buy our technology. So that I think that's a huge problem for them. But we do want to extend into more industries. For instance, we are going to extend to financial services, lifestyle, and food and beverage this year, and automobile next year. So whoever is our client with a big budget on marketing, their industries would be our target.
Client and Business Development
Got it, is it typical that customers enter for project-based solution and then you try to move them to the SaaS model? How do you try to convert potential customers?
Dr. Fan: I think that’s actually the advantage of working in this sector. No company would hire only one marketing supplier, especially when their market starts to be more and more fragmented. We are able to reach new target companies with a couple of trial projects. They can start collaborating with us with trial projects as small as (contract value of) 2000 RMB. Once they start working with us on trial projects, they would have already gone through all the processes in their procurement system, allowing us to get more projects because getting into their system is a crucial precondition to sell services. To give you a perspective with numbers, one client starting from 2000 RMB via trial projects might reach 2 million RMB in half a year. As the clients give us 2 million RMB worth of projects, they would start wondering how we handle projects with such diverse requirements in terms of size and urgency of tasks for both online and offline marketing. We explain to them that we can achieve that with our Digital Asset Management (DAM), a platform encompassing all the system, technology, and data. After we explain to clients how we process data to manage even 1000 projects at the same time, they would become more curious. Once they explore and understand the process, and have their mindset ready, DAM enters their radar.
Got it, that makes a lot of sense. I am not sure how many figures you can share, but I am curious as to how much of your work is project-based vs DAM and how do you shift things over?
Dr. Fan: Last year, based on contract value, 70% are project based and 30% are module/SaaS based. We launched the modular product in the last quarter of 2018, and now we have 5 pilot clients and we do not have a dedicated sales team yet. So, I do see a huge growth potential in DAM and also the AI generation part.
Let’s get to the AI piece a little bit. But first could you share more on your DAM product so our audience has a better sense of what this product looks like in case they want to use it? For example, what kind of technology, is there a dash board that shows matching for your creative resources? What other features does it have?
Dr. Fan: We basically have 3 major parts in terms of Digital Asset Management. First, for companies with multiple brands and multiple BUs, we have a centralized resource library that downloads all the creative marketing resources ranging from as small as e-commerce banners to as big as for offline campaign or a holistic campaign. All of these resources are automatically tagged or labeled by the system. So anyone can search and download these resources if necessary.
The second feature is that we provide data of all the creative marketing suppliers, including what kind of work they can do, what they have done in specific sectors, and feedback from other marketers who have worked with this supplier. All these data will be centralized and managed in one place and there will be a ranking system as well as a credit system. These data analysis make up the supplier management piece.
The third feature is incorporating project workflow information into our DAM. I like the way how Unilever positions it as a marketing operation system. Basically, as the marketers come to office, their first thing is to open their computer, and the second thing is to log into our system. Normally they would spend 3-4 hours in our system a day to look for all the resources they need. Some companies even include a fourth part, incorporating product development process into DAM, because for these marketers, branding and products are equally important. For example, whether they should develop an avocado scented shampoo is a marketing decision instead of a product decision. Marketers drive their company’s product development, so they also need to see information about product development cycle, which thus become an important marketing resource.
AI Applications
Ok that’s comprehensive. The DAM offers a lot of features that seem to provide quite a bit of efficiency. Now, let’s talk more about the AI piece of what you work on. I remember you mentioned last time that Tezign can help generate banners efficiently, meaning instead of building one banner at a time, AI can build thousands of them pretty quickly? You also mentioned using previous assets so that stuff you built before can be rearranged to build new design pieces. Tell us a little bit more about that.
Dr. Fan: Sure, first when you think about the clients, the consumer facing marketplace is becoming more and more fragmented. Our clients have to have personalized contents in order to engage their target customers through marketing. The second part is if our clients are using our system to manage all their creative marketing resources, their data is already stored in our system, both consumer and supplier’s data. As a result, the ability for AI to use all the supply side data to fit into every consumer’s preference becomes a challenge. So it’s a very natural extension to develop the AI generation feature.
When you have the DAM, you want to reuse digital assets through AI, and that is the technology we developed. The first of the two phases of our product development is that we have the infrastructure part. We built an open source dataset that will hopefully be completed by the middle of this year. Through this dataset, machines will be able to understand the creative aspect of information in contents. The internet teaches machines how to read an image and we are trying to use our dataset to teach machines how to read “design” so they know what is the font, what is the content, what is the style, what is the emotion, and what is the color combination. And with that we can decipher the design process for each business situation. The second phase is implementation. Amongst all industries, e-commerce has the highest demand, because they need a lot of personalized contents. We could recombine our digital assets to create personalized content for them. The AI system generates contents that looks as if they were designed by people, only using AI to recombine various information and tell personalized stories. Therefore, our generated result will be more human centered and human friendly. With this technology, we are able to help e-commerce and a few companies that are very offline heavy, so we do offline advertisement as well. And we are trying to expand into other territories in the future.
That is very fascinating. Would you consider this as a separate line of business in the future or as a new value adding feature in your DAM?
