In the recent 2022 ESG (EqualOcean Summit for Globalization), EqualOcean released the list of 2022 top 50 China SaaS companies based on yearly industry and investment research, high-level interviews, published rankings and reports, key business indicators and expert scores.
The list includes as many as eight companies in Blue Lake Capital’s SaaS portfolio, namely Leyan Technologies, Moka, Cloud Helios, Lingxing Technology, Zhenyun Technology, Jushuitan, Zaihui and Thinking Data (not in an order of priority). They cover a wide range of business areas such as marketing, HR & HCM, ERP, fintech & tax and vertical industry integration, testifying Blue Lake Capital’s comprehensive and in-depth deployments in the SaaS sector.
After more than two decades of development, the global SaaS industry is estimated to be worth hundreds of billions of US dollars, with huge potential in its business models of low-cost subscription with fast iteration.
China’s SaaS industry is in rapid development where new market opportunities arise from constant innovation in products and business models and fast-changing competitive landscape and use cases. In particular, the pandemic has added tremendous momentum to digitalization that would otherwise take 30-50 years to achieve.
As a venture capital firm driven by both industry research and business experience, Blue Lake Capital focuses on business value amid opportunities and challenges in the current market to work with excellent SaaS start-ups as an investor, entrepreneur and operator all at the same time.
We expect to see more SaaS companies in Blue Lake Capital’s portfolio become unicorns or hidden champions in the industry, which will bear witness to epic opportunities brought by China’s digitized innovations and upgrades.
Recently, Suzhou Jufu Polymer Materials Co., Ltd., the owner of Polymaker, the renowned brand of 3D printing materials, completed a new financing round of over CNY100 million. This latest round of financing was participated by Blue Lake Capital, Skytrace Capital, Sharelink Capital, IDG Capital and Changshu Guofa Venture Capital, with 100Summit Partners acting as the financial advisor. The proceeds of this financing round will be primarily used for the layout of global production capacity and supply chain, product R&D, new market development, and application scenario expansion.
Founded in 2012, Polymaker is headquartered in Jiangsu and has subsidiaries in Shanghai, North America, and Europe. The global 3D printing material provider focuses on the development and manufacturing of materials using the extrusion-based 3D printing technology such as FDM/FFF. It offers products that are respectively designed for consumers, professionals, and manufacturers, and can be applied to automotive, aerospace, industrial manufacturing, medicine, architecture, consuming and other scenarios.
Material is a critical restraining factor for downstream applications, because the richness of material varieties will directly impact the application potential of 3D printing devices. Technically, Polymaker’s core technologies lie in the printability, functionality, applicability, and sustainability of its materials. The company boasts multiple exclusive patents in improving the performance of printing materials, which thus enhances the quality of 3D printing products.
The patents include Jam-Free (the technology that prevents jammed nozzles), Layer-Free (the technology that enables Nylon-based filaments to be 3D printed with near-zero warpage), the Nano-reinforcement technology, and the Fiber Adhesion technology. The Jam-Free technology, for example, raises the softening temperatures of Polymaker’s PLA filaments from 60 °C to 140 °C by increasing the degree of crystallinity of materials, addressing the root cause of jammed nozzles. The aforementioned sustainability mainly refers to the efforts of being more adapted to the major trend of sustainable development, the new business model of shortening the supply chain, as well as the recycling and reuse of printing wastes.
In terms of scale, considering that the material industry is highly dependent on the scale effect, Polymaker adopts an omni-channel strategy by positioning itself as a provider for full-coverage solutions to materials using the extrusion-based 3D printing technology. It aims to cover material demands from all sectors and segments globally and continues to enrich and iterate its current materials. Xiaofan Luo disclosed, Polymaker’s existing materials and formulation cover about 80% to 90% of the demands from scenarios using extrusion- based 3D printing technology.
“Blue Lake tracks the additive manufacturing sector in a long time and remains bullish about it. We found Polymaker, an outstanding team, along the industry chain. We are delighted to see that the emerging technique of fused filament fabrication of non-metals is lightening various industries like fire sparks. These industries are not limited to the hand model sector and 3D printing factories for mass production. On the other hand, the production, printing, and manufacturing of end products are driving the further expansion of the future market of upstream materials. We believe the excellent team can be a rare China-based material provider for the global market in the sector of additive manufacturing”, said Haitao Wei, partner of Blue Lake Capital.
In recent years, Blue Lake Capital has kept a close eye on the trend of additive manufacturing and has actively invested in outstanding start-up companies in relevant sectors. Blue Lake Capital’s portfolio companies include unicorns in multiple industries, such as Raise3D and Chaozhuo Aviation Technology (688237.SH). Notably, the latter was listed on the STAR market on July 1, 2022.
Recently, PREQIN, a renowned data provider and data analysis platform, and Beijing Private Equity Association jointly released the first “Greater China-focused PE & VC Benchmark Report”. Based on the data of 75 fund managers and 210 funds, the report mainly contains performance benchmark data and ranking lists.
The benchmark data aim to provide a range of panoramic metrics showing the overall market performance which is evaluated by net IRR and net multiple. The ranking lists set out best performing fund managers and funds to improve market transparency. The report describes the new landscape and trends of the fund industry in Greater China in an authoritative and systematic way.
According to the report, the strong performance of Blue Lake’s USD-denominated fund III enabled -it to top the list of “Best Performing Greater China-focused USD-denominated PE & VC Funds” for a net IRR of 74%.
As a venture capital fund driven by industry research and industry experience, Blue Lake Capital has been dedicated to smart manufacturing and SaaS with a whole-industry-chain approach. Many Blue Lake’s portfolio companies have become leaders or potential leaders in their industries. The companies include Chaozhuo Aviation Technology (688237.SH), YHDA (301029.SZ), Zhenyun Technology, JST, Moka, Momenta, Raise3D, and Avove Electronic.
Blue Lake Capital will remain optimistic and vibrant and keep on building its soft power. As an investor, entrepreneur, and operator, the firm is committed to making joint efforts with excellent entrepreneurs for the innovation and upgrading of China’s digital industry!
Xizhi Technology, a China-based start-up company engaged in automotive-grade power and battery modules, has recently announced the completion of an Angel round and an Angel+ round of financing of over CNY100 million in total within 6 months. The Angel+ round of financing was participated by Blue Lake Capital, SHANGQI Capital under SAIC (Shanghai Automotive Industry Corporation), Inno-Chip, and Sunic Capital. The proceeds of the investment will mainly be used to build a team of technical talents in automotive-grade power and battery modules, expand production lines for the mass production of automotive-grade power modules, conduct tests for automotive-grade products and establish a failure analysis lab.
Xizhi Technology started its business in October, 2021, two months before it was included in an the list of enterprises attracting programs conducted by Suzhou Industrial Park in December as a valuable tech company. Xizhi Technology has divisions in Shanghai and Suzhou and employs over 80 staff, about 75% of whom are technical personnel. As a start-up company equipped with seasoned senior experts in critical processes such as automotive-grade power and battery modules definition/ design, as well as packaging and development/ manufacturing/quality control, Xizhi Technology is dedicated to meeting diverse demands of clients in the smart EV industry by offering highly customizable automotive-grade power and battery modules.
Propelled by the implementation of policies in carbon peaking and carbon neutrality, market attention on the smart EV industry is rocketing. Smart EVs are expected to contribute to more than 60% of sales in the automotive industry in China by 2030 with an estimated sales of smart EVs exceeding 18 million units while (the figure for the global market is expected to be 40 million units). Meanwhile, benefitted by the continued rapid growth of the smart EVs industry, the smart EV-use global high voltage semiconductor device market is valued at up to USD 50 billion by 2030. In front of Faced with a market of huge potential, Xizhi Technology seizes opportunities to make reforms by planning the expansion of production lines for automotive-grade products on a yearly basis to achieve a gross value of annual output of CNY2 billion for the Suzhou division in the next three years.
To be in line with China’s national strategy of transforming and upgrading the domesticits manufacturing industry, Blue Lake Capital has been deeply involved in the field of smart manufacturing in recent years, and invested in Chaozhuo Aviation Technology in 2020. Its investment portfolio companies in smart manufacturing involves have grown into other industry leaders, including Chaozhuo Aviation Technology (688237.SH), Momenta, Avove Electronic, Cospower, PR Measurement, Raise3D, YHDA (301029.SZ) and EMPOWER.
“Blue Lake Capital pays continuous attention to early investment opportunities in the field of main components of EVs and in the entire industry chain of self-driving. The firm’s investment decisions are in line with the prevailing trend of smartization and localization in automotive. Automotive-grade power modules manufactured domestically enjoy vast market potential and application scenarios, because of the continuous increase in the penetration of EVs and the regular iteration of the EIC system. Xizhi Technology builds a team of top-notch product design talents in China and it is also capable enough to manufacture automotive-grade products. We believe Xizhi Technology will grow into a top-ranking company in automotive-grade power and battery products in a few years,” said Haitao Wei, partner of Blue Lake Capital.
Chinese after-sales service platform Ruiyun Service Cloud completed tens of millions of USD A and A+ rounds of funding. In particular, the Series A round was led by Chuxin Capital and followed by Blue Lake Capital, while the Series A+ round was exclusively invested by Matrix Partners.
The money will be used for technology R&D, marketing promotion and operations.
