Deal focus: Gitee aspires to be more than China’s Github

When FutureX Capital identified Gitee, a China-based open-source software platform, as a potential investee in 2021, it was informed that the company had recently closed a funding round and had no immediate need for additional capital.

Cynthia Zhang (pictured), who founded the technology-focused investment firm after spending the best part of a decade as head of private equity at China Asset Management, took a step back and found a different way in. She initiated a discussion on how Gitee could develop further, suggesting that the company would be better placed operating as an independent platform rather than as a subsidiary of a tech giant.

At the time, Baidu was the majority shareholder. It was receptive to the notion of separation, but as a listed company, the compliance processes were lengthy. A CNY 775m (USD 107m) funding round that reduced Baidu’s stake from 51.54% to 14.04% launched in early 2022, during the Shanghai lockdown, and closed only relatively recently.

FutureX was the lead investor, supported by the likes of Legend Capital, Lenovo Capital & Incubator Group, China Mobile, and various investors with ties to local and national governments. The latter included Shanghai Science & Technology Venture Capital, Shanghai SIIC Fund Management, and the Ministry of Finance-backed China Internet Investment Fund.

Asked to explain how it came across Gitee, Zhang draws on a well-known Chinese idiom: follow the vine to get to the melon. From 2018, as technology competition between the US and China began to intensify, investors got busy theorising that Beijing would establish its own technology standards and infrastructure across hardware and software.

This led FutureX to back database company PingCap and an unnamed operating systems business. Both rely on open-source technology. Deeper research into China’s entire open-source ecosystem led the private equity firm to Gitee.

“Gitee has a massive customer base, with around 10m programmers utilising the platform. That covers 90% of China’s active programmers and 20% of active overseas programmers, making it the second-largest programmer community globally, behind only Github. It has also built a comprehensive suite of products including code hosting, which provides significant value,” said Zhang.

The company has experienced explosive growth in user activity over the past two to three years. While often described as a Chinese substitute for Github, Zhang believes it is distinguished by unique local angles. FutureX has turned down other start-ups that were trying to replicate the Github model in China.

“Gitee caters to specific local needs, such as open-source projects for local industries. When encountering a bug in such a project, programmers on Github may not be able to offer suggestions as the industry chain may not exist outside of China. Communication in Chinese language on Gitee is a plus, offering great convenience for local programmers,” Zhang explained.

Such characteristics can be traced back to the company’s origins. It was founded in 2008 by Yue Ma, who previously worked in the US, and a local programmer who goes by the name “Hongshu,” or “Sweet Potato.” Ma’s other projects include Forever OSS, an open-source software provider for airlines and airport operators currently listed on the Beijing Stock Exchange.

In its first 10 years, Gitee nurtured China’s open-source community and culture. Services were provided for free or at very low cost. The company gradually became the dominant local platform for hosting open-source code using git – a free and open-source distributed version control system designed to help coders collaborate or track changes.

In 2017, Gitee launched an enterprise version, offering a software-as-a-service (SaaS) solution to small and medium-sized enterprises. This has generated a stable recurring revenue stream. More recently, the company has begun serving large enterprises as well. This has involved some adaption: Gitee offers private versions of products originally available on the public cloud to address data privacy concerns.

The company has released various products that amount to substitutes for foreign offerings: Gitee Team for Jira, Gitee Code for GitLab, Gitee Pipe for Jenkins, and Gitee Repo for JFrog. Through this platform, it has hosted nearly 100,000 open-source projects, working with 10m developers, 260,000 enterprises, and 2,000 higher education institutions.

Last year, Gitee scaled up its ambitions, releasing Landscape, a hub for more than 200 open-source communities, and buying OSDN, a Japan-based open-source community formerly known as Sourceforge.jp.

“Gitee’s team combines global vision and local know-how and has developed into a platform-type enterprise. It’s not easy to find a good platform-type company, which is why we joined four consecutive rounds for ByteDance, one of China’s most successful consumer-tech platforms,” said Zhang.

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• Topics
• Greater China
• Technology
• Early-stage
• China
• FutureX Capital
• enterprise software
• Legend Capital
• Baidu
• Lenovo Capital
• China Mobile