Shanghai-based Zhenkunhang raised $129 million on Tuesday in what is the largest ever private fundraiser by a Chinese industrial product supplier — offering a textbook example of how a traditional company can find success by embracing technology.
In a statement posted on its official microblog, the company said its series C funding round was led by Tiger Global Management and Legend Capital, the venture capital arm of Chinese conglomerate Legend Holdings.
Other new investors include Shell China and Chinese asset manager Suzhou Oriza Holdings, while existing investors Matrix Partners China and Eastern Bell Venture Capital also increased their investment in the company through the latest funding round.
Zhenkunhang is seeking new capital just nine months after two separate funding rounds in July and December last year that raised a combined Rmb580 million ($85 million), highlighting investor confidence in the company as it transforms from a traditional old economy company into a full-fledged industrial products distributor.
Shanghai-based 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 cost because they could select from a larger group of suppliers.
The company said it sources more than 300,000 MRO items from 5,000 suppliers and distribute them to over 10,000 industrial firms.
Since 2013, Zhenkunhang started operating its own warehouses to improve its after-sales services. The company said these storage facilities helped reduce wastage by allowing its clients to store excessive suppliers.
The company said it plans to use the fresh capital to build an intelligent supply chain system with features such as smart storage and inventory management.
“We will look to further improve our supply chain, distribution and equipment leasing businesses, as well as focusing on product innovation and improving our Information technology system,” Long Chen, Zhenkunhang’s founder and chief executive officer, said in the statement.
China Renaissance was the sole financial advisor to Zhenkunhang.