Ruiyun Service Cloud is a SaaS application for after-sales service and field service management. It is dedicated to helping companies achieve digital transformation of services by connecting customers, businesses and devices, improving service efficiency and enhancing the commercial value of services.
With the advent of the customer experience era, companies are paying more and more attention to after-sales service, which is why after-sales service SaaS has been growing rapidly in recent years.
On the one hand, quality after-sales service is important for customer retention and increasing repurchase. On the other hand, as the traffic bonus disappears, enterprises are gradually changing from focusing on front-end marketing and sales to customer operations. After-sales service is a vital part of connecting with customers and improving customer experience, which also brings new development opportunities for after-sales service SaaS.
Ruiyun Service Cloud has now served more than 1,000 customers, including Bosch, Siemens, Philips, and other companies. Its business covers construction machinery, home appliances, medical equipment, smart manufacturing, new energy, smart hardware and other fields.
In May 2021, Ruiyun Service Cloud’s tens of millions of CNY Pre-A round of funding was led exclusively by Blue Lake Capital. Zhang Yifan, Investment Director of Blue Lake Capital, said that digital industry innovation has been a major development theme in China in recent years and is also the focus of Blue Lake’s investment perspective. Blue Lake also hopes that through the continued empowerment of Ruiyun Service Cloud to help China’s industrial digital upgrading.
The 4th China LP Conference & the 3rd Lujiang Venture Capital Forum hosted by FOFWEEKLY and Local Financial Regulatory Bureau of Xiamen City was held on September 8th in Xiamen. Blue Lake Capital is honored to receive the award of “TOP20 Investment Firm in Soft Power – GP Market Impact” which was unveiled at the forum. Blue Lake Capital was awarded for its deep accumulation in industry perspectives, investment decisions and post-investment empowerment.
It is the second time Blue Lake was recognized by a professional third party within one week after it had been awarded the title of “2022 TOP100 Most Admitted Venture Capital Firms” by Cyzone at the 2022 DEMO CHINA Innovation China Summit on September 7.
Since its establishment in 2017, FOFWEEKLY has been committed to becoming a professional platform for GPs and LPs. It aims to help institutional investors improve efficiency and assist distinguished investment firms with worldwide expansion by leveraging its advantage of being a local platform, its independent and professional philosophy, insightful content, targeted community, and professional services.
In 2022, FOFWEEKLY has profoundly explored how soft power theories impact the GP development in practice once again. It introduces and breaks down soft power into multiple dimensions, such as “value creation, service empowerment, organization & governance, market impact, innovation drive and social responsibility”. It describes and deconstructs the internal momentum contributing to GPs’ long-term development and outstanding performance. Based on quantitative and qualitative evaluation that is open, fair, and just, FOFWEEKLY “re-judged” and “re-evaluated” leading firms in the industry before revealing the “Investment Firm Soft Power Ranking List”.
Blue Lake Capital, a venture capital fund jointly driven by industry research and industry experience, focuses on investing in start-ups in the fields of SaaS and intelligent manufacturing. It deeply empowers entrepreneurs at all stages of business development by providing strategic consultation, introducing core resources, recommending key talents, and advising on financing.
Blue Lake looks forward to cooperating with preeminent entrepreneurs as an investor, entrepreneur, and operator from a unique “research + industry” perspective, while pressing ahead with the innovation and upgrading of China’s digital industry regardless of challenges.
At the 2022 DEMO CHINA held on September 7, Cyzone, a renowned new commercial media as the host of the event, revealed the list of “2022 TOP 100 Venture Capital Firms”. Blue Lake Capital was on the list for its forward-looking and distinctive entrepreneurial perspectives in the fields of intelligent manufacturing and SaaS, its precise and disciplined investment decision-making process, as well as its ecosystem of collaboration and co-prosperity across portfolio companies.
As a media platform conducive to the vertical development of the innovation economy, Cyzone has long focused on investment firms’ reputation. It is dedicated to discovering venture capital firms that are the most respected and admitted with the most “soft power” in the industry, aiming to encourage the industry to think about and pay attention to “the long-term investment value”.
The preliminary screening of the Top 100 list was based on data submitted by candidates and the data from Bestla, a data analysis platform under Cyzone. The shortlists were then voted on by nearly 300 veterans from outstanding VC firms. They selected the most admitted VC firms in terms of the following aspects, such as investment performance, post-investment services, industry position, innovation capability, long-term value, talent attraction capability, ESG practice, and so on. The list of “TOP 100 Venture Capital Firms in China” was finalized with the results of votes being taken into account.
Founded in 2014, Blue Lake Capital is a venture capital fund jointly driven by industry research and industry experience. It invests heavily in the innovation and upgrading of China’s digital industry by focusing on investing in start-ups in the fields of SaaS and intelligent manufacturing.
Since its establishment, more than 20 of Blue Lake’s over 100 portfolios have become unicorns/the best performer in their respective industries, including Yiheda (301029.SZ), Chaozhuo Aviation Technology (688237.SH), Momenta, JST, Moka, Zhenyun Technology, HELIOS and other renowned enterprises. Enterprises invested by Blue Lake Capital secured follow-on financing of over RMB 20 billion.
Blue Lake is committed to enhancing its soft power. It focuses on the innovation process in the noble cause of China’s digitalization and industrialization by providing the most foresighted support for valuable innovative technologies and talents, developing an ecosystem of engagement and collaboration across portfolio companies.
Since its inception in 2014, Blue Lake Capital has been in TOP lists for multiple times revealed by authoritative media as a top investment firm in different categories. Looking forward, Blue Lake Capital will consistently focus on long-term value and soft power with dedication across the whole industry chains of intelligent manufacturing and SaaS. We look forward to partnering with outstanding entrepreneurs to contribute to the innovation and upgrading of China’s digital industry!
Blue Lake Capital-backed ThinkingData has recently completed the Series C+ financing of CNY 100 million from GGV Capital. This is the company’s third funding round over the past one and a half years following its Series B round in March 2021 and Series C round in November 2021, bringing the total amount of financing to nearly CNY 600 million.
Founded in 2015, ThinkingData, a world-leading gaming big data analytics service provider, is committed to creating integrated data operational analytics solutions for the global gaming industry to meet the demand of gaming enterprises for operational analytics covering all categories, scenarios, and life cycles. ThinkingData has been growing with the entire gaming industry since 2015 by tiding over the pandemic, the freeze period of game license approval, the volatile international landscape, and the slowdown in industry growth. Aiming to create value for clients, ThinkingData has been devoting itself into the gaming industry and adhering to its philosophy of “data-driven”, which allow the company to completely solve the pain points and difficulties in data analysis in the game industry by introducing accumulated data analysis techniques and cases to the industry.
With its extensive experience in data processing and analytics service, ThinkingData has established a big data analytics platform that is robust, real-time, effective in database query, and of other essential characteristics. The platform supports multi-ID user identification, multi-time zone management, calculation of exchange rate of multiple countries, custom SQL query, etc. In terms of data analysis, the big data analytics platform of ThinkingData owns ten major models of data analysis which can identify critical behaviors of players and provide cross-interpretation of multi-dimensional macro indicators, in turn helping operational teams dismantle difficult operational problems in an efficient way, so that the big data platform can be more adapted to different business.
In addition, ThinkingData puts a high value on offering its clients professional and perfect services. To provide services that are standardized in procedures and tailored in details, the company has established a powerful Client Success Department to directly negotiate with clients. The procedures of its service include project matchmaking events, program design for data acquisition, system deployment, data access, system training, etc. The Client Success Department will continue to provide services for clients after products are delivered. Around the iteration of products, the department will introduce and demonstrate new versions and new features of products to clients and share best practice cases to make sure that clients can get used to new functions in a short period of time. There will also be a regular client revisit to help clients solve problems and gather their requirements, thus boosting the iterations of products with feedback collected in the revisit.
Looking forward, ThinkingData will be dedicated to building a brand-new data infrastructure for the global gaming industry. It will make great efforts to expand international business to have a presence in overseas countries and regions like Japan, South Korea, Southeast Asia, Europe, and America. The company will make a major strategic upgrade to products. The current version of ThinkingData’s gaming big data analysis platform focuses on gaming analysis while the new product to be released is expected to forge a comprehensive ecosystem with access to gaming data to enable a closed loop that starts from gaming data analysis and ends with gaming intelligent operations.
On March 16, 2021, ThinkingData, an important part of Blue Lake Capital’s SaaS portfolio, secured CNY 100 million in Series B financing led by Blue Lake Capital which made a follow-up investment in the company’s Series C financing in November of the same year.
Recently, “ezOne.work”, a cloud-native DevOps platform, has completed a Series A round of financing of tens of millions of CNY from Blue Lake Capital. The proceeds from this round of financing will be mainly used for the continuous R&D of products and accelerated commercialization. Previously, “ezOne.work” secured multi-million CNY in the angel round of financing from Kingsoft Cloud, and secured tens of millions of CNY in the Pre-A round of financing from Shunwei Capital.
“ezOne.work” was established in 2019 by a team of business experts from Baidu, Huawei, IBM, Kingsoft Cloud, JD.com and other companies who have long been engaged in the field of enterprise-level R&D effectiveness. The team has long been focus on the improvement of R&D effectiveness as well as the R&D and application of R&D toolsets at top large-scale companies, which allows them to see the power that software engineering and toolsets bring to the world and the huge gap in software engineering and basic toolsets at home and abroad.