Dr. Fan: The AI feature works very similar to the business models we described. If you think of the core of design, it remains the same. It is just different clients have different needs. Some clients work with us by project based and others by SAAS. It really depends on the clients. For us, selling the AI part is similar to what we have been doing. Some clients want us to generate 1,000 banners a week, which is a workload way beyond human capability. So we do human computer collaboration. Nevertheless, they still pay based on the number of banners they receive. This is by project, which is ok. When they trust us more, they feel like they want to adapt the whole system. For example, one of the largest real estate developers in China trusts the entire system so they work with us to build their internal design AI system. So technologically that is a very deep collaboration.
Organizational Development
Makes sense. I think it’s fascinating that when you first started, people thought of Tezign as a freelance platform, but clearly you have developed quite a bit beyond that. I’d like to learn more about your organizational development. How to manage a company that grows from 30 people to 200 people so quickly?
Dr. Fan: It’s a major challenge. I think that when the company is getting bigger, the challenge is not to sustain a business but rather to internally sustain people on the same page. Before this year, we are anti-hierarchy, anti-structure, anti-meetings, but now I start to learn more about how to be more efficient as a leader in an organization and how to make sure 200 people understand what they need to contribute and how would they develop internally. So, we set up an organizational development department that is in charge of building the structure, culture, and training program for the company. We need to help everyone develop, including myself. This is something we do differently since the end of 2018.
Really great to hear that. I think there is plenty of differences between China and U.S. and other markets. Not to generalize but I think traditionally perhaps Chinese companies tend to have very strong founders, top down management, and then the quality of management sort of falls off a cliff towards the middle management or lower levels. It just kind of happens that way when you hire very fast. In the U.S. it is a little different, because most founders want to hire a great team and give ownership to future leaders of the business. I think the mentality can be different, so it is refreshing to hear that Tezign has this approach. As China develops further and becomes more globalized, I feel that it does not have to be a rare thing, but companies need to become like Tezign to develop the next generation of leaders. So, I am really glad to hear that.
Concluding Thoughts
One more question, more taking a step back, not so much about Tezign… how do you view overall B2B and SaaS market? And as you think about growing further and finding the right investors, how do you think about the right partners to work with?
Dr. Fan: I feel very lucky to have all my current investors. I think the biggest challenge for us is hard to find suitable investors. Well, 2C investments have been developed very maturely in the past 20 years. At first it was the “copy to China” model. Whatever people see in the U.S, they just copy it to China, but gradually you see a lot of Chinese models emerge. 2C investors have become more confident in investing in China model such as O2O, bike sharing etc. I think the B2B investors that I met are probably still repeating this process, but 10 years too late. Most investors now are probably looking for a model that has been proven in mature markets like the United States. If you are a Chinese Salesforce variant you are lucky because the investors will probably understand you. Thus, the core of the challenge is we cannot find the exact same business model that has been proven to be successful in the States. For DAM, we probably overlap a bit with Adobe’s Experience Cloud, which is a very successful company. However, for the AI part, I would argue that China is more advanced than the States, and our model is unique.
In the US, there is Upwork and other freelancer management systems or market places, but in China what we do is very different from just a freelancer management. We are working with larger enterprises and our supply side platform are small businesses instead of freelancers. And in China if you are doing transaction based market place, it is hard to get the transaction fee. So, I guess all these Chinese (2B) landscape, similar to 2C, will have eventually a Chinese model. It will not have a pure copycat. And that is a challenge for the investors. If they are not able to see a successful model that is already duplicated, how can they convince their LPs and themselves to invest? So that is why I said I am very lucky to find my investors. Our angel investors are Linear Venture and Cherubic Venture. They have really strong belief in what they invest in, and I think that is very important. And our series A investors include Sequoia China who looks at the entire landscape and is willing to make a bet despite the fact that our revenue was only around half a million RMB at that time. In series B, we are able to partner with Hearst Ventures, one of the biggest and oldest media companies in the world. The brands and customers that trust their media are exactly the ones who would trust Tezign. We also have individual investors like Skip Battle who is the founding partner of Accenture, board director of Netflix, LinkedIn, and OpenTable. He has been a mentor to CEOs for decades, so we are very lucky to have him onboard. And David Chu is also a very successful Chinese American Entrepreneur. With this diverse group of investors supporting me in every aspect, I think in that sense I am very lucky because not too many 2B founders are able to curate such a great investor team.
Got it, finding the right investors is akin to finding a potential spouse so to speak. Not sure if you can share any more details but are you looking to fundraise anytime soon or what are your future plans for growth?
Dr. Fan: Starting from 2017, we feel we have found the so-called product market fit. In 2018, we had 4 times growth in terms of project-based model and built our SaaS model from 0 to 1. So, we are looking for at least 3-4 times of growth in project-based sales and then a 5 times growth in SaaS model in 2019. We are definitely looking for partners who can help us financially and also investors who understand our value. If there is this kind of investors around, I am more than happy to discuss the possibilities of having another round of fundraising.
Got it, ok thanks so much for that. Seems everything is going well. Wish you the best of luck for the future development of not only your product but also your team.
