Chiu Yuxiang has no common profile for working in the Chinese manufacturing world. A soft-spoken yet enthusiastic man in the early thirties, Zhou graduated with a government degree from Dartmouth College and began working in investment banking in Hong Kong, following in the footsteps of many Chinese foreign immigrants. However, a few years after his career, Chit realized he wanted to start his own business. It was around 2015, when China swallowed a startup craze during Premier Li Keqiang’s”mass enterprise and innovation” campaign. Instead of going to the smooth world of consumer lifestyle, fintech or AI, Zhou chose manufacturing as a starting point.
During his time at Barclays, Chinese assisted deep-pocketed Chinese manufacturers in the integration and acquisition business in Europe. He observed that German factories digitize their operations using Siemens and SAP solutions. In China, “factories had a lot of money and they could buy top-line equipment. But they were still very primitive on the software management front,” Zhou said in an interview with TechCrunch.
“Most of the operations were written on paper. Every day, workers get a stack of papers to tell them what to do and, as a result, fill out sheets to report what materials they used … When you get these financially efficient comparative factories in Europe, you realize that their software is infrastructural. It is still far better than you are, “Zhou added.
This digital gap encouraged Zhou to start Black Lake, a software platform for factory workers to log in to their daily tasks and managers to supervise the plant floor. Since its inception in 2016, the startup has raised more than $100 million from GGV Capital, Bertelsmann Asia Investments, GSR Ventures, ZhenFund and others. The company recently pocketed about 500 million yuan ($77 million) by closing the Series C round and bringing in new backs, including Singapore Sovereign Wealth Fund Temasek, as well as China Renaissance and Lightspeed Venture Partners.
Black Lake’s vision is a single-stop collaboration platform for factory workers and managers, digitizing data at all stages of production, from client orders, material collection, quality, warehouse management to logistics and shipments. The software analyzes the restoration of this information, examines production abnormalities in bosses, and examines reports to see how employees can increase their output and revenue.
Black Lake seeks to simplify its user experience in the Lego-like building process so that factory executives can easily access the software for their own use can customize. Workers access cloud-based software from their smartphones, which has become ubiquitous in China’s affluent cities due to the increasingly friendly device prices and data fees. Zhou said a foreign Sash giant’s solution could cost the 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, with its customers counting on Tesla, L’Oreal, Xiaomi, Sinopec and the Chinese state-owned China Resources Pharmaceutical Group. In all, the company claims to have reached 500,000 production workers. Black Lake is riding on the perfect wave of “upgrading” in China’s manufacturing world. For one, the demand for customized products is growing as consumers become safer. Instead of producing bottled water with the same packaging, beverage companies now design different looks based on different populations. Factories need to adapt quickly to the flood of customized orders, and cloud-based data management platforms can be the solution, Zhou suggested.
Another impetus for Chinese pressure upgrades the US-China trade war factory. After feeling the heat from trade sanctions, Chinese manufacturers are looking to cut costs and improve productivity. That move, along with the government’s “new infrastructure” policy to breathe high technology into sustainable industries, makes Chi more bullish about his business. However, Black Lake has certainly not had the opportunity to modernize China’s manufacturing alone, and the short-term monetization cycle of enterprise software in China has led to somewhat less acceptance and reluctance to pay for companies’ services.
With the proceeds from its new fund, Black Lake plans to spend on developing, renting, expanding markets, and creating an open platform for third-party developers. The startup realizes that it cannot create everything the factories need and is already working with partners across telecommunications; cloud computing, automation, and consulting, such as Huawei, Alibaba, SAP, and McKinsey.