Linear Academy | AfterShip Practice Sharing: How an International SaaS Navigated Cold Start, Growth, Customer Acquisition, Compliance, and Beyond

Linear Academy

At the end of July, Linear Academy invited Hong Xiaojun, CTO of the well-known SaaS company AfterShip, to deliver an online session for Linear Capital's portfolio companies. Drawing from AfterShip's own growth journey, he discussed how SaaS companies can cold-start and scale, how to accumulate customers, and how to handle security and privacy issues. He also shared his observations on trends in the overseas SaaS sector. Below is a transcript of his talk.

Speaker: Hong Xiaojun, AfterShip CTO | Compiled by: Linear Capital

AfterShip was founded in 2012 and has been a global business from day one. Our customers and operations initially focused on overseas markets like North America and Europe, and only gradually expanded to Asia-Pacific (including China) later on. This is one way we differ from companies that start domestically and then go global.

From our first year, the team and talent have been globally distributed — our members come from 14 different countries and regions. In 2018, seeing the abundant engineer and talent dividend in China, we established a new R&D center in Shenzhen. Currently, AfterShip has over 400 employees worldwide. Our Support and related teams are in India, while Sales and other teams are mainly in North America and Europe. R&D accounts for roughly 70% of headcount. In earlier years, the R&D ratio was even higher; Sales, Marketing, and Customer Success roles have only been added in recent years.

AfterShip operates in the international e-commerce SaaS space. Our customers include major platforms like Amazon, eBay, Etsy, and Wish, as well as numerous direct-to-consumer brands such as Gymshark, Kylie Cosmetics, and Murad. Retailers are AfterShip's primary customer segment. According to public data from etailinsights, there are 9.1 million online retailers globally, including 5.2 million brand retailers and 3.6 million traditional online retailers. The US alone has 2.5 million online retailers, of which 1.5 million are brand retailers.

From 2012 to 2016, the entire company focused on just one product: the global shipment tracking solution AfterShip (#1 Shipment Tracking), which has since become the absolute leader in its international niche. Its core function is simple: enter a tracking number and get the complete journey of an order. Over time, we've added many features that merchant customers need, such as customizable branded tracking pages, AI-powered delivery time predictions, and carbon emissions calculations.

In 2016, we launched Postmen, a shipping label printing product. In 2018, we introduced Returns Center for returns management. Starting in 2019, we gradually rolled out a series of pre-purchase products. The core pre-purchase offering is Automizely Marketing, which provides merchants with rich pre-sale solutions including email marketing and website pop-ups. To date, AfterShip has over 10 e-commerce SaaS products, forming a matrix spanning post-purchase to pre-purchase. We aim to build the best automation platform to help global e-commerce merchants succeed.

Internally, we call what we do a "four-way win." We want to better serve retail brands, which in turn better serves end consumers (our B2B2C business model). We also want to create greater value for partners, ultimately achieving a four-way win for retail brands, consumers, partners, and AfterShip itself.

You're all familiar with SaaS, so I won't cover the basics here. I want to share the industry opportunities and trends we've observed through AfterShip's practice.

Cold Start and Early Growth

The first question everyone running a SaaS service encounters: how do you cold-start a SaaS product, and how do you grow in the early days?

From AfterShip's experience, two things come first:

First, deep and extensive industry experience accumulated by the founders. AfterShip CEO Teddy started engaging with e-commerce in middle school back in 1996. After graduating from university in 2004, he began selling on eBay and went from zero to over $3 million in monthly GMV in just five months. He has rich experience in global e-commerce. AfterShip CMO Andrew previously worked at Accenture and also has extensive B2B industry experience.

Second, AfterShip achieved PMF (Product-Market Fit) relatively quickly. The need for AfterShip's shipment tracking product came from Teddy's own pain point as a large e-commerce seller. Before AfterShip existed, the typical package tracking process for consumers on most foreign e-commerce platforms was: call or email the store's customer service — the rep gets the courier company and tracking number — checks the courier's website — tells the consumer. This cumbersome process drove Teddy crazy. He and Andrew decided to automate these tedious workflows. Industry peers had the same need, so the product achieved PMF shortly after launch.

Everyone knows the innovation adoption curve. For a new product, the key to early growth is finding early adopters as quickly as possible. These early adopters are typically your seed customers. They're usually eager to try new products and services, and many are industry opinion leaders. If a product can find these customers earlier and concentrate resources on them, it has a faster chance of achieving growth.

