Chinese technology giant Tencent made a rare foray into the manufacturing sector by leading a $160 million funding for industrial product supplier Zhenkunhang, underlining its intention to help transform the industrial product supplier with the power of technology.
Tencent was the only new investor in Zhenkunhang’s series D funding, which involved commitment from existing shareholders like Eastern Bell Capital, Genesis Capital, Matrix Partners and Legend Capital, the venture capital arm of Chinese conglomerate Legend Holdings, the company said in a statement on Tuesday.
China Renaissance was the sole financial advisor to Zhenkunhang.
Zhenkunhang’s series D funding is the largest private fundraiser by a Chinese industrial product supplier, breaking the company’s own record with its $129 million series C funding 10 months ago.
It was also the company’s fourth fundraiser in two years. The Shanghai-based company closed two separate funding rounds in July and December 2017 that raised a combined Rmb580 million ($85 million).
Tencent’s commitment will provide strong support for Zhenkunhang as it can now leverage on the tech giant’s internet expertise to improve its online platform and transform itself into a fully fledged industrial product distributor.
Zhenkunhang started life as a chemical supplier in 1996, helping industrial companies with sourcing and procurement.
It counted Shell China and American chemical giant Dow Corning among its clients, but its operational scale was limited before 2011 as it relied on direct sales to an established group of customers. That left limited scope for it to build its customer base.
In 2011, Zhenkunhang set up its e-commerce platform and allowed customers to order online. At the same time, it also expanded its product lines – from adhesives and lubricants to a full list of maintenance, repair, operation (MRO) items including compressors, pumps and valves. It also sells safety and cleaning products commonly used in factories.
Through the e-commerce platform Zhenkunhang was able to expand its client base. At the same time, it was able to help buyers reduce their procurement costs because they could select from a larger group of suppliers. It is now dubbed as the online supermarket for industrial products.
The company said it sources more than 300,000 MRO items from 5,000 suppliers and distributes them to over 10,000 industrial firms.
“There is a huge market for industrial product procurement and services. Tencent is upbeat about the long-term potential to upgrade the value chain through digitalisation,” said Tencent managing partner Zhaohui Li. “Tencent is committed to support various industries with digitalization and create value with outstanding companies.”