Deal focus: MiningLamp brings AI to low-tech China

Despite the precedent for sweeping policy and technology rollouts under nationwide government mandates, the digitization of China’s legacy industries is likely to be a custom, company-by-company job. The tailored IT solutions needed at the small to medium-sized enterprise (SME) level cannot always be satisfied by standardized products – creating a tantalizing opportunity for nimble start-up service providers and their backers.

Huaxing Growth Capital, the flagship PE arm of China Renaissance, is underlining its faith in this thesis by joining Tencent Holdings in a RMB1 billion ($159 million) Series C round for MiningLamp Software, a big data and artificial intelligence (AI) company that works across areas such as cybersecurity and marketing analytics. Yanshu Zou, a director at Huaxing, sees it as an opportunity to plug much needed information processing power into a massive but underdeveloped SME market.

“The opportunity is larger in China than other Asian markets because of the size of the market, the low level of digitization, and growing recognition of the importance of more sophisticated data analysis and computing systems,” Zou says. “This is increasingly important in consumer-facing enterprises as the consumer market is very big and fast growing and needs better technology service. The existing infrastructure is not well suited to AI or big data, so it’s critical to work with enterprises to establish basic levels of digitalization, creating the groundwork for the implementation of more sophisticated analytics.”

MiningLamp was founded in 2014 to supply bespoke big data solutions to Chinese enterprise clients, including financial and industrial organizations as well as government agencies. It has since established itself in a number of new verticals including public security and manufacturing, offering services such as digitizing information from old databases and integrating AI applications into new platforms. This growth has been supported by VC rounds in 2015 and 2016 that featured the likes of Sequoia Capital China, Heaven-Sent Capital Share Capital Partners, and Zhejiang Paradise Silicon Valley Asset Management.

The Huaxing plan is to further develop and commercialize the company’s AI technology with a view to improving user experience and business efficiency. Zou also indicated that collaborations and partnerships were possible with existing portfolio companies such as fellow AI player SenseTime. Meanwhile, China Renaissance’s advisory platform will be accessible for capital markets planning work and M&A support. 

Value-add efforts will also include help strengthening the currently 400-strong team with additional scientists and industry experts. The availability of relevant skills and experience is widely regarded as the key bottleneck to AI development as well as a top factor in deal targeting – perhaps especially so in MiningLamp’s theater of operations. 

“Strong tech is always fundamentally important, and we undertake a rigorous tech due diligence process. But in China, it’s extremely important to evaluate the team, its execution abilities and marketing strategy,” Zou says. “Chinese customers demand total and customized solutions, so it’s important to evaluate the team and how competently the company can work with clients to meet this need and what track record they have for doing so.”

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• Topics
• Greater China
• Technology
• Support services
• Expansion
• China
• China Renaissance
• Tencent
• TMT
• professional services