Zhubajie charges on toward unicorn status, and flotation
With fresh investment of 2.6 billion yuan, the crowdsourcing platform hopes to transform itself into a “super incubator”
One of China’s largest online crowdsourcing platforms, created a decade ago by a veteran journalist and backed by its local government, is seeking another round of funding a year after its last, with the aim of becoming a “unicorn” company and floating next year.
Zhubajie.com, which claims more than 16 million users, announced just 12 months ago it had secured 1.6 billion yuan in C-round financing from Cybernaut (China) Investment, a Beijing-based venture capital firm that focuses on technology, and another 1 billion yuan in backing from the government of the Liangjiang New Zone in Chongqing, where the company is based.
Now valued at 11 billion yuan, Zhubajie is looking for another round this year with plans to go public on the mainland by 2017, according to the zone’s Bureau of Science and Technology Innovation.
Yang Chunlin, the director of the bureau, said its efforts to help Zhubajie become a unicorn company – defined as a start-up valued more than US$1 billion – were aimed at building a successful model to attract high-growth tech companies across the country to locate in the city to boost the region’s tech industry and economy.
With the new investment of 2.6 billion yuan, the company hopes to transform from a so-called “witkey website” into a “super incubator” to stimulate entrepreneurship and encourage business start-ups in 35 mainland cities this year, expanding to 100 cities in over 10 years.
Witkeys provide an online service where customers can use their intelligence, knowledge, abilities, and experience to earn income by solving problems for other people or companies.
Established in 2006, Zhubajie has been the country’s leading witkey for years and its business model is unmatched by any domestic or overseas counterparts, and is impossible to imitate,
according to Zhu, because of what he describes as its specially designed business modes to attract customers.
Zhubajie was created by Zhu Mingyue, a former reporter for state-run newspaper Chongqing Evening Post, as an intermediary to connect mainly small and medium sized enterprises and individual entrepreneurs to a wide range of service providers, including software developers, graphic designers, web designers, translators, and interior decorators.
“Zhubajie was far from successful in its first nine years between 2006 and 2014,” said Zhu, now its CEO.
“It was very time-consuming to forge a valid platform and attract active users, and we had been relying on commission fees from transactions to survive
“But I always believed the platform would be unique and valuable one day because it has helped more than one million SMEs to design their logos and websites in the past decade, as well as offering thousands of individual designers full-time jobs through transactions on the platform each year,” he said.
Zhu added millions of designers and creators across the country have registered on Zhubajie, and many have started their own workshops and even companies based on trades via the platform.
“It means Zhubajie is not only a trading platform but also an incubator for startup companies that grow on the rising deals from the platform,” said Zhu.
The revenue of one of its startup clients, generated through trades on Zhubajie, is expected this year to reach 100 million yuan.
“That’s very impressive. Could you find another incubator park to hatch up to 10,000 startups each year?” he said.
In 2014, China’s State Council pledged to provide a more supportive environment for innovation and entrepreneurship in order to power more sustainable growth and generate jobs.
The State Administration for Industry and Commerce said in January 2015, that 10,600 new companies were being set up each day, since March of 2014.
“The number of individual startups in various sectors has been soaring across the country since early 2015. We spotted the great opportunities from these newly built SMEs, as every startup needs services like brand design, trademark registration, accounting taxes and profits, recruitment, and so on,” said Zhu.
He decided to stop charging a one-off commission fee from each transaction, but turn to generating profits from expanding his service catalogue for new startups into trademark registration, financial advice, office design, recruitment, administrative support and printing.
“For example, we set up an 800-strong team to help domestic startups process their trademark registration.
“Now we are the biggest trademark registration agent in the country, with 2,000 orders every day” Zhu said, “which means we could have up to 800 million yuan in revenue from the service.”
The platform’s annual volume of transactions reached about 3.5 billion yuan in 2014 and 7.5 billion yuan in 2015, and is expected to reach 20 billion this year, according to Zhu.
The business continues to benefit from local authority innovation incentives and funding.
Yang Chunlin said the Liangjiang New Zone introduced four other local Internet companies to Cybernaut (China) Investment, before it finally chose to invest in Zhubajie last year.
“We also invested 1 billion yuan in the platform, under our project to invest in and then incubate several startups towards becoming unicorn companies in various emerging industries in Chongqing,” he said.
The New Zone has earmarked funds of up to 25 billion yuan to boost local technology innovation.
“Besides Zhubajie, our district government has also invested in other startups involved in big data, e-commerce and telecommunication.
“Now many of them are worth between a hundred million yuan and US$ one billion, and some have the potential to be another unicorn,” Yang said.
“We are very happy with Zhubajie’s achievements and hope its success could become a model for high-growth tech and internet companies across the world.”
Zhu said the company has signed strategic partnership with a total of 35 local governments across China to help them boost startups and entrepreneurship, such as Changsha in Hunan province, Kunming in Yunnan province, Tianjin and Guangzhou in Guangdong, and the investment cash will help it potentially create more links.
“In cooperation with local governments, we plan to build and operate incubator parks for local SMEs and establish a VC fund to support local startups,” Zhu said.
“This venture capital funding will allow Zhubajie to become China’s biggest servicing platform for startups and SMEs, with a national network of online platforms and offline incubators.
“2015 is just a beginning.”