Therefore, “ezOne.work” decided to establish a Chinese company specializing in enterprise-level R&D effectiveness to help enterprises achieve business success and show the world the power of software engineering tools developed in China by constantly exploring underlying technologies and continuously using technology and product innovation to promote the improvement of enterprise-level R&D effectiveness.
Since its establishment, “ezOne.work” has been awarded with widespread praise and honors in the industry: In 2020, it was appointed as a CAICT DevOps standard setting company; In 2021, it was appointed as a CAICT trusted cloud standard setting company; In 2022, it was appointed as a specialist company for the Cloud Software Engineering Community; It has successively received the certification of the AAA-level corporate credit rating, the certifications of ISO9001, ISO27001, and ISO20000, and the certificates of Zhongguancun High-tech Enterprise and Beijing Haidian District Germ Enterprise.
According to the latest survey of 1,049 enterprises conducted by the CAICT in the second quarter of 2022, the overall engineering capability of domestic R&D teams is weak, the level of their digitalized R&D synergy is low, and the adoption rate of software R&D tools isn’t high. In most cases, R&D teams are using overseas open source tools for integration, interface modification and packaging, and script concatenation, meaning that they have to invest valuable R&D resources and face high maintenance cost and the low tool-adoption efficiency of engineers. Commercialized DevOps platforms in the domestic market are mainly integrated based on overseas open source software. The current economic climate strongly requires constant efforts in further cost reduction, energy conservation and efficiency improvement as well as in self-developing and obtaining control over basic software. There is a strong demand for a true domestically-developed one-stop R&D synergy platform.
The products of “ezOne.work” are designed in accordance with the current situation, meaning they are all self-developed and can provide users with a true end-to-end one-stop DevOps platform. “ezOne.work” offers products covering project management, knowledge base management, document management, code hosting, code review, code scanning, code metrics, code search, distributed builds and pipeline systems, unified artifact management systems, host deployment systems, Kubernetes cluster management and deployment systems, test management platforms, R&D effectiveness measurement and process approval BPM.
The company’s products boast strong features and have obvious client perception. The features mainly include:
The company’s products are awarded with multiple core technology patents and ten-plus software copyrights. Since they were launched, they have won GOPS 2020 Star Product of the Year Awards, 2021 CAICT Cloud Native Technology Innovation Awards and CAICT Trusted Cloud Devices Tool Advanced Level Certification. Two client cases implemented by “ezOne.work”, the China Life Property & Casualty Insurance case and the TCL case, both won the Outstanding Case Award at the 2022 CAICT Software Engineering Conference.
Up to now, the “ezOne.work” SaaS version has thousands of corporate users while its private deployment version has medium and large sized clients from industries including insurance, banking, energy, Internet, cloud computing, AI, manufacturing, real estate, government, and scientific research institutions. “ezOne.work” also provides a free private deployment version for hundreds of small and micro sized enterprises.
Regarding this round of financing, Qing Liu, the founder of “ezOne.work”, said, “The field of engineering tools for basic software belongs to basic software, with high technical moats which need a long-term accumulation of domain knowledge to form. The company’s product matrix has been improved with years of precipitation and accumulation. The proceeds from this round of financing will be used for constant R&D investment to improve products’ core competitiveness, in turn accelerating their commercialization.”
Yifan Zhang, Blue Lake Capital’s Investment Director remarked, “In recent years, Blue Lake Capital has been seeking outstanding domestic technology enterprises, as investment opportunities in China lie in science and technology. Basic software tools for software engineering in the domestic market is expected to have a promising future, given that the development of these tools at home is weaker than that abroad. Looking forward, as technology evolves in China, enterprises that are more professional in providing basic software tools for software engineering will be desperately needed. As a tech company with strong R&D capability, ‘ezOne.work’ has shown its preliminary strong competitiveness benefited from its painstaking R&D accumulation. This allows the company acquired typical clients in industries by winning biddings in a row and allows it achieved the evident momentum of growth against the adverse environment. Blue Lake Capital is not only bullish on the long-term development of ‘ezOne.work’, it also hopes it can make contributions to China’s technology industry by investing in the company.”
Yixuan Geng, Executive Director of Shunwei Capital said, “As Chinese technology companies expand and technologies like cloud native evolve, the digitalized R&D synergy and management brings increasingly prominent demand for DevOps platforms. For the long term, Shunwei Capital is bullish on ‘ezOne.work’, a Chinese company specialized in this field and a leader in technology, and it is optimistic about the basic software industry in China. Shunwei Capital, the investor in the Chinese tech company’s Pre-A round of financing, believes ‘ezOne.work’ will enter a new development stage with the additional assistance of Blue Lake Capital,”
Kaiyan Tian, Partner and Vice President of Kingsoft Cloud noted, “‘ezOne.work’ has an outstanding team that leads in the domestic DevOps market in terms of technology and professionalism. As the angel investor of ‘ezOne.work’, Kingsoft Cloud believes in the rosy prospect of ‘ezOne.work’ and supports its development. Additionally, it forms a close strategic partnership with the company in many projects. The cooperation between Kingsoft Cloud and ‘ezOne.work’ is more than providing their common clients with more professional service, more complete solutions and higher client value. Kingsoft Cloud’s entire R&D system has been significantly improved in R&D synergy efficiency and R&D management by comprehensively applying the ‘ezOne.work’ platform.”
Despite interruptions such as lockdowns and logistic problems in the first half of this year, Leyan Technologies helped brands attract consumers at all stages of the consumer lifecycle with its digital and intelligent technologies. The company serves as a booster for the long-term healthy growth of brands by providing them with comprehensive technical support and service.
“Qingsuo-Mofang AI”, Leyan’s intelligent ad delivery system, is applicable to Tmall and Taobao. The system boasts single-click intelligent optimization that empowers merchants to overtake their competitors in online store traffic and helps brands to acquire more consumers in the incremental market. For merchants who applied the “Qingsuo-Mofang AI” to their Taobao stores during the 618 promotion to dive traffic, sales per store were twice the average and ROI was up 30% compared with last year.
“Qingsuo-Douyin”, Leyan’s operating system integrated into Douyin live rooms, provides systemic solutions for live streaming. The solutions include offering compelling marketing narratives, displaying multidimensional data of live rooms on intelligent monitors, and helping merchants with real-time analysis and detailed review. During the 618 promotion, merchants adopting “Qingsuo-Douyin” witnessed sales of up to CNY 100 million, with a year-on-year increase of 25% and 30% in the total number of orders and viewers, respectively.
Zhenling Technology passes CMMI3 certification, with R&D capability recognized internationally
Recently, after months of rigorous review and appraisal by an authoritative CMMI appraisal team, Shanghai Zhenling Technology Co., Ltd. (Zhenling Technology) has been awarded the certificate of CMMI Maturity Level 3.
CMMI (short for Capability Maturity Model Integration) is an internationally recognized model specifically used to benchmark the quality management and quality assurance of software products. CMMI3 refers to CMMI Maturity Level 3. Achieving CMMI3 means Zhenling Technology has a whole set of management practices for project implementation to ensure the completion of projects. It also means the company is able to institutionalize this set of management systems and procedures based on its own characteristics and standard procedures, which ensures the successful implementation on projects of the same kind, as well as on projects of different kinds.
Achieving CMMI Maturity Level 3 marks a significant breakthrough and success of Zhenling Technology in the areas of software technology R&D, process improvement, project management and service. The certificate indicates that the company has reached international standards in project quality management, information security management and process improvement capabilities. It also means that Zhenling Technology will provide clients with high-quality contract management products and high-quality professional services that both reach international standards.
As an Amazon certified SPN service provider and partner of Amazon ads, Lingxing ERP officially joined the Amazon ads partner network and becomes an “Amazon ads advanced partner” with its expertise and extraordinary service.
In July last year, Amazon ads launched the “partner network” consisting of advertising and relevant technology service providers, to help advertisers achieve their business goals through Amazon ads.
In addition to rounds of qualification reviews, becoming an Amazon ads advanced partner also requires the expertise in helping merchants manage and optimize their advertising businesses on Amazon and the capability of creating profits for advertisers. This is the second time that Lingxing ERP has been officially recognized by Amazon after becoming an Amazon SPN provider.
With the approval of the Shanghai Municipal Commission of Commerce, Zaihui (Shanghai) Network Technology Co., Ltd (Zaihui) was approved as “Foreign-funded R&D Center” recently.
Since its establishment in 2015, Zaihui has been committed to becoming the number one service brand in the catering industry. Based on independent innovation and development, the company has obtained 25 computer software copyright registration certificates and two China software products evaluation certificates and one China software enterprise certificate. Zaihui consistently provides full-stack SaaS solutions for local merchants, with its service covering over 20,000 brands.
Shanghai has over 90,000 foreign-funded enterprises at present, yet less than 1% of them have been approved as “Foreign-funded R&D Center”. Being one of the approved enterprises represents Shanghai municipal government’s recognition of Zaihui’s strength, and also embodies the company’s strong capability, rigorous attitude, hardcore strength, and professional skills in scientific research.
On May 25, Shanghai JUSHUITAN Network Technology CO., LTD. (“JST”) completed its strategic investment in Beijing JISHIYU Intelligent Technology Co., Ltd (“JISHIYU”), a cross-border e-commerce intelligent customer service platform. The strategic investment was another important arrangement of JST in the field of cross-border e-commerce, further improving the company’s capability in SaaS e-commerce service.
