China B2B platform targets supply chain disruption

This is no coincidence. Zhaosuliao was set up in early 2014 with a view to becoming to the plastics industry what Zhaogang already is to China's steelmakers. Bin Mu, the company's founder and CEO, had experience working in both the commodities and internet spaces, so he was under no illusions as to the potential and went looking for opportunities in other verticals.

"Not all verticals are ideal for this kind of disruption but eventually he found plastics," says Jing Wu, a partner at Qiming Venture Partners, which recently teamed up with IDG to commit $20 million in Series A funding to Zhaosuliao. Matrix and Li also participated. "First, you need large trading volume. Second, the existing offline supply chain has to be very fragmented. There might be 3-4 levels of intermediaries in between suppliers and end users of plastics."

Matrix and Li's Zhen Shun Fund provided RMB10 million ($1.6 million) in seed funding last June and the platform launched in July.

Trading volume reached RMB1 million in the first month but the following month it shot up to RMB10 million. According to Wu, monthly transaction volume is now a few hundred million renminbi. For the general plastics industry as a whole, online and offline trading amounted to RMB361 billion last year.

The growth is comparable to that of Zhaogang, which was set up in late 2011. The platform transacted 4.31 million tons of steel in 2013 across 15.3 billion deals. This rose to 20.4 million tons and 68.8 billion deals in 2014. The company raised a $34.8 million Series C round led by Bull Capital Partners and Sequoia Capital, and featuring several existing investors, in early 2014. Last month it was said to be closing in on a $100 million round.

These two B2B trading platforms differ from their predecessors in that they are transaction-based rather than just information portals. While Alibaba Group, which runs its own industry agnostic B2B trading platform, has been looking at transaction-based models, Wu thinks it will be difficult to compete with specialists.

This is in part because Zhaosuliao not only brings transparency of information to its users, but also facilitates the trading process itself. The platform relies on its industry expertise to pair buyers and sellers. As users become more accustomed to online supply chains, the need for this matchmaking role will recede. Meanwhile, other areas, notably payment, become more sophisticated.

"We envision transactions happening 100% online but at this point, once buyers and sellers are matched, they complete the transaction offline," Wu says. "We already have some solutions in mind but they are work in progress."

 

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• Topics
• Venture
• Greater China
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• China
• Venture
• TMT
• Qiming Venture Partners
• Matrix Partners
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• Growth capital