Founded in 2014, Xreacloud (徐工信息) is a public/private high-tech enterprise which is committed to becoming a leader in Industrial Internet technologies and solutions. The company announced today (Dec 16th) the completion of its series A round of financing, led by Hillhouse Capital. Its valuation after this round reaches CNY 1.5 billion.

After this round of financing, Xuzhou Construction Machinery Group’s (XCMG) stake in Xreacloud changed from 60% to 45%. XCMG is one of the largest construction machinery companies in China, with 76 years of manufacturing operation experience. Based on their manufacturing background and accumulation of IT know-how, the company has begun to cultivate the Industrial Internet, smart manufacturing and related fields.

Since December 2014, Xreacloud has established four major business segments: smart manufacturing, Internet of Things, consulting implementation and system integration. The company promotes intelligent products and services through cross-regional, cross-industry, and cross-scenario applications, thus added value to the manufacturing industry. 

Here are the representative industry solutions provided by Xreacloud:

●Construction machinery full-life-cycle integration

●New Engine Vehicle logistics dispatch management

●High-end components smart manufacturing integration 

●SME IoT financial support

●Full-life-cycle predictive maintenance services

Who are they up against?

There is an upward trend in the primary market in the Industrial Internet and IIoT sectors in China. Compared with the total PE/VC funds raised in 2016, the figure has climbed to CNY 926 million in 2019, with a 5-year CAGR of 54%. After looking at the deals from the past 3 years, we found that about 90% of the deals were early-stage ventures.

One of Xreacloud's biggest competitors in China is RootCloud (树根互联), which has a valuation of CNY 2 billion. RootCloud was founded in 2016 and has completed two rounds of funding.  One of these was the largest VC deal in the IIoT sector in China in 2019, raising CNY 500 million in its Series A. RootCloud has over 11 years of experience in Internet of Things and industrial applications. It connects industrial assets, platforms, and applications, and provides end-to-end, one-stop Industrial Internet products. Overseas counterparts also include Instana, a German-American software firm founded in 2015 that specializes in developing application performance management (APM) software. The total funding amount of Instana is USD 57 million.

This crossover between the Internet and the hard industry is taking place at the frontier of manufacturing and has revealed an undisputed power for transformation. One example is 'flexibility' in production line logistics. Pushed by rapidly changing demand, the manufacturers can use the Industrial Internet and IIoT solutions to achieve Flexible Manufacturing Systems (FMS).  FMS can easily adapt to changes in the type and quantity of a given product being manufactured. An FMS can lower a company's production costs, which is a promising technique for manufacturers with a high reliance on tangible assets. An FMS can also be a key component of a make-to-order strategy that allows customers to customize the products they order.