JISHIYU allocates customer service resources flexibly based on the number of available human agents and the demand for robotic customer service agents, in turn improving the efficiency of pre-sales consultation requested by customers to enhance user experience. At the same time, JISHIYU helps merchants to improve operational efficiency by efficiently managing human agent resources, acting as a middle-end platform for e-commerce sellers to allow them to provide better services for overseas consumers, thus enabling cross-border merchants to manage human customer service agents digitally.
As of now, JST SaaS ERP (the cross-border version) has been connected to nearly 100 overseas e-commerce platforms, over 500 cross-border logistics companies and more than 100 overseas warehousing systems. Its integrated “Business + Financing” solutions help merchants to achieve refined operation and sustainable growth, realizing the goal of selling products worldwide.
In cooperation with Shanghai Zhenyun Information Technology Co., Ltd. (“going-link”), a top-ranked larg e logistics company in Japan launched a digital procurement management project recently, which was a comprehensive upgrade of the procurement system of the company’s parent company.
For “going-link”, this is its first large-scale project implemented both in Japan and China. It covers more than 20 local subsidiaries of its Japanese client, marking the first step of the Chinese company’s going overseas in accordance with its globalization strategy.
“Going-link” provides the logistics company with a one-step online procurement procedure covering procurement application, order generation, order confirmation, delivery & receipt of goods, and the integrated ERP system for financial settlement.
Based on this project and through product iteration, “going-link” has created a set of product solutions that meet the requirements of laws & regulations and financial norms in Japan. The company can expand to more foreign countries by using this case as a template, so as to enrich its SaaS products.
Hubei Chaozhuo Aviation Technology Co., Ltd. (“Chaozhuo Aviation Technology”, hereafter referred to as Chaozhuo) invested by Blue Lake Capital begins trading under the stock code “688237” on the STAR Market on July 1.
Founded in 2006, Chaozhuo has since been engaged in the aviation industry for more than a decade, dedicated to customizing additive manufacturing and repairing airborne equipment with military and civil aircraft maintenance as its major business. It is among the few enterprises in China that master the technique of cold spray additive manufacturing (CSAM) and apply the technique to aircraft maintenance and remanufacturing.
Chaozhuo has been committed to providing repairing services of airborne equipment, with years of technological accumulation and innovation in techniques. Its business now covers military and civil aircraft pneumatic accessories, hydraulic accessories, fuel accessories and electrical accessories.
In 2015, Chaozhuo made it a key objective to develop the CSAM technique before expanding its business to the remanufacturing of airframe structures and the production of aircraft parts, as it anticipated the technique would hold out great promise and recognized the limited role played by conventional maintenance techniques in the repair of aircraft parts made of materials like magnesium alloy.
In 2017, Chaozhuo participated in an aircraft renewal project in China as the major stakeholder providing technical support for repairing longeron cracks of landing gear of fighter aircrafts. It has developed the capability of using the CSAM technique to repair fatigue cracks in longerons of fighter aircrafts by giving its first try in the project. Later, it started repairing fatigue cracks in longerons of fighter aircrafts and remanufacturing the needed parts for repairing purposes in batch.
Chaozhuo is the only supplier of the A and B base overhaul plant under the Equipment Department of China PLA Air Force when it comes to the repair and remanufacturing of fatigue cracks in longerons of multi-type military aircrafts.
As a pioneer in remanufacturing with CSAM in the aviation industry, Chaozhuo will rely on its first-mover advantage in its core technology to continuously expand its businesses. It will proactively adopt additive manufacturing technologies in various scenarios as enablers to advance domestic industries for a rapid development.
The prospectus shows that Chaozhuo generated a revenue of CNY 140 million in 2021, and reported a CAGR of 66% during 2019-2021, with CNY 70.7311 million in net income attributable to stockholders of the parent company in 2021.
Chaozhuo’s business continued to grow rapidly in the first quarter of 2022, with its revenue reporting CNY 42.42 million, rising 63.87% YoY, and net profits reaching CNY 25.77 million, up 67.43% YoY.
Today, Chaozhuo Aviation Technology started trading, with its opening price up 42.86%. Its stock traded at CNY 74.37 per share by the time of publication, 80.2% above its listing price of CNY 41.27, giving it a market capitalization of about CNY 6.66 billion.
To be in line with China’s national strategy of transforming and upgrading the domestic manufacturing industry, Blue Lake Capital has been deeply involved in the field of smart manufacturing in recent years, and invested in Chaozhuo Aviation Technology in 2020. Its investment portfolio in smart manufacturing involves other industry leaders, including Avove Electronic, Cospower, PR Measurement, Raise3D, YHDA(SHE: 301029) and EMPOWER.
Editor’s note: China’s venture capital and private equity industry have undergone huge shifts over the past few years, thanks to a sea change in the global and domestic socio-economic climate.
As Chinese businesses struggle to adapt to the new normal, marked by more stringent regulatory oversight against overseas listings, a Covid-battered economy, dwindling household consumption, and stronger headwinds as startups move up the value chain, so will their financial patrons.
How are VC/PE investors faring in these turbulent times? What are the challenges they deem the most intractable and what are their solutions? Conversely, which are the emerging areas of opportunities that can be turned into the next money-spinner with their Midas touch? More generally, how do they expect China’s entrepreneurial scene to evolve in the next couple of years? And most importantly, after having their finger on the pulse of the country’s innovations, are they still China bulls or have turned perhaps into China bears?
These are defining questions to which no one has the exact answer. But we at EqualOcean believe that one can at least get a glimpse into the future of the Chinese economy by looking at how VC/PE investors are planning and making their moves.
With this in mind, we start a new series called “China VC Interview,” in which our analysts will sit down with frontline industry practitioners to hear their opinions about China’s VC/PE industry.
The following is the second in this series, conducted after interviewing Ray Hu, founder and managing partner at Blue Lake Capital(Chinese:蓝湖资本).
About 「Blue Lake Capital」 and Ray Hu
Blue Lake Capital is a next-generation, research-driven venture capital firm, founded by Mr. Ray Hu in 2014, which focuses on big market opportunities primarily on cloud software with a strong portfolio of investments including Meicai, Momenta, JST, Leyan Technologies, Zhenyun Technology, Cloud Helios, Moka, Thinking Data, Zaihui, Asinking, etc.
Ray Hu has 15 years of experience in venture capital investing. Before founding Blue Lake Capital, Ray worked at GGV Capital and the Boston Consulting Group. Ray holds a bachelor’s and master’s degree in economics from Fudan University and an MBA Degree from the Kellogg School of Management of Northwestern University.
Part Ⅰ Retrospect| Locating relevant variables and knowable questions
EqualOcean：What are the different types of venture capital firms?
Ray Hu：Relatively speaking, some firms tend to source their deals extensively while Blue Lake Capital focuses on two lanes: intelligent manufacture and SaaS. Of course, extensive sourcing is a precondition for finding quality deals. The purpose of doing research is to raise the efficiency and accuracy of investment decision-making after quality deals were found through early-stage sourcing and to be more targeted when sourcing deals.
My team was able to build a set of methodologies through research that promises lesser time and lesser decision-making in the future. After all, our investments — the startup companies — are high-risk assets. Oftentimes, their products are yet to be formed, the competition landscape unclear, and many variables awaiting in line. We research so we can locate the relevant variables to investment ROI and rule out the irrelevant ones. After that, we still need to distinguish between the knowable and the unknowable within the relevant range. Focusing on the relevant and knowable parts could bring about a small lift in investment success rate in one deal. That way, our fund as a whole could embrace a giant leap in return over time.
EqualOcean：Are you satisfied with the work of these eight years since Blue Lake Capital was founded in 2014?
Ray Hu：I’d give it a pass, but not without regrets. We’re not depressed for missing deals worth hundreds of billions of dollars, but we feel sorry for locking down on some deals in later rounds rather than earlier when their valuations were lower, which means more return for us. For example, we had a chance in a SaaS startup during their angel plus fundraising. But we ‘thought’ that the founding team had no sales team management experience which could leave them vulnerable. At the round following angel plus, when the team had proved their ability to manage the sales team, we then worried that their future expansion might hit a rock. This has given our team a lesson: base our decisions on the knowable and not waste time on the unknowable.
The success probability and achievement ceiling of a startup lie heavily on its founding team. But as investors, we can hardly reach a reliable judgment of the founder’s capacity based solely on several hours of communication and that would be meddling with the unknowable. Since then, we’ve made a turn towards objective and knowable questions, such as business progress, client contracts, price level, client conversion rate, and efficiency per capita. Venture capital firms need to look for universal patterns that could quantify a startup’s levels and risks.
EqualOcean：In the two sectors you’re experienced, intelligent manufacturing and SaaS, are founders’ backgrounds relevant to what they later do?
Ray Hu：Not so much as for academic degrees. But of course, more founders of intelligent manufacturing startups are of science and engineering background and have experience in relevant industries. It would be rare for a total stranger to come into this industry. Most SaaS founders also come from within the industry. For example, the CEO of JST was once CTO of a shoe company with the experience of ERP development and the founder of Thinking Data worked previously as a developer at Tencent Interactive Entertainment Group. They were aware of certain needs underlying the industry, and how to design products accordingly, hence successful companies.
EqualOcean：In hindsight, are there commonalities among successful founders?
