China B2B steel-trading platform raises $74m

The RCIF commitment was one of several announced during a visit to Moscow by Chinese President Xi Jinping. These included a pledge from China Investment Corporation (CIC) and the Russian Direct Investment Fund to inject $1 billion into the RCIF. It has already invested $1 billion in 19 companies since 2012.

Zhaogang closed its previous funding round at RMB1.1 billion in January 2016. This was co-led by West Fund, an investment vehicle launched by Chinese state-backed steel company Shougang Group and domestic broker Zhongtai Securities.

Founded in 2012, Zhaogang facilitates steel trading online between suppliers and buyers, as well as providing storage, material processing, and logistics services. It has also expanded into lending, offering loans to small and medium-sized steel companies. It accounts for more than 40% of the online market for trading in steel products, according to a RCIF statement.

Zhaogang claims to have facilitated transactions involving about 32 million tons of steel in 2015, or 8% of the overall domestic steel market. Of this, 8.5 million tons were traded directly through the Zhaogang “steel mall” – in other cases, the platform matches buyers and sellers, who then transact offline – worth a cumulative RMB18 billon. The company was targeting a transaction volume of RMB36 billion for 2016.

More than 1,200 people are employed across Zhaogang’s servicing network in 42 cities nationwide. The company has also expanded into South Korea, Vietnam, Thailand, the Philippines, Singapore, and the United Arab Emirates. It is considering a move into Africa and RCIF’s participation is expected to facilitate a roll-out in Russia.

“We have been closely monitoring the company’s development for three years, and we are glad to make the investment now as the company’s business model has been validated, after it has weathered the sector’s severe downturns and emerged as a winner. We believe RCIF’s investment will help the company implement its international business strategy in Russia and other countries along the One Belt and One Road,” Bing Hu, co-CEO and president of RCIF, said in a separate statement.

Zhaogang has raised more than RMB2 billion across five funding rounds. The first saw K2VC – the result of a spin-out from Ceyuan Ventures and a partnership with China Renaissance – and Zhenfund put in $1.64 million in 2011. The same investors provided the $6.43 million Series B in 2013.

The company raised a $34.8 million Series C round led by Bull Capital Partners and Sequoia Capital, with Matrix Partners China and K2VC also participating, in early 2014. In January 2015, Zhaogang completed a $94.7 million Series D round led by IDG Capital and Huasheng Capital, a fund managed by China Renaissance. Matrix, Sequoia and Bull Capital also participated.

The Series E last year saw the company remove its variable interest entity (VIE) structure in preparation for an onshore listing. West Fund and Zhongtai contributed RMB890 million to the round. Other commitments came from IDG, Huatai Securities, Sanren Capital, Oriental Fortune Capital, K2VC, Yunqi Capital, Qianhe Capital, Xinmen Investment, Minheng Wealth Management, and Fulin Yuyong Capital.

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• Topics
• Greater China
• Technology
• Expansion
• China
• Growth capital
• Venture
• China Renaissance
• Russia
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