After stepping off the bullet train at Tainan station and grabbing a ride through farmland and factories to get to Yongkang, we arrive at an older building with an aging façade. There is little to suggest that hidden inside is a world-class high-tech company.

Taiwanese startups in recent years have set their sights on global markets, but only two app developers have successfully attracted overseas users and scored more than 100 million downloads. One of them is beauty apps developer Perfect Corp., a subsidiary of publicly listed software provider CyberLink Corp. 

The other is the company housed in the unimpressive building in Yongkang – Kdan Mobile Software Ltd. – which develops tool apps for commercial use. 

“These so-called tool apps are not at all sexy, and for Kdan to achieve so much has been anything but easy,” said Kay Lin (林桂光), a partner with Darwin Venture Management, one of Kdan’s main investors. 

Apple’s App Store rolled out in 2008 triggered a global wave of app entrepreneurship. Kdan founder and CEO Kenny Su (蘇柏州) spotted the trend, and decided in 2009 to quit his job at the Industrial Technology Research Institute (ITRI) and move back home to Tainan, where he holed up in his mother’s kitchen to write programs.

When his app was uploaded, there were fewer than 1,000 apps in the App Store, and Su benefited from being an early entrant into the market. His income quickly shot up to hundreds of thousands of Taiwan dollars per month, and he decided to start a new company.

The move worked out, with Kdan apps having been downloaded more than 200 million times to date. But the app development craze is old news, and many once-touted startups have fallen by the wayside. What was it that Kdan did to survive and thrive in the brutally competitive app sector?

A Lean Startup Approach: Over 100 Apps in Two Years

According to Lin, Kdan has been able to maintain its growth dynamic to the present because it is constantly adapting.

Kdan’s entrepreneurial history has closely followed the “Lean Startup” model espoused as the “Bible” by Silicon Valley technology innovators. In its first two years, Kdan created more than 100 new apps, and it has changed its business model several times during its 11-year existence.

Initially, Kdan charged US$1 to download any of its apps, generating robust revenues in the company’s early stages. That encouraged a feverish pace of app development, averaging about one new app per week, with the company making any small tool imaginable, such as calculators, alarms and flashlights. 

“At the time, we really wanted to push to become No. 1,” Su said, and being fast was the way to achieve that. The faster one pumped out apps, the greater the opportunity to bring in larger numbers of users, and because Kdan could not know which product would be a hit, its strategy focused on speed to market. 
But the pay per download model charges users only once, and after one or two years, Kdan began to see its revenues stagnate. That led Su to shift to an in-app purchases model in 2011 and 2012 without success, and Kdan lost money for the following three years. 

In 2015 and 2016, Kdan decided to jump on the bandwagon of the cloud subscription SaaS (Software as a Service) model gaining favor among international companies. Su selected a handful of products with stable download numbers and consolidated them into a product line available by subscription only, finally launching Kdan down the right path.

Success at Last: Subscription Renewal Rate Up to 80%

“The advantage of SaaS is that it can be run without having to do anything,” Lin explained, saying the model has two clear strengths. One is “retention,” where a user starts with a product and continues to use it. The other is “scalability,” where a product’s sales can soar while its costs remain relatively fixed.

Many app companies post huge download numbers early on only to disappear a year or two later, but Kdan has generated steady growth and still averages an additional 1.5 million to 2 million downloads globally every month that have pushed annual revenues to NT$100 million. Beyond its strong model, that steady growth also stems from the high priority Kdan puts on user behavior analysis. 

Su explained that Kdan has amassed 200 million downloads and 8 million subscribers over the years, and the company’s internal metrics team is constantly collecting user data and feedback to optimize its user interface and processes. In particular, the improvements are used to better acquire users and have them download and open the app, and then get them to use the product, register and pay for services. 

Having accumulated over a decade of data, Kdan has developed its own methodologies, helping boost sales conversion rates and renewal rates, Su said.

“The subscription model depends on the renewal rate. Only with a high renewal rate can you grow every year,” Su said.