Ray Hu：Of course. First, successful founders are good learners. They will find themselves in an emerging industry in China with a perplexing marketplace and few predecessors to learn from. Besides, SaaS founders mainly worked as PMs or programmers before and lacked experience in managing a functional organization. Things such as managing a sales team, issuing performance indexes, remaining independent, recruiting partners, and constantly adjusting to the external environment could be challenging.
Another important quality would be to get ahold of the Pareto Principle — the law of the vital few. It’s both tricky and essential for founders to recognize with accuracy the fundamental issues of the given moment right in the given business line. The first half-year after getting financing would be a dangerous period for many startups when they tend to proceed too aggressively. The familiar financial condition for most SaaS startups in China would be in deficit. To ration limited resources while losing money and expanding quickly could be complicated. Different companies face different situations such as whether to expand territories or to expand product lines and how. In the meantime, a lot of opinions coming from investors and from within the team are interfering with the founder constantly.
Part Ⅱ Status quo| Discerning certainties among uncertainties
EqualOcean： Is the plummet of major SaaS indexes in the US stock market a hit on your confidence?
Ray Hu： I wouldn’t worry about the stock market too much because I am optimistic about the fundamentals of the SaaS industry on solid grounds. When we look into some holistic indicators, we would see a fast growing market. The companies in our portfolio have acquired a lot more business leads this year than those of two to three years ago with more and more potential clients showing up with a clear budget and project. Based on companies’ communication with clients, we have the confidence to say that the market maturity has lifted prominently. Two to three years ago, clients would raise concerns about data security which hardly anyone would mention nowadays. What the buyers frequently bring about is whether the software could meet their operation standards and allow for flexible deployment suiting their organizational features. No longer is SaaS deemed mere “paperless tools”, but also a booster of elevated core competitiveness. Lots of industries do appear to move forward towards what the Chinese government calls for — digital transformation.
Here let’s raise an example of a contract management SaaS company we’ve invested in. In the past, we assumed contract management as helping companies to draft, approve and ratify contracts. Much more than that, lots of companies have procured the system to improve operational efficiency. Salespersons used to bring back a contract from clients to their direct leaders and district managers along with financial and legal departments within. Several weeks have passed before a contract could be finalized. Not to mention there might be hundreds of clients for a company and thousands of contracts involved. Now, using SaaS, the average contract signing period could be reduced to two to three days. That’s a huge lift of efficiency and motivation for salespersons to lock clients. We now see more SaaS applications have been approved by clients as of their value to businesses and have become a must to companies. That’s why I wouldn’t be too worried about stock performances since the SaaS business models are getting more recognition.
EqualOcean： How does the market view SaaS nowadays?
Ray Hu： When I started to talk about SaaS when raising funds in 2016, 90% of limited partners were not optimistic on it. Now, most of them do. With some SaaS companies going publicly listed and the frenzies about consumer internet cooling down, most importantly all general partners believing in the future of SaaS, limited partners are more open to this business model.
The same situation has befallen publicly listed SaaS companies over the past few years. Stock prices went high at first, then dropped. This implied that the market held expectations toward SaaS companies. Investors voted with money when companies with quality benchmarks went public, then vetoed when they were disappointed by bad performances. The currently listed SaaS companies derive their revenues mainly from customization, but the majority of their incomes go to building SaaS businesses. So they’re in transition. We do need eight to ten IPOs of high-quality and fast-growing SaaS companies to boost market confidence. Based on my evaluation, there are currently over 20 SaaS companies with Annual Recurring Revenue or ARR over CNY 100 million. It takes them two to three years to grow to the size qualified for IPO — which is USD 100 million of ARR at least.
EqualOcean： What would be your suggestion for fundraising SaaS companies?
Ray Hu： The financing environment may not be very friendly to SaaS companies this year. At the end of the last year, the valuation of SaaS companies in the US stock market was at its peak, most of which reached a dozen to twenty times Price-to-sales(PS). Now that number has dropped more than half. SaaS companies with a growth rate over 50% are valued eight to ten times PS, yet those with less than 50% are valued only six to seven times PS. This means for SaaS companies seeking financing this year that revenues need to be doubled than that of the previous year only to get a valuation equal to the previous year’s. For many entrepreneurs and former investors, mentality needs to be modified and the market status quo needs to be recognized. For worse, the fund is not guaranteed even if revenues double and valuation is equalized. Many VC investors are so overwhelmed by the turbulence in the stock market that they haven’t had the time to rebuild a sound evaluation pattern. We’re all in the process of adjustment.
I would recommend SaaS startups to hold a steady expanding pace, be prudent on cash flow planning, and resume financing the next year unless they were willing to bear the extended fundraising duration and harsher valuation and terms. We are hoping that long-term economic policies could be more explicit after the 20th CPC National Congress. We’ll see if it would be possible for some companies to seek IPO in the US stock markets. The HKSE is at a relatively low spirit for an IPO now. We’ll wait and see what happens next. We expect some good news to boost the market.
Part Ⅲ Prospect| Reacting promptly with prudent optimism
EqualOcean： Do you believe that Chinese SaaS companies could win global markets?
Ray Hu： Mostly I do. Firstly, there are a bunch of Indian companies with ARR of USD 30 to 50 million that live in Western markets. So SaaS companies from non-Western countries can open Western markets. Chinese SaaS companies usually start in domestic markets. The adaptability to global markets varies with product types. But it is reassuring that one SaaS startup in our portfolio that develops reimbursement systems has successfully won several Japanese key accounts despite all the obstacles, such as gaps in finance and taxation administration, approval procedures, FMIS, and HRMIS — that would be Financial Management Information System and Human Resources Management Information System.
Since startups themselves are in the process of probing, it would be hard for me to make assertions. But we can deduce from experiences that expansion would not be too quick for SaaS companies serving key accounts since they need time to adapt to the complicated operation procedures of global markets. While things could be different for SaaS companies who provide tools for small and medium-size companies in emerging industries, such as e-commerce and games, tools are often more applicable in a universal sense and they could bring about quantitative outcomes which help speed up clients’ decision-making process.
EqualOcean： What would be the challenges and opportunities of business service SaaS companies when going global?
Ray Hu： Building local teams would be the most challenging part, much more than mere recruitment. For example, SaaS companies targeting key accounts need at least pre-sales, delivery, and customer success departments to work together. In China, companies may win over a client with a broad tender and make modifications throughout the delivery process. But in Japan, they may need to submit a 300-page pre-sales proposal that wholly displays every interface of the software to the client. Once the proposal is agreed upon, there will be no modification commands from the clients. The whole team needs to cooperate functionally, including the local teams abroad and domestic supports. Besides, conditions in every market vary from each other. It may take six to nine months on average to recruit one employee in Japan!
There are not as many challenges at the technical level as in the product sense. Again take Japan as an example. Japanese companies hold zero tolerance for interface and language imperfections. They emphasize data security and compliance. The clouding environment is different there. So we’re talking about a lot of localization to be done.
Challenges aside, Chinese companies still stand a chance with better services. The western SaaS giants are somewhat slow speaking of their response time to Japanese clients’ needs. After all, it’s just a regional need of a regional market to them. But Chinese companies can be quick to respond when it comes to meeting clients’ demands. Besides, just like to China, Japan is also a foreign market to the west. So we’re equal in terms of localization.
EqualOcean： Do you think that this round of the Covid-19 epidemic would hurt entrepreneurs’ morale? How about the influence on your following investment allocations?
Ray Hu： Their morale appears to be higher than I thought. Since June 1(the day the city-wide quarantine was called off), I had been going around about the companies in our portfolio. Founders are generally in positive spirits based on the fact that over 90% of sales leads acquired before quarantine are still in pipeline. Market needs are not erased, maybe a little postponed. There would not be many changes to my investment allocations. CNY funds would be divided pretty much evenly between intelligent manufacturing and SaaS. USD funds would flow mainly to SaaS. In all, the SaaS industry would take up around 60% of the fund and intelligent manufacturing about 30%. The remaining 10% is for consumer Internet.
EqualOcean： While the economic growth has slowed down, what new Chinese narrative would you bring about to global investors?
Ray Hu： I would speak frankly to investors. The current environment may seem discouraging, but the future is bright. Economic policies could be more explicit after the 20th National Congress and the customs administration could be more liberal at the end of this year. In terms of asset allocations, it would be impossible for global investors to ignore an economy with such size and growth rate as China. Their perception of China needs adaptation: it is no longer the wasteland as ten to fifteen years before. The environment for investment has changed. Every VC firms, and every investor, need to have this question constantly in mind: how to better design their investment portfolios.
The science and technology innovation system(STAR) is still full of fast-growing opportunities. Big firms like Sequoia Capital, Hillhouse Capital, and GGV Capital tend to source from broader ranges and distribute their resources in sectors from consumer technology, and industrial technology, to even more advanced ones. For more compact organizations like ours, we focus on two fields so that the personnel and funds assigned to each field still have an edge in competition with big firms.
All in all, we hold a prudently optimistic attitude toward the economic trend. But this is not drawn from anything. We would keep a close eye on the companies in our portfolio as of their performance in the following two quarters. Being a venture capital investor is just like being an entrepreneur, “you gotta stay alert and react promptly to the outside world, and all the time.”
