China AI specialist 4Paradigm receives $700m Series D

Sequoia Capital China, Goldman Sachs, CPE, Jinyi Capital, and FountainVest Partners also came into the round as financial investors. Meanwhile, China-UAE Joint Investment Fund, Mubadala Investment, CDB Capital, China Reform Holdings, JIC Technology Investment, CSC Financial, and Haitong Securities were described as participating strategic investors.

It follows a $230 million Series C round, which closed last year at a valuation of more than $2 billion.

4Paradigm uses machine learning technology to help companies collect and manage data, facilitating increased operating efficiency and lower risk. It provides the middle platform infrastructure – known as platform-as-a-service (PaaS) – that allows enterprise customers to run business applications from outsourced cloud-based systems.

Founded in 2014 by a group of Huawei Technologies veterans, 4Paradigm claims that its solutions are deployed in every major sector. Suggested application scenarios include anti-fraud detection systems for banks, supply chain and customer relationship management platforms for retailers, AI-enabled disease prediction in healthcare, and market forecasting and pricing systems for energy companies.

During the COVID-19 pandemic, 4Paradigm claims to have helped customers maintain business continuity while accelerating the shift from offline to online operations. It will use the new funding for strategic planning across key industries, establish an enterprise-grade AI-based ecosystem, and cultivate AI talent, according to a statement.

The company often refers to investors as strategic when they are also customers. 4Paradigm's three tranche Series C featured Agricultural Bank of China, China Bank of Communications, Cisco, CITIC Bank, China Reform Holdings, and Lenovo. Sequoia – an early investor in the company – Green Pine Capital Partners, Co-Stone Capital, Poly Capital, and Three Gorges Capital also participated.

4Paradigm is one of a cluster of well-funded independent players that have emerged in China's PaaS space, alongside technology giants such as Alibaba Group and Tencent Holdings. MiningLamp Technology is regarded as a close competitor. Last month, it secured a Series E extension of $200 million led by the Russia-China Investment Fund. This took the overall round to $500 million.

The software-as-a-service (SaaS) challenge in China is monetization, specifically getting companies to pay for a standardized rather than a customized, or project-based, solution. Some investors see more potential in PaaS because middle platforms can become standardized layers, while front-end software products are tailored to meet the needs of individual users.

However, China's PaaS providers are said to be some distance from emulating the likes of Palantir Technologies because standardized products account for a minority of contracted revenue. Most of them – like their SaaS counterparts – work on a project basis. These projects are typically small, low margin, and the customer pays on delivery, which can lead to unreliable cash flows.

4Paradigm claims to have expanded and upgraded its product portfolio in 2020, adding a standardized, full-process tool for decision-making AI applications, an AI operating system for application scenario management, and machines with all-in-one hardware and software solutions.

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• Topics
• Greater China
• Technology
• Expansion
• China
• SaaS
• enterprise software
• artificial intelligence
• Growth capital
• Boyu Capital
• Hopu Investment Management
• Primavera
• Sequoia Capital
• Goldman Sachs
• Fountainvest Partners
• Citic Private Equity
• Mubadala
• China Development Bank