Zhou Yuxiang does not have the typical profile for working in China’s manufacturing world. A soft-spoken, enthusiastic man in his early thirties, Zhou graduated from Dartmouth College with a degree in government and worked in investment banking in Hong Kong, following the path of many Chinese foreign returners.
But a few years into his career, Zhou realized that he wanted to build his own business. It was around 2015, a time when China was consumed by a startup craze during Premier Li Keqiang’s campaign for “mass entrepreneurship and innovation”. Instead of moving into the sleek world of consumer lifestyles, Fintech or AI, Zhou chose manufacturing as a starting point.
During his time at Barclays, Zhou helped Chinese manufacturers with deep pockets for merger and acquisition deals in Europe. He saw how factories in Germany digitize their operations using Siemens and SAP solutions. In China, “factories had a lot of money and could buy top-line equipment. But on the software management front, they were still very primitive, ”said Zhou in an interview with ClearTips.
“Most of the operation was done on paper. Every day, the workers found a stack of papers telling them what to do, and in return, they filled the sheets with what materials they used… when you were in Europe these economically vulnerable When acquiring factories, you realize that their software infrastructure capabilities are still far better than you, ”said Zhou.
That digital gap encouraged Zhou to start Black Lake, a software platform for factory workers, to log their daily tasks and managers to oversee plant floors. Since its inception in 2016, the startup has raised over $ 100 million from GGV Capital, Bertelsmann Asia Investments, GSR Ventures, GenFund and others. The company recently closed a Series C round, pocketing around 500 million yuan ($ 77 million) and bringing in new backers, including Singapore’s sovereign wealth fund Temasek, who led the round, as well as China Renaissance and Lightspeed Vent Partners.
Black Lake’s vision is to become a one-stop collaboration platform for factory workers and managers, digitizing data across all stages of production, from customer orders, material procurement, quality compliance, warehouse management to logistics and shipments is. The software analyzes these reams of data, churning out reports to examine abnormalities in production and for workers to see how they can increase their production and income.
Compared to the SaaS Incumbents of Western countries, Black Lake has more appeal to the wider swag of China’s small and medium-sized factories due to local services and cheaper prices, Zhou argued. Black Lake tries to simplify its user experience to a Lego-like building process so that factory owners can easily customize the software for their own use. Activists use cloud-based software from their smartphones, which have become ubiquitous in affluent cities in China, for increasingly favorable device prices and data charges. A foreign SaaS giant’s solution could cost at least three million yuan a year, while Black Lake 300,000 yuan or less, Zhou said.
To date, the company has served around 2,000 manufacturers and suppliers in the Greater China region and Southeast Asia, counting on its customers Tesla, L’Oreal, Xiaomi, Sinopec and China-owned group China Resources Pharmaceutical Group. The company claims to have reached 500,000 production workers.
Black Lake is riding a perfect wave of “upgrades” in China’s construction world. For one, the demand for customized products is increasing as consumers have gone dark. For example, instead of producing bottled water with the same packaging, beverage companies now make different designs to suit different demographics. Factories need to quickly accommodate a flood of customized orders, and a cloud-based data management platform can be the solution, Zhou suggested.
The US-China trade war is another motivation for China’s push for factory upgrades. After feeling the heat from trade restrictions, Chinese manufacturers cut expenses and improve productivity. This shift, along with the government’s “new infrastructure” policy to provide high-tech breathers in traditional industries, makes Zhou more aware of his business.
But Black Lake has certainly not seen opportunities in China’s push to modernize production, and a notoriously slow monetization in part due to low adoption of enterprise software in China and companies’ reluctance to pay for services Is the cycle. The key is finding a viable business model for millions of factories in China to make their dream the ultimate “data entry point”.
With the proceeds from its new fund, Black Lake plans to develop product development, hiring, market expansion and an open platform for third-party developers. The startup realizes that it cannot build everything factories need, and is already working with telecommunications, cloud computing, automation and consulting such as Huawei, Alibaba, SAP and McKinsey.
Zhou insisted, “When Chinese factories ‘wake up’ their speed of digitization will surely be a leap from their American and European counterparts.”