Black Lake raises US$77M to give factories a digital upgrade | FI SENSE

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Zhou Yuxiang doesn’t have the typical profile for working in China’s manufacturing world. A soft-spoken yet incisive person in his early thirties, Zhou graduated from Dartmouth College with a degree in government and went on to work in investment banking in Hong Kong, following the path of many Chinese overseas returnees.

But a few years into his career, Zhou realized he wanted to build his own business. This was around 2015, a time when China was consumed by a startup craze amid Premier Li Keqiang’s campaign for “mass entrepreneurship and innovation.” Rather than going into the sleek world of consumer lifestyle, fintech or AI, Zhou picked manufacturing as a starting point.

During his time at Barclays, Zhou helped deep-pocketed Chinese manufacturers scour 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-of-the-line equipment. But on the software management front, they were still very primitive,” said Zhou .

“Most of the operation was done on paper. Every day, workers received a stack of papers telling them what to do, and in turn, they filled up the sheets reporting what material they had used… When you acquire these financially underperforming factories in Europe, you realize their software infrastructure capabilities are still far superior to yours,” Zhou added.

That digital gap encouraged Zhou to start Black Lake, a software platform for factory workers to log their daily tasks and managers to oversee the plant floor. Since its inception in 2016, the startup has raised over $100 million from GGV Capital, Bertelsmann Asia Investments, GSR Ventures, ZhenFund and others. The company recently closed a Series C round, pocketing nearly 500 million yuan ($77 million) and bringing on new backers including Singapore’s sovereign wealth fund Temasek, who led the round, as well as China Renaissance and Lightspeed Venture Partners.

Black Lake’s vision is to be a one-stop collaboration platform for factory workers and managers, digitizing data incurred in all stages of production, from client orders, material procurement, quality compliance, warehouse management, to logistics and shipment. The software analyzes these reams of data, churning out reports for bosses to check for abnormalities in production and for workers to see how they could increase their output and income.

Compared to SaaS incumbents from the West, Black Lake’s more localized services and affordable prices have a greater appeal to China’s wide swathes of small and medium-sized factories, Zhou argued. Black Lake tries to simplify its user experience to a Lego-like building process so factory bosses can easily customize the software for their own use. Workers access the cloud-based software from their smartphones, which have become ubiquitous in China’s affluent cities thanks to increasingly friendly device prices and data fees. A foreign SaaS giant’s solution could cost a factory at least three million yuan a year, while Black Lake charges 300,000 yuan or less, Zhou said.

To date, the company has served nearly 2,000 manufacturers and suppliers across the Greater China Region and Southeast Asia, counting in its customers Tesla, L’Oréal, Xiaomi, Sinopec, and Chinese state-owned conglomerate China Resources’ pharmaceutical group. In all, the company claims to have reached 500,000 production workers.

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