Historically, Chinese founders and investors showed limited enthusiasm for open-source software due to concerns about its business viability. However, Zilliz’s recent funding demonstrates a shift in this perspective. The Chinese startup, focused on building open-source solutions for managing unstructured data, has just completed a Series B funding round of $43 million.

This investment brings Zilliz’s total funding to over $53 million, a significant sum for any open-source company globally. The round was spearheaded by the well-known private equity firm Hillhouse Capital, with participation from Trustbridge Partners, Pavilion Capital, and existing investors 5Y Capital (previously Morningside) and Yunqi Partners.

According to Charles Xie, founder and CEO of Zilliz, investors are increasingly acknowledging open source as a successful software development approach. He shared this insight at an open-source gathering in Shenzhen, where he also served as the first Chinese chairperson for LF AI, the Linux Foundation’s AI initiative.

He further noted, “Investors are witnessing strong exit outcomes for open-source companies worldwide, such as Elastic and MongoDB.”

Liu Kai, a partner at 5Y Capital, commented, “When ‘Starlord’ [referring to Xie] initially presented his vision for future data processing, we considered it ambitious, but we decided to support it.”

A key consideration for investment in this sector is patience. Returns may not be realized for three to five years. However, Xie believes that these open-source companies have the potential to achieve valuations in the tens of billions of dollars over an eight to ten-year timeframe.

After a six-year tenure as a software engineer at Oracle, Xie returned to China to establish Zilliz. Reflecting a common trend among Chinese entrepreneurs, Xie chose an English name for his company to emphasize its ambition to be “global from the outset.” While currently based in Shanghai, Zilliz intends to move its headquarters to Silicon Valley within the next 12 months, once it has developed “robust technology and products,” as stated by Xie.

China provides an advantageous starting point due to its cost-effective engineering talent pool and the rapid expansion of unstructured data – encompassing everything from molecular structures and consumer behavior to audio and video content.

Xie explained, “The volume of unstructured data within a region correlates directly with its population size and economic activity, making China the largest data source.”

Furthermore, China has experienced substantial advancements in mobile internet and AI, particularly in practical applications, which Xie contends makes it an ideal environment for testing data processing software.

Zilliz’s open-source offering, Milvus, has garnered over 4,440 “stars” on GitHub, attracting approximately 120 contributors and 400 enterprise users globally, with half of those users located outside of China. This growth has been achieved without any expenditure on advertising, relying instead on active engagement within online developer communities like GitHub and Reddit.

Looking ahead, Zilliz intends to utilize its new funding to expand its international recruitment efforts, strengthen its open-source ecosystem, and invest in research and development for its cloud-based products and services, which are expected to generate revenue starting in the latter half of 2021.