Author: Lina Peng Editor: Yiran Xing
On June 15th, Shanghai Zhenling Technology Co., Ltd., a SaaS solution provider of CVLM (Contract Value Lifecycle Management), announced the completion of a Series A financing round of 53 million RMB, the second financing within six months. The financing round was led by Yunqi Partners and followed by the old shareholder Blue Lake Capital. Yiren Capital was the exclusive financial advisor. And all funding of this round will be used mainly for product development to deepen the value management of the performance phase of the contract.
As a leading contract management solution provider in China founded in 2021, Zhenling Technolgy’s core team was developed from HAND, a well-known enterprise digitalization service provider, having been equipped with digital service capability. “One Contract Cloud”, a self-developed product by Zhenling Technology, through controlling major nodes of CVLM—before signing, during signing, during performance, and after performance— organically integrates the three major processes of enterprise operation: business operation, financial accounting, and contract management. One Contract Cloud can better verify enterprises’ real business and financial data, implement upgrades from business finance to business finance law, help enterprises control operational risks, and improve their management systems.
Xie Weihu, CEO of Zhenling Technology, said, “Contracts are the carriers of economic activity and naturally carry all aspects of an enterprise’s economic activity, especially the liquidity management of funds. From time to time, enterprises will have various troubles in the actual performance process, which greatly impacts funds. Coping with these situations faster and more efficiently is a lesson (and a headache) for every business owner. Therefore, contract management is not the goal, but rather the solution.”
Considering that, Zhenling Technology has positioned its product as a “Contract Value Lifecycle Management.” While other vendors focus on contract signing and provide solutions to improve the efficiency of signing contracts from offline to online, One Contract Cloud extends its service focus to contract performance. By linking enterprise business and financial systems, One Contract Cloud sees each node of contract performance as a key, drives the execution of these key nodes, provides real-time feedback on the current situation, and exerts positive and timely influence.” Business owners may not have time to find out every detail, but now they can find the key points and deal with the difficulties in advance by watching the overall situation through the dynamic feedback of the contract,” Xie Weihu explained.
“This is a hungry market,” Xie Weihu added. “After beginning to operate independently, business opportunities have increased 2.5-3 times on average, with the number of customers signed in the first half of this year approaching the whole of last year.”
Since its establishment, Zhenling Technology has cooperated with nearly 130 large enterprises, including LVMH, Siemens, BECKMAN COULTER, Hello Inc., 360, Moka, and China Resources Capital. It has accumulated considerable experience in several industries and has been implementing productized solutions to certain professional cases, which can be rapidly promoted and applied to more enterprises in the future.
Zhang Yifan, Investment Director of Blue Lake Capital, said: “After our first round of investment, Zhenling Technology has exceeded expectations in team-building and market expansion, winning contracts from many major clients. The product has also been quite ahead of the game. We are very optimistic about the future of contract management and One Contract Cloud.”
The SCC (Supply Chain Collaboration) platform ZONE (Shanghai Zhenyi Technology Co., Ltd.) announced the completion of Series A financing of 70 million RMB, led by Blue Lake Capital, followed by Redpoint, INFAITH GROUP, and YI Capital, with Yiren Capital as the exclusive financial advisor.
“Complete supply chain digitization should internally improve the efficiency of departmental collaboration while supporting multi-party collaboration with the external supply chain. Disappointingly, the fact that enterprises prefer to apply IIS (Inside Information Systems) + SRM (Supplier Relationship Management) while in the integration of internal and external SCM (Supply Chain Management) means they still need to arrange people to be stationed at the production sites of offline suppliers and OEMs to monitor real-time progress, inspect quality, manage costs, support business upgrades, establish traceability systems for multi-party collaboration plans, and regularly dispense feedback to concerned departments using relevant business systems (or by sending word or excel documents via email or WeChat). All of this not only takes time and effort, but requires plenty of manpower,” explained Zheng Xiangtian, CEO of ZONE.
Considering that, ZONE—incubated in China’s well-known IT consulting service provider, HAND—started using SCC to further its SCM in 2020. Its core product, Zone Cloud, an SCC SaaS platform, connects the demand side (large manufacturing enterprises or brands) with the supply side (suppliers and OEMs). Besides the application, customers can connect to the business systems of suppliers through the Octopus connector—a real-time production schedule tracker developed by ZONE to reduce internal waste, minimize conflict between supply and demand sides, and achieve common goals through early warnings (and timely control) of problems with delivery time, quality, and cost.
Specifically, ZONE proposes solutions for various cases, including master data collaboration, multiple suppliers, OEM manufacturing process, inventory management, change management and statistical analysis, quality forwarding and traceability, supply chain planning, supplier logistics, checking, supply chain exception sensing, analysis, and other cases that require supply- and demand-side collaboration.
Within two years of independent operation, ZONE has over 50 cooperative customers in various fields, including equipment manufacturing, lithium support, 3C, footwear, central kitchen pre-prepared dishes, and other fields, and over 1,000 linked supply-side enterprises.
Revenue mainly comes from two areas: SaaS subscription fees, including the basic and deep collaboration versions, with an average unit price ranging from 100,000 to 300,000, and an SaaS service fee, which is calculated separately, according to demand.
There are nearly 200 members of ZONE, of which 60% are product researchers. It’s reported that this round of financing was mainly used for product development and marketing.
Ray Hu, the founder and managing partner of Blue Lake Capital, had this to say:
“Enterprises have a higher demand for monitoring OEMs and suppliers with the digitization of the supply chain. However, a complete solution that satisfies enterprises well does not exist in this field.
ZONE aims to meet these needs by building a software platform that involves understanding production processes, adapting multiple business systems, and polishing out-of-the-box tools. It seems to be simple but requires continuously integrating diverse customer scenarios into a standardized SaaS product.
ZONE has accumulated over ten years of relevant experience. We are optimistic that ZONE will help Chinese companies build a tighter supply chain network to improve efficiency.”
On June 6, Blue Lake Capital received the certificate of the “TOP 20 Investment Firms in Enterprise Services that are Most Focused by LPs in 2021.” made by FOFWEEKLY on the first day of returning to office work after the Shanghai lockdown.
After exploring the ways of building a core driving force for the GPs that are surviving and thriving in the new cycle of global economic development environment and local market development stage, FOFWEEKLY has put forward a relevant evaluation system and found many active firms including LP and LP-recognized GP.
Based on the above principles, FOFWEEKLY compiled a FOFWEEKLY “2021 Annual Investment Firm Ranking List” through its research on China’s equity investment industry. This listfocuses on leading firms with the most sustainable development in the new ecological environment. Important indicators include length and prosperity of Firm, continuous return on investment, and social responsibility. In addition, it publicly recognizes the leading investment Firms that play an exemplary role in advancing social development.
As a new generation of research-driven venture capital funds, Blue Lake Capital has been closely following tech innovators in China’s digital transformation. Upgrades and enterprise services have been the key areas that Blue Lake Capital has focused on. With years of extensive and in-depth communication and engagement with entrepreneurs, the Blue Lake team has accumulated a broad base of know-how in the field of enterprise services. A multi-dimensional analysis mechanism has been established from products, implementation, sales, competitors, and cash flow, as well as administering a post-investment service system with unique Blue Lake characteristics. This was accomplished by creating a Blue Lake enterprise service ecosystem and integrating post-investment resources. In recent years, Blue Lake has invested in many industry-leading projects including JST, Zaihui, HELIOS, Momenta, and Moka.
Moving forward, Blue Lake Capital will continue to seek investment opportunities in the field of enterprise services and cooperate with outstanding entrepreneurs to create value for Chinese enterprises.
In a recent online talk organized by Blue Lake Capital, SaaS operators of the Blue Lake portfolio had a discussion on topics of common concern to SaaS entrepreneurs, such as the investment and financing environment under the new cycle, improving company management and HR efficiency during the pandemic, and post-pandemic era business layout and sales management.
Ray Hu, Founder & Managing Partner of Blue Lake Capital, shared his views on the SaaS Valuation Environment in 2022 and the Pace of Investment and Financing in VC Circles:
Below are condensed and edited shareable highlights:
Bessemer’s SaaS index in the US outperformed the stock market by a wide margin until November 2021 because of two substantial reasons. First, unlike traditional businesses hit by the pandemic, the software sector had been buoyed by the storm to a certain extent. Some SaaS enterprises reported positive changes in their fundamental secondary markets. Second, amid the high-risk environment, investors preferred assets with high certainty, such as SaaS products featuring recurring revenue and visibly compelling business. As a result, tech growth stocks, especially SaaS stocks, had attracted considerable attention since 2020.
However, the market turned around considerably after November 2021.
As the pandemic alleviates, traditional businesses become less uncertain and show high PS, thus regaining distribution from growth stocks. Therefore, without much correction in the general index, SaaS companies ’stocks have retreated.
A further driver is the correction in valuation multiples for these SaaS companies. SaaS entrepreneurs seeking funding this year are more likely to suffer from the effects of the secondary market. There has recently been a sharp retracement in valuation multiples for SaaS companies overseas. According to Meritech, the average EV/NTM Revenue has fallen from over 30x to 11x, and the median has fallen from nearly 20x to 7x.
If there is no major rebound by the end of this year, mid- to late-stage investors will generally anchor SaaS companies at around 10x PS. Of course, higher valuation multiples are available if the company grows at a rate of 70-80%, and even higher if over 100%. Take the US market as an example. US-listed SaaS companies generate a median revenue of $500 million. Under such a scale, these companies maintain a YoY growth of nearly 30% on average, and those with faster revenue growth have naturally obtained a higher PS premium (about 20x).
