China-based internet group Tencent had another bumper year in 2017, definitively passing its key domestic rival, e-commerce firm Alibaba, in terms of corporate venturing. Both companies made several large investments, but Tencent won out in the end through dint of sheer numbers.
Tencent participated in almost 20 nine-figure venture capital rounds over the course of the year, the largest being the $4bn raised by online services provider Meituan-Dianping in October, which was led by Tencent at a $30bn valuation. The corporate had initially invested up to $500m for a 20% stake in Dianping in 2014 prior to its merger with Meituan, and has maintained a substantial position ever since.
Like some of the other biggest spending corporate venturers, Tencent went big on ride hailing in 2017. Already a prominent investor in domestic on-demand ride service Didi Chuxing (though it did not publicly take part in the company’s 10-figure rounds this year), Tencent led a $1.2bn round for Indonesia-based Go-Jek in May at a $3bn valuation, before backing a $1.1bn round for India-based Ola in October.
Tencent’s transport deals weren’t confined to ride hailing however. It led a $600m series E round for bicycle rental service Mobike in June at a reported $3bn post-money valuation, led a $1bn round for electric vehicle (EV) developer Nio last month and, as the year approached its end, was rumoured to be considering an investment in WM Motor, another EV developer which had raised $1bn from unnamed backers in August.
Other highlights for Tencent over the course of the year included the $1.4bn round closed by India-based e-commerce company Flipkart at an $11.6bn valuation in April, which also featured Microsoft, Naspers and eBay; a series B round for cancer diagnostics startup Grail that closed at $1.2bn in November; and a $150m investment in Maoyan, an online event ticketing spinoff from Meituan-Dianping, the same month, giving it a 5% stake in the company.
An intriguing feature of Tencent’s deals is that it has increasingly begun to partner Japan-based telecoms and internet group SoftBank and domestic ride hailing service Didi Chuxing – one of its portfolio companies – in investments. Flipkart for example received a $2.5bn SoftBank investment four months after it closed the Tencent-backed round.
All three invested in the $1.1bn Ola round and are also among Singapore-based ride hailing platform Grab’s backers; Tencent and Didi Chuxing are both investors in second-hand car trading platform RenRenChe and publicly-listed telecoms firm China Unicom; and Tencent and SoftBank’s joint portfolio companies also include artificial intelligence software developer Petuum and Didi Chuxing itself.
Tencent and Didi Chuxing were two of the five Chinese online-focused corporates that combined to invest $11.7bn in China Unicom in August, and the former backed up its VC investments with a series of large-scale private equity deals this year.
Tencent paid $367m for a 5% share of investment banking firm China International Capital Corp in September and invested $2bn for a 12% stake in Snapchat owner Snap last month before capping the year by buying $604m in shares of e-commerce platform Vipshop this week.
As with Tencent’s CVC investments, transport was a key area. It spent $1.7bn to buy up 5% of EV producer Tesla’s stock in March and followed that by joining JD.com and Baidu to provide $1bn for Yixin, a spinoff from automotive data and e-commerce firm Bitauto that went on to raise $867m in a Hong Kong IPO in November.
Yixin was one of several big IPO exits for Tencent during the tail end of the year, the biggest of all being the $1.5bn offering for ZhongAn, the online insurance platform it founded with Ping An and Ant Financial, in September.
Sea, the Singapore-based online services provider backed by Tencent at an early stage, raised $884m in a US offering in October, before Tencent spun out online publishing and e-book platform China Literature in a November IPO that raised $1.1bn, and Sogou, the search engine provider that received $448m from Tencent in 2013 in return for a 36% stake, floated in the US in a $585m offering the same week.
Tencent looks set to continue its strategic investment approach to expansion in 2018, and will likely continue to invest in ride hailing in tandem with Didi Chuxing and e-commerce in partnership with online retailer JD.com, which is also an investor in Vipshop, Go-Jek and Unicom, and perhaps in a range of sectors with SoftBank. If previous years have resembled a land grab for individual CVCs, it now looks as if they’re forming partnerships big enough to go for all the chips.