So after cold-starting, AfterShip asked: where are these seed customers, and how do we find them? From the other side of the curve, after finding early adopters, the bigger inflection point is moving from early adopters to the early majority. Therefore, finding early seed customers and concentrating resources on them matters a lot.

So where were AfterShip's early adopters? Shopify.

Everyone knows Shopify now, but ten years ago it was virtually unknown. In 2012, AfterShip was already partnering with Shopify. From 2013 to now, nearly a decade of continuous collaboration. All our new SaaS products are prioritized for launch on the Shopify platform.

Shopify has several characteristics. First, it brings its own traffic. Second, it has many seed customers, especially numerous small and medium merchants willing to try new products and pay for them — as long as it helps them and creates value, even with minimal features. Of course, as Shopify became better known, we've also seen some non-Shopify large customers use the Shopify App Store as one of their procurement decision references when choosing SaaS services. Because our SaaS products have consistently ranked high in the Shopify App Store, Shopify has also helped us with marketing to some extent. We've always maintained high investment on Shopify.

Additionally, after 2016, as we developed many new products, we established clear internal principles for what a product should look like at the MVP (Minimum Viable Product) stage and at each subsequent stage.

We can currently take an idea to MVP launch within two weeks. We typically release on Shopify first. Even for relatively small and limited features, there are usually users. At the MVP stage on Shopify, we typically pay more attention to Reviews. This not only shows us user feedback for continuous product improvement, but Reviews are also a key factor in Shopify App Store ranking calculations — higher ranking means more traffic.

Next comes growth. At this stage, we begin focusing more on active users while continuing to concentrate on serving customers well, understanding their needs, and continuously creating greater value. Of course, the timelines mentioned above are reference points; different products may vary. Sometimes we also consider delaying monetization to gain more traffic early on. In SaaS, what the product and engineering team thinks and what the customer ultimately wants often diverge, so this process requires the team to better understand the industry, the business, and the customer.

To summarize simply: start from one point, go deep, and do it extremely well. Whether it's the company starting with just one product, or each new product starting with just one feature — start with the first one, then continuously iterate on product features and growth.

Customer Accumulation

The second question is: without dedicated Sales and Marketing teams in the early days, how do you accumulate customers? To this day, AfterShip's Sales team is still relatively small, though we are accelerating its buildout. On this dimension, I'll share two perspectives.

First, connectivity. For a global SaaS provider like AfterShip, the entire overseas market is a relatively open ecosystem. Everyone is connected to each other. There are many benefits to being connected: more convenient usage for customers, and mutual traffic referral and collaboration.

Besides Shopify bringing us significant traffic early on and continuing to do so, we've basically integrated with all major e-commerce platforms to date, so users can conveniently use AfterShip products on their respective platforms. We've also integrated with nearly 1,000 logistics companies globally, building the largest global logistics network — that's connectivity too. Finally, we connect with many service providers, fellow e-commerce SaaS providers. From the perspective of serving end customers, this makes their experience better and more convenient. Among SaaS services, we also have referral mechanisms for mutual traffic. So from our experience, in overseas markets, connectivity is very important, and the overseas market has the soil for it.

Second, I want to talk about PLG (Product-Led Growth). PLG is a term that has only gained more attention in recent years, but AfterShip has been practicing it continuously since founding. Take our shipment tracking product as an example. Before 2018, most of our team were engineers. We had no dedicated Marketing or Sales teams. We did some things that brought decent traffic and growth to the product.

We provided shipment tracking capabilities to B2B customers, and we wondered: could we open up this basic capability in web form for C-end and even some B-end customers to use simply? So we launched track.aftership.com, where users can conveniently track shipment journey information by entering a tracking number. This capability significantly helped with SEO and brought us considerable traffic. Extending from this, each brand can easily customize a dedicated tracking page. If you look at some European and American brands now, many of their tracking pages are provided by AfterShip, and many brands link this page from their e-commerce homepages, which also brings us significant traffic. We also provide a Track Button capability, where users can embed AfterShip's Track Button functionality on their own websites by copying a simple snippet of JavaScript code. A large number of customers use this feature, which similarly drives traffic growth for us.

From another dimension, there's Open API. We now consider this a basic capability, but we launched our Open API back in 2013 — we were among the earliest in this space to do so. By 2014, platforms like Amazon, eBay, and Wish were gradually using it, slowly building better brand effects.

Security and Privacy

The third question is about how to meet large European and American customers' security and privacy requirements. Currently, AfterShip's customers are predominantly from Europe and America, and serving these customers does present considerable challenges.

