Chinese industrial internet platform gets $42m Series A

Hillhouse Capital led the round, with additional commitments coming from SAIF Partners, CLP Fund – a private equity vehicle launched last year by CICC Capital and a unit of China Electronics Corporation – an investment unit of property developer Sunac China Holdings, state-owned Xinhua Daily Media Group, and Jiaxing Cornerstone. It is described as the largest-ever Series A in China's industrial internet space.

Xreacloud was established in 2014 and listed on China's New Third Board last year. It has since delisted. The company is positioned as an industry 4.0 platform that helps manufacturers automate production processes and introduce smart communication channels that integrate supply chains. Its edge computing capabilities can aggregate and analyze large volumes of industrial data and plug it into models for the rapid development of industrial apps.

Xreacloud serves more than 1,000 companies with operations in 20 countries across the construction machinery, new energy, logistics and precision components manufacturing segments, according to a statement. It claims to have built 20 industry sub-platforms. For example, the company helped China Railway Construction Corporation create four industrial apps that facilitate more efficient use of equipment.

The company is the first mixed-ownership enterprise within XCMG, and the latest round of funding will see the parent's equity interest fall from 60% to 45%. The new capital will go towards recruitment – Xreacloud already has over 400 employees and seven R&D centers – and plans for state-owned enterprise reform. The company has previously supplied government agencies and research institutions with material supporting the development of industrial economic policy.

"The Xreacloud industrial internet platform will continue to invest in core technologies, create high-value SaaS [software-as-a-service] products, improve its industrial solutions capabilities, and promote the digital transformation of China's manufacturing sector," said Qiliang Zhang, the company's CEO.

Industry 4.0 has attracted considerable private equity interest in China – indeed, XCMG is not the only construction machinery manufacturer to secure funding for an IoT start-up it has incubated. In June, RootCloud, a platform established by Sany Heavy Industry, received a $500 million Series B round from the likes of Hejun Capital, Zw Ventures and Matrix Partners China.

It remains to be seen how quickly and easily these solutions can be adopted by domestic manufacturers. Industry participants previously told AVCJ that companies tend to focus on upgrades in specific areas, rather than unilaterally reconfiguring all supply chains, and some aren't even interested in doing that.

However, one area in which the phenomenon does appear to be taking hold is textiles, which is among China's largest and most fragmented industries. Smart Fabric, which recently received a $100 million round, started out as a software provider but then built China's first cloud-based factory, leveraging its technology to bring together 2,000 small-scale textile manufacturers. The company claims to be able to turnaround orders in 7-14 days compared to 30-40 days for large textile factories.

Baibu, a B2B trading platform for textiles and fabrics, has moved in the same direction. It now claims to manage a cloud-based platform comprising 100,000 textile machines, representing 8% of the industry's capacity in China. Earlier this week, Baibu announced a $300 million Series D round led by DST Global.

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• Topics
• Greater China
• Early-stage
• Technology
• Industrials
• China
• manufacturing
• TMT
• Hillhouse Capital Management
• SAIF Partners