China’s cloud industry moving to new era with emergence of unicorns

By Anna Lee for Technode

Just a few years ago, billion-level funding would be beyond the imagination of Chinese cloud computing companies. But now it is becoming more and more tangible as the market matures.

QingCloud, a leading player in the field, is announcing the largest ever funding in the industry so far. The cloud computing platform made it public that they have secured D round funding worth RMB 1.08 billion (around US$ 158 million). The current round adds to a US$ 2 million series A in 2012, a USD 20 million Series B in 2013 and USD 100 million in 2016.  The company confirmed with TechNode that it has IPO plans, but declined to offer more details. The firm reportedly is removing their VIE structure to prepare for a local listing.

The massive round is from a consortium of investors, including China Merchants Securities International and China Merchants Zhiyuan Capital Investment (two wholly-owned subsidiaries of China’s top security trading and brokerage firm, China Merchants Securities), Riverhead Capital Investment Management, CICC Jiatai Fund and China Oceanwide Holdings Group. Existing investors of Lightspeed China Partners and Bluerun Ventures also participated.

QingCloud Founders

QingCloud founding team (L-R): Spencer Lin, Richard Huang, Reno Gan (Image credit: QingCloud)

QingCloud’s funding isn’t a single case. It marks the latest in a series of venture investments in this sector, which has bumped several companies in the vertical to unicorn status recently.

Two companies in the arena received similar-sized backings in June alone. Cloud and big data solution provider Dt Dream received an RMB 750 million A round led by Alibaba and Everbright Industry Capital Management. Another Alibaba-backed cloud computing startup Cloudcare received nearly a 1 billion RMB C round led by FOSUN Group and Sequoia Capital China. Tencent-backed UCloud completed an RMB 960 million series D round earlier this year.

Among the companies that have landed billion-level RMB funding, Dt Dream is the only one that announced unicorn status with over US$ 1 billion valuation. This may shed light on the valuations of the other companies, which have received similar size or higher funding.

Behind the investment frenzy is the huge potential of this market. A report from research institute CCID shows that China’s cloud computing market surged 41.7% YOY to RMB 279.7 billion in 2016, forecasting that this figure would reach RMB570.64 billion by 2019 with an annual growth rate of over 20%.

The emergence of several unicorns over a relatively short period of time is signifying a deeper change in the market. In line with the second-half era proposition proposed by Meituan-Dianping CEO Wang Xing, the cloud computing startup pointed that China’s cloud computing market is also entering a special transition point for a new period. While cloud computing platforms only used by non-core businesses for financial clients like banks, insurance, and security companies in the first-half era, it will find wider application in the new era.

Co-founded by IBM alumni Richard Huang, Reno Gan, and Spencer Lin, the company launched the QingCloud platform in July 2013. They now operate 24 data centers, of which 10 are run independently and 14 through partnerships, providing services to over 70,000 enterprise services.