To meet these large customers' security and privacy requirements, we've done many things.

AfterShip not only fully meets the requirements of the EU's GDPR and the US CCPA regulations, but also obtained ISO 27001 certification several years ago, and will obtain SOC 2 certification this year. These two certification systems are currently the more common ones and are typically what large customers care about.

Another very critical point is that the technology stack we use, or rather all services facing customers, have very high requirements. For overseas SaaS companies, especially those whose primary customer base is in Europe and America, you need to list on your public website all third-party tools and systems used to process customer data. That is, any tool that involves processing, storing, or transmitting customer data — even business monitoring systems — needs to be disclosed. This also means ensuring all these third-party systems meet corresponding security, privacy, and compliance requirements, which is typically quite challenging. Usually when signing contracts with large European and American customers, you need to answer a series of security and privacy questions they raise. Looking at these questions, you can feel how high their requirements are in this area. So for AfterShip, when selecting vendors, we must first ensure they meet corresponding security and privacy requirements. At this stage, we only choose products from global, mature companies.

The company's executives once discussed: under what circumstances would the company be put in an extremely passive position? We basically reached consensus: encountering security and privacy issues. AfterShip has a clear internal rule: once any security or privacy risk is encountered — note, not just issues, but risks — once such a risk is encountered, regardless of what else is happening, everything must be paused. As long as there's any possibility of a problem, it must be addressed immediately. Everything in the company, big or small, must give way to security and privacy issues.

Speaking of compliance, I have a personal suggestion. If you want reference for what certification systems you need to pass and what security and privacy safeguards you need when doing global SaaS services, you can look at the SaaS granddaddy, Salesforce. Through this link, you can understand what needs to be done for different scenarios, different countries, and different industries.

Pricing

Pricing is a critical part of SaaS. From the perspective of the overall overseas market, users are willing to pay for value. So if you look at AfterShip's pricing model, you'll see it's not based on cost or competitors, but more on value.

How to create value? First, there's a critical prerequisite: the product must have measurable value that users can perceive. Take AfterShip's shipment tracking product: we tell users how much money and time each tracking event saves them. For pre-purchase business, we also tell users how much GMV we bring them. The product needs to let users more intuitively feel the value.

Second, most overseas SaaS services charge based on usage, and you'll see AfterShip's product pricing follows this model too, mainly usage-based. Another point that's slightly different from China: for many overseas products, the more you use, the higher the unit price. For example, when many of our customers upgrade from the Pro plan to the Enterprise Advanced plan, the unit price is higher. The logic behind this is that higher-priced packages bring greater value to customers and can create greater value for them, and customers are usually willing to pay.

Many people have asked us: AfterShip now has some R&D in China, and we want to build the best SaaS, but doing SaaS in China is quite different from overseas. How do we help our China-based R&D better understand overseas SaaS?

We have a philosophy: to build the best SaaS, you need to have used the best SaaS. Only then can you know what "best" means, and only then might you be able to build it. AfterShip currently uses over 100 of the world's top paid SaaS services. For example, you might see some overseas vertical SaaS companies with very high market caps or valuations and not understand why — their functionality seems so simple. But after actually using them, many people gradually understand that they do bring value and convenience to users from many dimensions, and gradually come to understand.

Industry Observations

Finally, I want to share some industry observations.

First, there are opportunities in different verticals in overseas markets. If you want to go overseas, my suggestion is to avoid direct competition when possible. If the market is large enough and users have better willingness to pay, willing to pay for value, then in different verticals there's less competition and it's easier to acquire customers.

Second, find where competitors are innovating insufficiently and build there. Many problems solved by new-era SaaS products aren't new — there were products in these spaces before. But those products may have failed to keep up with market demands after reaching a certain stage. Take Slack, which everyone knows — there were similar tools before, but Slack was overall very simple, fresh, and convenient to use. Another very important point is that its ecosystem and connectivity were very well developed.

Third, overseas SaaS is basically built thin first, then thick. Like Zendesk — for roughly its first 7-8 years, it only did an email customer service system, did it to the extreme, became the best in the industry, then extended to other capabilities. AfterShip also started with just one product, did it for 5-6 years, became the best in its niche, accumulated more brand customers and industry experience, then expanded the product line.

Fourth, these successful SaaS products have some built-in marketing effects, like AfterShip's "Powered By."

There was a report saying that around ten years from now, around 2032, software will be completely replaced by cloud services. Looking at this trend chart, at least at this stage, it seems fairly accurate.

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