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How can a third-party service provider start with a niche but eventually expand its reach to cover the entire value chain?
Hua Xian Bang (化纤邦), a chemical fiber-focused B2B platform, has recently landed tens of millions of yuan in a series B funding round co-led by Industrial Innovation Capital Management and industrial capital, Hua Xian Bang told KrASIA.
The company raised an 8 million yuan angel round from 01VC and Jiuzhou Venture in October 2015 and a 15 million yuan B round led by Welight Venture Capital in June 2016.
Founded in early 2014, Hua Xian Bang is a one-stop chemical fiber trading platform that facilitates the trading of dozens of chemical fiber products including PTA, MEG, PET and polyester fiber.
Business model and development:
- Bang Bang Dai offers comprehensive sales and purchase services on a commission basis. It registered a more than 400% year-on-year growth in gross merchandise volume (GMV) in 2017.
- Bang Bang Ding provides chemical fiber enterprises in over 20 regions with customized SaaS solutions, with the ratio of its active versus total clients exceeding 70%.
- Bang Bang Wuliu is cooperating with more than 70% of the chemical fiber-focused logistics providers in the market.
- Chemical Fiber Mall and Bang Bang Peijian offer one-stop mobile solutions for the trading of chemical fiber products, with combined annual GMV nearing 50 billion yuan.
- Chemical Fiber News offers information on industry updates and trends and, as of now, has amassed more than 100,000 readers.
Fang Junfang, CEO of Hua Xian Bang, got her startup idea from a habit she’d been keeping for six to seven years: “I would send a short newsletter that contained information like product prices of the day and market analysis to my clients at 7:00 a.m. each day.”
Those clients consisted mainly of small chemical fiber enterprises whose initial investment fell below 10 million yuan. As it turned out, they became Hua Xian Bang’ seed users.
At first, it was just information and news that Hua Xian Bang provided, but its services soon expanded to buyer and seller matching, as well as tracking of logistics, invoices and contracts.
As these services matured, Hua Xian Bang took steps to make them more systematic and module-based.
Systematic operation brought the company a notable improvement in efficiency, said Fang Junfang, which helped it win the attention of investors and raise an angel round and series A round in 2015 and 2016 respectively.
Following the A round, Hua Xian Bang branched out into supply chain management and started to offer purchase and sales services on a commission basis. Clients need to pay deposits and transfer part of the product ownership to Hua Xian Bang to enjoy the services. In return, they can benefit from the services in two ways. For one, they can fix the prices of raw materials in advance with a relatively small amount of money; for another, they may purchase goods in smaller quantities at a time and thus free up more working capital.
With respect to products, Hua Xian Bang started with the more standard mid-range products, primarily PET particles, and is currently handling the trading of dozens of chemical fiber materials.
In 2017, Hua Xian Bang began to sell SaaS solutions to small chemical fiber enterprises. Unlike other solutions on the market, Hua Xian Bang’ products are connected with packaging lines. Through the system, companies can manage their purchase, storage and sales activities online and have reports generated automatically, saving them the trouble of writing down data manually and allowing them to check inventory levels in real time.
Additionally, clients can add modules like information, supply chain management and logistics services to the software to create a comprehensive service system.
Under the traditional model, small enterprises tend to have little say in the transactions. Their purchasing cost was frequently pushed up by the lack of price transparency as they often had to buy the same product at a higher price than large companies; their complaints often went unaddressed, and smaller business scale means higher logistics cost per unit and greater difficulty in loan application.
In essence, what Hua Xian Bang does is giving small enterprises the advantages that are otherwise enjoyed only by large companies and consequently helping small companies bridge the gap with large ones. “What we do is breaking down the sales of commodities that are traditionally traded in large quantities to ensure that all companies can trade fairly,” said Fang Junfang.
As for revenue streams, most of Hua Xian Bang’ services are chargeable, from buyer and seller matching to supply chain finance and from purchase and sales services to SaaS solutions. According to statistics provided by the company, it has generated altogether 50 billion yuan in GMV and approximately 3 billion yuan in sales revenue since inception.
The company is looking to raise a new round of financing in 2018, which it expects to use to create higher barriers to competitors and make its SaaS solutions more data-driven by incorporating AI and blockchain technologies.