It’s notable to see five large deals involving Tencent in the week after its financial results showed the power of its investment holding company model for growth.
Ke.com, a real estate services marketplace spun off from Lianjia, is in the process of raising $800m in a series D round led that is being led by Tencent. The funding is being framed as a series D round, but Ke, which began operating in early 2017, has not publicly disclosed any earlier external funding. It will use the capital to enhance its technology and user experience.
Yipinshengxian is pursuing a new retail model that combines brick-and-mortar fresh food retail stores with an app-based ordering facility – kind of like building a combined online and offline business from the ground up, as opposed to adding mobile ordering to an existing business or supplementing an e-commerce offering with live showrooms. It has also just received $298m in a Tencent-led series B round. It plans to put that money into expanding its stores to 1,000 outlets by the end of 2019.
Tencent has returned to co-lead a $297m series D round for big data and AI technology provider MiningLamp that will fund technology development and an expansion of its R&D labs. The corporate had already co-led MiningLamp’s $159m series C round last year, and the series D investors also included Huaxing Growth Capital and Avic Trust.
Cross-border finance transfer service Airwallex has meanwhile received $100m in a series C round featuring Tencent that valued it at more than $1bn. The DST Global-led round almost doubled the company’s overall funding to more than $200m, its earlier investors including Mastercard and Bank Central Asia’s Central Capital Ventura unit.
Finally of the five big deals last week, the healthcare-focused crowdfunding service Shuidi shaked out series B funding with $74.5m in the Tencent-led round, which will be used to add AI technology to its insurance platform.
As Tencent noted last month for its 2018 annual results: “We have invested in more than 700 companies. More than 100 investees were valued at over $1bn each. Among which, over 60 went public.”
Tencent’s investment strategy differs to that of its rival Alibaba Group, China’s largest e-commerce giant, which has made significant outright purchases of companies, including Asian e-commerce platform Lazada, logistics platform Cainiao Network and Chinese on-demand services company Ele.me, according to one of Alibaba’s portfolio companies, South China Morning Post in an article.
Alibaba also pointed in its results to “cash outflow of RMB22,888m ($3,329m) for investment and acquisition activities, including investments in Focus Media and Tokopedia” in its fourth quarter.
JD.com for its annual results for last year noted an “increase in investment in equity investees and investment securities of RMB22bn [$3.3bn]”.
Baidu in its annual results for last year said its “total other income was RMB11.8bn ($1.72bn), increasing 111% from 2017, mainly due to gains from the disposal of Du Xiaoman, (financial services), and fair value gains on private company investments”.
A senior director at one of the large China-based corporate venturers said: “The markets were choppy in Q4 [fourth quarter] 2018 but private markets have remained fairly stable and companies are increasingly relying on private capital even well beyond the $1bn valuation benchmark.
“The density of unicorns within a given segment or vertical, and the sheer growth in the number of private unicorns in China (and globally) is also staggering, which begs the question whether the $1bn unicorn threshold is that meaningful of a benchmark in differentiating companies in the current environment.”
Data provider CB Insights tracks 326 unicorn companies around the world.
The Economist, citing research by CB Insights, noted last month that, in the last three months of 2018, deals to commit venture capital to Chinese startups slumped in number by two-fifths.
However, the number was underpinned by corporate venturers, which increased their activity to 88 deals in Q4 compared to the prior three months’ 83 deals and 78 in the same period of 2017, according to GCV Analytics.
The power of these corporate venturing offerings to spinouts and startups has meant most – 110 out of 130 – of the next generation of unicorns awaiting a flotation or acquisition have local corporate venturing backing, according to research by GCV Analytics using latest valuations data on Chinese unicorns by China Money Network and CB Insights.
Read more in our April issue of GCV and hear from Jeffrey Li (pictured), managing partner at Tencent Investment, at the GCV Symposium at London’s County Hall and the UK’s House of Commons on 22-23 May.