Deal focus: Laiye leverages European connections

Before investing in Chinese workflow automation start-up Laiye, Cathay Capital introduced the company to several Europe-based Fortune 500 companies that number among its LPs. It was not only a gesture of goodwill but also a helpful due diligence exercise.

“These large corporates were very satisfied with all aspects of the product and service experience, so we decided to invest,” said Lanchun Duan, a managing partner at Cathay. “We had already assessed the team and its AI [artificial intelligence] capabilities. Recognition by corporate customers was helpful. And then the subsequent merger went beyond our initial expectations.”

Cathay Innovation, the venture affiliate of Cathay Capital, led a Series B extension of USD 35m in 2019 and re-upped in several following rounds. At the time, Laiye provided chatbot services to consumer and business end-users. Later that year, it acquired robotic process automation (RPA) specialist Awesome Technology and pivoted to “AI plus RPA,” offering a suite of intelligent automation software solutions intended to enable business digitalisation.

Cathay can claim to have assisted with further M&A through its European networks. It introduced Laiye with Mindsay, a Europe-based enterprise chatbot and voicebot platform, which culminated in an acquisition that closed a few months ago. Europe now accounts for 20% of Laiye’s revenue, according to Guanchun Wang (pictured), the company’s CEO and chairman. It will be 50% by 2025.

Meanwhile, fundraising continues apace. Laiye secured USD 42m in Series C funding in 2020 led by Lightspeed China and Lightspeed Venture Partners. There have since been two extensions: USD 50m in 2021 and USD 70m last month. Ping An Global Voyager Fund and Shanghai Artificial Intelligence Industry Equity Investment Fund led the first and Hopu Investment led the second.

Other investors include Youshan Capital, VMS Group and Hong Kong-listed Far East Horizon.

“While UiPath dominates in the US, RPA is at an early stage in Europe, and we believe Laiye can be competitive there,” Duan added. “Europe is a mature market for enterprise software – customers are willing and able to pay for services. If Laiye can do well in Europe, that is good for commercialization. It will also demonstrate the quality of its products and its ability to serve global companies.”

Perfect partners?

Founded in 2015, Laiye began targeting overseas markets in 2020. It served international customers remotely prior to recruiting salespeople and partners in Europe. Mindsay was introduced to the company as a potential partner – its chatbot features were seen as a good fit for Laiye’s RPA. After initial talks, Mindsay’s founder suggested a full merger represented the best growth strategy.

“What really matters for successful M&A is that the two parties share the same vision and the same culture,” said Wang. “Mindsay had another offer from a global RPA leader, but it felt the company was too corporate. It wanted to work with a more dynamic and agile partner.”

Mindsay’s investors, however, took a different view. They preferred a cash-plus-stock sale to the global RPA player because it offered greater certainty and a degree of liquidity. Two happened to be Cathay LPs as well, and the private equity firm helped smooth the path to a Laiye acquisition.

“Trust is crucial, especially in the current international environment. Building trust across borders and cultures is very difficult, but without it, that transaction would have been extremely difficult,” said Duan.

The founders of Mindsay were awarded co-founder status at Laiye and the entire core team remained in place. Post-deal integration was faster than Wang had expected, with Mindsay soon operating under the Laiye brand and adopting the same objectives and key results (OKR) systems. The hope is that Mindsay can serve as a beachhead for Laiye’s penetration of Europe.

Both Wang and Duan make the case that Chinese software companies have an edge internationally because competition is so fierce in their home market. In addition, local customers are demanding, partly because they are often new to RPA. This means customer service must be very hands-on and end-to-end solutions are preferred to stand-alone products.

“In overseas markets, you can live well on a strong single product, but in the Chinese market, you have to do this layout of full service. Once you achieve this layout, you can expand geographically, and in fact, you will have certain advantages,” said Duan

Product evolution

Laiye now has more than 100 people spread across 15 countries in Europe, North America, and Southeast Asia. The new funding will support this international buildout, including the cultivation of a developer community that already numbers 600,000 people and 600 corporate partners. The company will provide community editions of its products to developers free of charge.

"Our product matrix has been tried and tested in the tough China market. The organisational power we have accumulated must be expanded and released into the global market. It would be such a shame otherwise. Today we are winning deals from the likes of UiPath and Microsoft,” said Wang.

The company currently serves more than 200 Fortune 500 companies, 200 government agencies, and thousands of small to medium-sized enterprises across energy, financial services, communications, and retail. It claims annual revenue growth of 120% over the past three years.

The product offering has moved from AI plus RPA to “organically integrated” intelligent automation, which means features are no longer linked by patches but seamlessly connected under a single solution. For example, to automate insurance claims, information is extracted from claim forms by an AI engine and then entered into the system using RPA. Customer interaction is led by an AI chatbot.

“Only end-to-end automation can accelerate processes, improve user experience, and ease the burden on staff. And only companies with both AI and RPA genes can offer truly integrated and smooth solutions,” said Wang. “If you team doesn’t have the expertise on both sides, you must work with other products and suppliers to complete this thing.”

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• Topics
• Greater China
• Technology
• Expansion
• China
• artificial intelligence
• Cathay Capital Private Equity
• Hopu Investment Management
• Lightspeed Venture Partners
• Ping An
• Growth capital