Deal focus: Turning data into operational efficiencies

Qiang Suo (pictured) is familiar with the ebb and flow of investor exuberance. As founder and CEO of Prothentic, a China-based software-as-a-service (SaaS) start-up specialising in process mining, he was being chased by prospective investors even before the company was founded in March 2021. Since then, sentiment has cooled amid corrections in technology valuations globally and economic uncertainty in China.

“From the angel round to the pre-Series A and Series A rounds, we were very much in demand. Some investors were so keen to participate, that they didn’t negotiate on price at all. For the Series A in October of last year, we got term sheets from most of the well-known funds active in SaaS,” Suo said.

Despite the subsequent deterioration in market conditions, Prothentic recently closed a CNY 135m (USD 20m) Series A extension led by B Capital Group and Kunlun Capital. Existing investors GL Ventures and Kaitai Capital and GL Ventures re-upped. It is said to be the largest funding round in China’s process mining space, which covers a range of disciplines related to big data services and business automation.

Daisy Cai, a general partner and head of China at B Capital, observes that valuations in the broad SaaS market have reset over the course of 2022. However, she remains bullish on the long-term outlook.

“We believe that the fundamental factors that have catalysed the explosion of China SaaS in recent years still exist and will further deepen. Short-term adjustments in valuations help promote healthier industry development,” Cai said.

According to Suo, Prothentic’s valuation has still doubled from the previous round, which he links to strong customer validation. The company launched its sales effort last September and secured three anchor customers within a month. As of May, the initial batch of customers had become repeat customers, signing up to annual subscriptions worth CNY 3m.

There are now 20 customers in total, including Deutsche Bank, China Resources Group, Yuexiu Real Estate, Porsche China, and several large internet companies. In addition, Prothentic has about 40 non-paying proof-of-concept customers, which underscores how China SaaS is still in a relatively early stage of development.

“Prothentic has built technical barriers and been recognised by many top enterprises,” Cai added. “Chinese companies have completed early digital transformation and accumulated high amounts of data. At the same time, process optimisation often gets neglected amid rapid growth. As companies mature, process mining will be a powerful tool to increase efficiency, cut costs, and strengthen risk controls.”

Demand and supply

While Prothentic’s rise has been swift, it is based on Suo’s longstanding domain expertise. He served as China head of Netherland-based process mining player ProcessGold, which was acquired by UiPath, a global leader in robotic process automation (RPA), in 2019. He was then appointed Asia Pacific head of process mining at UiPath.

Suo got to know some of Prothentic’s future customers when representing ProcessGold on roadshows in China. Meanwhile, his public profile was boosted by becoming a prolific and authoritative poster on all things about process mining on local question-and-answer platform Zhihu. This was how many Chinese entrepreneurs interested in the space got to know Suo.

“I first met some companies in 2017 and 2018 and that was the beginning of a long dialogue,” he said. “When they heard I was launching a local process mining business, they came to me.”

Despite the increased awareness of process mining, capacity is limited, with few foreign providers maintaining a presence in China. According to Suo, it’s hard to find a sales representative and support is insufficient. Price is obstacle to local adoption, but security is a more pressing issue: local enterprises are reluctant to run operations from offshore cloud-based servers, while global players don’t want to come onshore.

Prothentic is currently developing a product in conjunction with Huawei Technologies, following the imposition of restrictions on the latter’s access to many US-relevant technologies. A test version is set to launch in October with the objective of matching the essential functions of global leader Celonis’ 2018 product. If everything goes smoothly, commercial rollout will begin in December.

“For our early customers, it’s like purchasing futures instead of a final product. We must quickly iterate based on their demands and perfect our products. This put significant pressure on our R&D team,” said Suo, although fortunately there is no real need for customisation in process mining – the Huawei product, for example, could serve any company.

“It’s the same product, but you put in different data and it reaches a different conclusion regarding process optimisation.”

Process mining is essentially an X-ray examination of internal operations. Prothentic and its peers sift through information stored across a company’s IT systems and identify loopholes, defects, and bottlenecks that deviate from standard processes. Once solutions are recommended, continuous monitoring services are available to oversee implementation.

Prothentic claims that, after one year of using its technology, companies can reduce average processing time for customer complaints from 45 days to five days. In one case, this was achieved by cutting the number of processing paths from 93 to 30.

A common interpretation of process mining is that it handles the body check and then RPA is used to deliver operational improvements. Suo believes this is inaccurate. He defines process mining as a self-imposed consulting capability that productises consulting services.

“Previously, people used surveys and interviews to optimize these procedures, but when a company has millions of pieces of data, manual solutions often aren’t enough,” he said. “RPA, on the other hand, involves small-step automation that doesn’t necessarily influence overall workflow efficiency.”

B Capital’s Cai sees a natural dovetail between Prothentic’s services and those offered by mainstream management consulting firms. The private equity firm will leverage its strategic relationship with Boston Consulting Group to help Prothentic access the consulting industry.

Other collaborations could focus on developing solutions for small and medium-sized enterprises (SMEs) that are sometimes priced out of traditional process mining services. For example, Prothentic is working with a leading enterprise reimbursement management platform on an automated tool that makes it easier for employers to verify and audit expense bills.

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• Topics
• Greater China
• Technology
• Early-stage
• China
• enterprise software
• B Capital
• GL Ventures