I believe that halving valuation multiples from last year will become the market norm. If a company has closed a round of funding in 2021 at a valuation of 25-30x PS, during its next round this year, the valuation amount will not differ greatly from last year, even if revenues have increased by 80-100%.
At this point, management needs to timely adjust their mindset. In the case of relatively abundant funds, the financing window can be adjusted for the first half of next year with a more optimistic macro environment. The process is certainly subject to uncertainty. Or, with expected valuation cuts this year, we raise money at the expense of diluting more shares.
The liquidity of the primary market faces an even more severe situation than the valuation. There was a significant QoQ decline in both the number of investment projects and the funding amount over the first quarter of 2022. When communicating with some of our peers, we noticed that this year, institutions focusing on early-stage and growth projects invested in less than 1/3 of the number of projects in the same period in the previous year, and the investment pace of the whole market is going to be very slow. This is partly due to the macro environment (like the pandemic) and partly because some software companies with mediocre performance, or that were packaged as SaaS companies, also got financed last year. And when their performance this year falls short of expectations, investors will react against the attitude of the whole industry.
In addition, the delisting risk of Chinese concept stocks from the US stock market also has a negative impact on the macro environment of the primary market. Especially for mid- to late-stage investors, a potential for delisting was not previously taken as the main risk—the business itself was. When this factor became a risk item, as it is today, institutional investors’ willingness to invest was further affected. This should be defused by valuation reduction.
Therefore, we do not have an optimistic financing environment this year. From a quantitative perspective, the valuation multiple is estimated to be only half of last year, and the number of projects expected to be closed in the market is 1/3 to 1/4 of last year.
Earlier, I shared that the US market has also seen a drop in SaaS valuations and a slowdown in the pace of investment, which is being hotly discussed in Silicon Valley. Here are the tweeted opinions of Bill Gurley, the managing partner of Benchmark and a well-known American investor, who has been involved in venture capital for nearly 25 years and who has gone through several cycles. His advice is objective and to the point:
Opinion 1: Forget last year’s market madness.
The market price throughout last year was very unreasonable, and we must learn to forget the institutional offers of last year.
Opinion 2: Lower expectations for valuations.
If you stick to a measure of company valuation, 10x PS is ideal.
Opinion 3: Focus on cash flow and profitability.
Tech companies will ultimately return to focus on cash flow and profitability. Facebook has a YoY rise of 23% in revenue but only 14x PE.
Opinion 4: Ultimately, return to revenue and profitability.
Always keep in mind that the revenue and long-term profitability of the company remain the priority in the end.
Despite the recent gloom in capital markets, we are fortunate to be in a very appealing industry today. SaaS business is attractive to investors for its distinctive highlights, such as sustainable revenue, high gross margin, high growth, etc. Once the competitive landscape of the software market is established, there are usually only 2-3 top companies left in the end. If one becomes the market leader, they will enjoy a higher dominance and market share. SaaS businesses can generate strong operating cash flow after growth stabilizes.
From an investment perspective, SaaS business has a big competitive edge and high entry threshold and deserves long-term bullishness.
Amidst the overall market slowdown in investment pace this year, investors are expected to continue focusing on software projects in the technology sector, and in frontier technology, such as semiconductor and unmanned technology. The company’s management simply needs to adjust valuation expectations.
Despite the wave of dramatic changes the world has undergone in the past two years, the digitalization trend has not changed. Whereas digitalization was previously just a way to improve the business of some enterprises, today it is necessary for survival.
It was supposed to take 30 to 50 years to go digital, but now the process has been greatly accelerated as a result of the pandemic. Amid all the uncertainties ahead of us, digitalization remains the most certain and the biggest opportunity.
As a new generation research-driven venture capital fund, Blue Lake Capital focuses on technology innovators in China’s digital transformation, with enterprise software as one of our key investment areas.
Blue Lake’s portfolio companies, including Jushuitan SaaS ERP, Leyan Technology, Moka, Momenta, Going Link, Helios, Shopastro, and Thinking Data, provide more efficient solutions for a wide range of industries through innovation in information science and technology.
Launched the First Online Audit Solution in the Industry
With new fiscal and tax policies, such as the 14th Five-year Tax Reform Plan and all-electronic invoices, the fiscal and tax environment for enterprises has changed drastically over the last two years. With unprecedented digital capability, the Taxation Department can supervise enterprises more strictly and more frequently. In addition, to deal with internal and external audit sampling, walk-through tests, and periodic industrial and commercial legal inspections, enterprises have had to spend many workdays sorting and searching files of different legal persons across various departments and even for different periods.
Facing these challenges, Helios came up with the first online audit solution in the industry to help enterprises meet the regulatory requirements of internal and external auditing in a more efficient and compliant manner. This solution can significantly enhance file utilization efficiency, reduce manual file searching and sorting, and address the problem of low audit efficiency.
Using an E-archive query-tracing feature, Helios establishes relationships among various unstructured documents by relying on a flexible configuration of a chain of evidence. According to external auditing and supervision requirements, standard templates are created for corresponding investigations of the Taxation Department and compliance checks, audit sampling, and walk-through tests. It can perform an intelligent search and provide complete sets of archives useful for internal and external audits with a click. It also supports tracing and file searches for different legal persons across various departments, warehouses, and accounting periods. No longer using an offline paper accounting approach, it dramatically improves the efficiency of internal/external audits.
Helios’ E-archives system is helpful for archival storage for enterprises; it also leverages its advantages to make better use of data. It helps enterprises build a more compliant, efficient, intelligent, and shared archive management system for paperless accounting and effectively meets compliance requirements for accounting documents, including electronic invoices. Moreover, it launched two innovative schemes: intelligent matching with categorized storage and online auditing, which significantly reduces time sorting and binding vouchers by more than 90%, and reduces time spent on compliance with internal and external audit requirements by more than 80%. Using comprehensive electronic image borrowing increases the efficiency of archive retrieval by more than 90%.
Jushuitan SaaS ERP
Awarded the title of “Excellent Service Provider” on Jingdong’s Service Market
On March 31, Jingdong released its annual winners’ list of excellent service providers for 2021, with Jushuitan as a winner for its software services.
Covering 17 categories and involving both upstream and downstream portions of the e-commerce industry chain, this reward is considered the highest honor JD’s service market awarded to its service providers. It reflects an affirmation of the comprehensive capabilities of awarded service providers, including their transaction amount, service quality, contract performance ability, merchant satisfaction, and degree of cooperation, and constitutes an important reference point for JD merchants to select service providers.
As a leading SaaS software service provider in China and a quality partner of JD e-commerce merchants, Jushuitan stands out from many other enterprises by virtue of its excellent technologies and services to secure this annual award, which shows the affirmation and recognition of the JD platform and its merchants for their quality service.
Jushuitan’s SaaS ERP system has been provided to more than 300 e-commerce platforms to deliver comprehensive information and digital solutions for businesses. Up to now, Jushuitan has more than 4,000 employees and has set up more than 100 offline service outlets nationwide, covering more than 400 cities and towns. Over 70 million orders are sent through the SaaS ERP system every day, and one out of every 5 or 6 packages in China is sent through Jushuitan.
Listed in the 2022 Panoramic Report of AI Manufacturers by Ai Analytics, This AI Tech Firm Helps Brands Continue to Grow
Ai Analytics, well-known digital market research and consulting agency in China, recently released the 2022 Panoramic Report of AI Manufacturers. With outstanding products, quality service, and a good reputation, Leyan Technology was selected as a representative manufacturer of intelligent customer service and marketing. Previously, Leyan Technology was also listed in the 2021 Panoramic Report of AI Manufacturers as a representative for intelligent robotics and intelligent quality inspections. As can be seen, Leyan Technology has been recognized many times for its comprehensive strength.
As an important driver of the digital economy, artificial intelligence improves production efficiency and serves as a catalyst for new products and models, which in turn promotes the reconstruction of the entire industrial chain. It has become an essential engine for social progress and sustained economic prosperity.
Now, facing rapid growth of online business demand and consumers’ demand for high-quality service, brands must combine their products and services with better intelligent marketing operations to stand out from the competition.
By using AI tools, such as intelligent customer service, marketing, and advertising, Leyan Technology provides consumers with complete, high-quality, around-the-clock online services, thereby helping them refine their store operations and decision-making tools to help develop their marketing strategies.
Leyan Technology is a high-tech firm focusing on the industrial application of AI technology. Led by its CEO, Dr. Shen Libin, and other outstanding experts in natural language processing and knowledge graphs, it is an outstanding provider of overall AI solutions in China.
With the mission of “pioneering AI technology to create value for customers,” the company is committed to enabling e-commerce customer service, intelligent education, government and medical consultation, and other public service verticals with advanced cognitive computing technology to improve efficiency, reduce labor costs, and create more customer value. After many years of involvement in e-commerce, Leyan Technology has built a complete set of AI solutions for e-commerce businesses that cover all links from marketing to services.
The New TA System Version 3.6 is Released
Thinking Data recently released TA system 3.6, upgrading three aspects of its core functions, adding 10+ functions and 20+ optimized items, and improving its overall analysis capacity, efficiency, and intelligence. The new version supports complex data types and can create SQL statement labels, add field-level permissions, extend time ranges, and upgrade functions for behavior sequences, including more forms of data visualization, better alerts, and daily pushes.