When Kdan launched its subscription model in 2015, its renewal rate in the first year was only 20 percent, but that rose to 50-60 percent in 2016 and 2017 and now exceeds 80 The company has reached the point where it can figure with a high degree of precision how many downloads and users can be acquired with every Taiwan dollar of advertising, along with how much revenue these users will contribute and how long it will take to recoup the amount spent on ad placements.

“This model is at the core of marketing apps overseas,” Su said confidently. The more users make use of Kdan’s platform and services, the more precise the company’s analyses, enabling Kdan to stand out as one of the “few companies that are growing faster and faster,” he said.

Snatching American, European Customers from Tainan

Lman Chu (朱宜振), the founder and CEO of blockchain startup BiiLabs, said Kdan’s choice at its inception to develop “tool apps” was smart because those apps resonate across borders, helping penetrate overseas markets and build overseas teams.

Not coincidentally, Kdan has focused mainly on users in Western countries. At present, the United States is Kdan’s biggest market, accounting for 40 percent of its revenues, with another 25 percent coming from Europe, 20 percent from China, 5 percent from Japan, and 10 percent from the rest of the world.

Kdan’s apps have gained strong followings in the West because users see them as native English-language products.

“Our marketing is done completely from a Western perspective,” said Wei-chung Wang (王爲中), Kdan’s vice president for global marketing and strategy who lives in the United States.

From the beginning, Kdan has put its marketing emphasis on the English-speaking world, and the first iteration of its website and its publicity materials were only in English. Even though the website has undergone several revisions, Wang stressed that it “looks like that of a typical American company. That’s the key.”

Long based in Pennsylvania, Wang has recruited local marketing teams, followed the examples of foreign technological startups, and worked American discussion and technology forums such as Reddit and Quora so that user reviews reach beyond technology circles. 

Even more important than marketing and publicity is getting user feedback firsthand and forwarding it to the product team to optimize apps’ user interfaces and ensure they appear as genuine English apps.  

Employee Turnover Lower than at TSMC 

“Another key has been the team’s resilience,” observed Lin. Kdan has been around for more than 10 years, but almost all members of the company’s original team are still around and there has been little change in its overall workforce, especially for a startup, with only 5-6 percent annual  turnover. 
Su attributed the low turnover in large part to being based in Tainan, which he described as Kdan’s biggest competitive edge. 

In its early years Kdan quickly generated extremely high download numbers, and companies like that practically did not exist in Taiwan. Most companies like Su’s would have been based in Taipei to take advantage of its better access to resources and talent, but without similar companies there, Su felt it did not matter whether Kdan was in Taipei or not so chose to stay in Tainan.

He only realized later that the biggest advantage of locating the company’s headquarters and R&D department in Tainan was the stability of the workforce, especially in comparison to Taipei where there may be more talent but where turnover is higher and startups struggle to outbid bigger companies for good employees.

That stability negates the need to constantly retrain employees and enables ongoing capacity building. “This group will push you and make you believe you can do bigger, more difficult things,” Su said. 

The “bigger things” Su was referring to was Kdan’s preparations to file an IPO application next year in Taiwan. If things go smoothly, Kdan would become the first home-grown Taiwanese app company to go public and the first Taiwanese app stock, and would likely inject a new jolt of economic momentum into Taiwan’s capital markets. 

“A company’s ceiling is determined by its CEO,” said Su, who has gone from being a relatively unknown engineer to the head of a company with 100 million downloads and led it through several revamps. 

Su admits that Kdan has encountered bottlenecks at every stage of the company’s development, but said the best way to deal with them is by looking at oneself.  
“You have to keep getting better, so that at every stage you can keep adjusting as necessary to pave the way for new breakthroughs.”

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Kdan Profile
Established: 2009
Founder: Kenny (蘇柏州)
Main Products: Document 365 PDF document reader, editor; Creativity 365 multimedia content creator; DottedSign electronic signature app; Kdan Cloud cloud sharing services
Milestone: More than 200 million app downloads globally; more than 8 million registered members; named one of the world’s “10 Best Software Companies” in 2018 by the Silicon Review magazine

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Translated by Luke Sabatier
Uploaded by Penny Chiang