Since its launch in 2018, Thinking Analytics (TA System), an extensive data analysis platform developed by Thinking Data for games, has won unanimous recognition within the industry with its capabilities in data collection, flexible and robust data analysis, and safe, rapid deployment.
As a professional platform for data analysis, the TA system continuously delivers pioneering data awareness and experience and constantly upgrades and iterates products according to customer needs.
Thinking Data always adheres to its “customer first” corporate value and implements it throughout its product development and innovation, always believing that connecting functionality to customers’ needs is the lifeblood of products.
In the future, Thinking Data will continue to focus on the gaming industry and adhere to its corporate mission of “making the value of data accessible at the touch of a finger.” It will continue to improve the depth and ease of TA analysis to create the most professional data analysis products and build a new data infrastructure for global gaming.
The Zhejiang Double Hundred Project for Public E-Commerce Services Recommends Shopastro Services for Brands Going Overseas
According to the Notice of the Zhejiang Department of Commerce on Organizing Public E-Commerce Services (2021, No. 62), which includes important instructions for department leaders, it is necessary to combine online and offline businesses under the new normal of COVID-19. The Zhejiang Provincial E-Commerce Promotion Center has explored more options for e-commerce service providers. It has integrated and sorted many high-quality ones within and outside the province. Offering preferential prices for the Double Hundred Project, the Center has launched a series of activities to help enterprises with public e-commerce services.
“Shopastro Going Overseas” has always responded actively to a new mode of government-enterprise cooperation by helping achieve win-win development of cross-border industries and enabling more high-quality domestic brands to go overseas quickly. Honored to be recommended in the Double Hundred Project, Shopastro will provide better commercial services for Chinese brands and sellers.
To couple with the Double Hundred Project, Shopastro launched the Starry Sea Plan for government-enterprise cooperation and offered a 50% discount for one-stop services for 1,000 high-quality brands to go overseas. The benefits include independent website building, year-round website operation, and overseas advertising. From building the website to marketing transformation and repurchasing, Shopastro can walk brands through its development cycle by meeting their needs at every step.
Shopastro is a one-stop and full-link service provider helping Chinese brands go overseas. Focusing on “building and operating websites, marketing transformation, and repurchasing,” it is dedicated to serving B2B foreign trade factories, domestic brands, cross-border brand sales, and existing DTC brands. Shopastro is committed to solving the pain points of Chinese brand sellers aspiring to go overseas, including independent website building, efficient advertising, accurate customer acquisition, and all-around marketing, and to realize brand value and cash in on internet traffic through focused operation driven by big data and AI technology.
Ray Hu, founder and managing partner at Blue Lake Capital, was recently invited to the “Dark Horse SRDI Industry Convention” hosted by Dark Horse and delivered a speech titled, “Consensus and Anti-consensus for SaaS Entrepreneurship .”
In the speech, Hu gave his thoughts on the outlook of the Chinese SaaS industry and suggested innovations for SaaS products and its entrepreneurial process.
The following are excerpts from the speech:
We at Blue Lake Capital manage both CNY and USD funds, and we pay great attention to the digital transformation of the Chinese economy. The core part of our business is enterprise software. Over the past three or four years, we have heavily deployed our investments in the enterprise software sector, covering nearly 40 companies.
During the process, we as investors feel lucky to learn while making investments and growing together with many outstanding SaaS companies as China’s digitalization continuously deepens.
Under certain circumstances, when we look at the growth of these companies as a board of directors, we consider different perspectives as we notice the development of these emerging firms.
Today, I’d like to share what we have seen and experienced during this process.
When we talk about SaaS, we are first challenged with the market scalability of SaaS start-ups, which is the concern of most entrepreneurs in the initial stages. When people compare SaaS with the thriving consumer internet industry of the past ten years, they often worry that either the market isn’t big enough, the growth of companies isn’t easy enough, or action isn’t fast enough. Entrepreneurs to investors, including even our LPs, are concerned that SaaS start-ups may not reach an impressive size even with a long time to develop.
From a macroscopic perspective, we’re not too worried because China is among the top countries in the world in terms of GDP growth rate. If we break down the figure to look at the growth rate of each industry, we’ll see that digitalization, information technology, and software-related sectors are all growing at 2-digit speeds. Such high growth speeds are very rare, even compared with global rates.
For anyone who’d like to start a business, finding a rapidly growing environment is essential. Only high growth leads to significant opportunities and only when there are enough opportunities can start-ups seize upon one and enter the market. Information technology and software industries are undoubtedly rapidly growing environments that provide great market opportunities.
We are often asked that if a Chinese software company succeeds, what kind of scale can be achieved? And how much can its market value be on the secondary market? To answer these questions, we have consulted a large amount of data from third-party research institutions. According to a research report from JP Morgan, the market scale of the SaaS industry is forecasted to exceed ¥260 billion by 2025, and that of the software industry will be even larger.
Suppose the P/S ratio of a software-related company is 20-25x, which is equivalent to a market value of $1 trillion on the secondary market. It means that if an average company has a ¥100-billion market value, at least 50 companies of a similar size will emerge. Suppose the average market value of a company is only ¥50 billion. In that case, over 100 companies will arise in the next few years with the boom of the Chinese software market, each with the opportunity of becoming relatively large companies in capital markets (in Mainland China, Hong Kong, and the US). We are very optimistic about both the size and the growth rate of this industry.
Lately, we’ve heard a lot of feedback saying that a significant drop came in the secondary market, making investors worried about the software industry not receiving enough attention and potentially leading to a bleak prospect for starting a software business.
We’ve given this a lot of thought. First of all, the question is a little weird because, in essence, the drop reflects short-term fluctuations in the secondary market but not the fundamentals of the software market. To a degree, the instability of the secondary market provides an excellent opportunity to eliminate companies with relatively poor production capacity from the industry. Companies with unhealthy businesses will have difficulty in raising funds in the market. On the contrary, those with excellent products and high-quality businesses will be able to withstand the fluctuation.
The other side of the coin is that we’ve seen very positive signs in the Chinese software market even in the last two or three quarters. In Q1 of this year, the production capacities of China’s top integrators barely met the unprecedentedly high demands of middle-to-large enterprises for IT-supported and systematized solutions. This means the digitalization of the Chinese economy is prospering. Whether for entrepreneurs or investors, it is a good time to get involved.
Why do we say there are opportunities for the SaaS industry this year? And why are opportunities happening now?
One important reason is the maturity of public cloud infrastructure. The second reason is that Chinese enterprise software users use ERP on their computers at work but consumer applications on their phones, which offer hugely different experiences. Also, the upgrading and iterating of companies’ businesses are getting faster while traditional, locally-delivered, customized software is having difficulty catching up with the demands generated from the development of these businesses.
An increasing number of entrepreneurs are asking where the opportunities are. The demands of enterprises for IT products have been fundamentally changed. We’ve noticed some obvious trends: apart from application development and product-centric approaches, improving artificial intelligence is essential but difficult to achieve in traditional, locally-delivered software products. Even if you look from a global perspective, Chinese entrepreneurs today have the opportunity to overtake their competitors because in terms of AI algorithms or human resources, China is leading the world when you make horizontal comparisons.
The timing for our software products is perfect for integrating intelligence with information. The product power thus produced is highly likely to exceed that of European SaaS products of the previous generation. We’ve seen increasingly more cases of the practical application of this integration in software products.
Next up, let me share with you our thoughts on product value.
First, how do we weigh up the value of a software product? Which target is better, KA clients or SMBs? It’s not simply an either/or question. There have been cases of success for both KA and SMB clients. The type of clients you choose is not the key to success. But the product positioning and the value it creates for a client have to match the client’s positioning.
Usually, products for KA clients are positioned to reduce costs and increase efficiency. KA clients are usually more complicated in their organizational structures and attach more importance to the transparency of business operations, efficiency improvement, and controlling costs. Software products can generally meet clients’ management demands. However, it would be unprovable if we told a large enterprise that our software product could increase their revenue. Too many factors influence a large company’s sales, so it isn’t realistic to expect revenue to increase with a mere SaaS product.
Contrary to the above, the organizational structures of small to medium enterprises are relatively simple and owners of SMEs know how to save money. If we told them our software products could help them save money, they would probably be unwilling to spend an additional ¥100,000-200,000 per year to save a little money. They care more about generating extra income and how our software products can help them increase their revenue and improve the efficiency of client acquisition. For example, among our portfolio, JST specializes in order processing and inventory management. Zaihui focuses on precision marketing for catering businesses. Leyan Technologies deals with intelligent customer service. Lingxing is dedicated to PI analyses of the cross-border e-commerce industry. All of them base their businesses on their respective value propositions. When it comes to small to medium enterprises, your growth curve will be impressive if you can find the right target clients for your products and show the value created by the products.
At this moment, SaaS is a highly feasible field with a huge market for both investors and entrepreneurs. It provides an opportunity rarely seen in other verticals. From Blue Lake’s perspective, this is the best entrepreneurial opportunity in 15 or even 20 years.
From an entrepreneur’s perspective, running a business is a long-term game. It is necessary to consider whether a company can succeed and become an asset and whether the products can match client positioning, accumulate WoM, and gain higher customer satisfaction. If the answers are yes, success will naturally follow.
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