As news provider Fortune said, in 2003, as Alibaba battled US peer eBay for control of China’s online shopping market, Jack Ma, co-founder of Alibaba, predicted that in their home market Chinese startups like his would inevitably triumph over Barbarian invaders, no matter how deep the foreign firms’ pockets or how sophisticated their technology. EBay, he said, might be a “shark in the ocean”, but Alibaba was a “crocodile in the Yangtze River”. As Ma put it in Fortune’s article: “If we fight in the ocean, we lose – but if we fight in the river, we win.”
And while much credit goes to chairman Ma, it is his other co-founder, Joseph Tsai, executive vice-chairman and who controls its investments and corporate venturing strategy along with direct report, Ethan Xie, managing partner of Alibaba Innovation Ventures and member of the Global Corporate Venturing Powerlist 100, that have built up its market dominance.
Ma also underestimated Alibaba’s growing clout outside of China. Having joined in March last year as head of enterprise and emerging technology investments in the US, Bo Zhai, GCV Powerlist 2018 award winner, is developing China-based online retailer Alibaba Group’s corporate venture capital CVC investment efforts in enterprise, cloud and emerging tech, such as artificial intelligence, outside Asia-Pacific.
Zhai said for his profile in January: “My primary responsibilities include both minority stake equity investments, acquisitions and joint ventures. Some areas I closely follow include cloud infrastructure, AI infrastructure and applications, autonomous, big data, and security.
“In additional to investment transactions, I also introduce the best innovators to the right Alibaba business units in China for commercial collaboration.
“My role ultimately is to be the bridge between east and west. It is not an easy task and remains a work in process.”
Zhai added on his LinkedIn profile: “Some areas I am looking into – artificial intelligence], deep learning, cloud, security, big data, computer vision, voice, neuro-linguistic programming and the internet of things.”
The scope of his interest reflects the interests and influence of Alibaba, which has expanded from a China-focused ecommerce company to a global company with a market capitalisation of more than $500bn in less than 25 years, which is less than a quarter of its planned lifespan.
Alibaba aims to be a company that lasts at least a 102 years, so that it will have operated across three centuries, and many of the company’s current plans hinge on the abilities of Ethan Xie, who joined Alibaba in January 2013 and is now managing partner of its corporate venturing unit.
Xie, a former speaker at the GCV Academy in Shanghai, China, runs Alibaba Innovation Ventures, the investment arm of Alibaba Group that provides venture and growth-stage funding to technology companies.
He said his unit was separate from the Alibaba Pictures corporate venturing unit, which announced a $300m fund ahead of a bigger $1.5bn initiative as part of Alibaba Digital Media & Entertainment Group to oversee all Alibaba’s entertainment subsidiaries.
And with growth at payment platform Alipay, which is owned mainly by Alibaba’s founders, Jack Ma and Simon Xie, rather than Alibaba, and financial unit Ant Financial Services Group, which Alibaba spun off ahead of listing expected later this year at about $150bn in market capitalisation, the group has strong potential inside and outside China.
Taking as a starting point probably the most comprehensive list of such unicorns in China – the 108 tracked by China Money Network (CMN) as at 28 August – and more than 90% of them appeared from public records to have at least one corporate venturing investor in the syndicate, according to GCV Analytics in October.
In China, however, the concentration of a handful of sophisticated CVCs in the most successful deals is more extreme. Nearly half of CMN’s list of Chinese unicorns, 46, had at least one of the BATJs as an investor, GCV Analytics found. Even adding in another 15 or so reported or estimated unicorns by 28 August, such as VIPKid and Cambricon, yet to be tracked by CMN at that time and the pattern continues to play out that the largest private sector companies are driving the entrepreneurial ecosystem.
Alibaba’s 18 unicorns in its portfolio indicate how important it is, even excluding their track records outside of the country.
Similarly, Alibaba’s affiliate, Ant Financial, has backed a couple of other unicorns, including UrWork and Qufenqi, even outside of those, such as Koubei, Ofo and Ele.me, it has coinvested alongside Alibaba in. The crossholdings become more complicated once affiliated, subsidiary or personal investments are included.
Alibaba founder, Jack Ma’s, personal investment vehicle, Yunfeng Capital, which has also invested in Koubei, Alisports and VIPKid among others. Yunfeng also backed BGI Genomics, a division of BGI Group, which in mid-July completed a RMB547m ($81m) initial public offering by selling 40.1 million shares at a list price of RMB13.64 each on the Shenzhen Stock Exchange’s ChiNext board. After the first day’s 44% share price pop – or increase – BGI Genomics was worth $1.15bn.
BGI, in turn, has also become a corporate venturing investor, backing UK-based genomics company Congenica, developed at University of Cambridge, while its alumni have also left to set up some of the most exciting unicorns, such as Wang Jun’s departure to create healthcare analytics firm ICarbonX, backed by Tencent and the fastest to reach such a status in the world.
Alibaba first began investing heavily in 2013 when Xie joined. Joe Tsai, executive vice-chairman of Alibaba, summed up the vision when he said in 2013: “Alibaba is run by entrepreneurs, and we believe in supporting entrepreneurs with great vision and a strong sense of mission for their companies.”
At that time, Alibaba was launching an investment arm in the US to seek startups working in the e-commerce and emerging technologies spaces. It has since scaled up in the US, including leading the $793.5m series C round for augmented reality company Magic Leap in February 2016 and joining last October’s $502m D round.
Leading such a high-profile round affirms Alibaba’s status as one of China’s, and the world’s, corporate titans. Rony Abovitz, founder, president and CEO of Magic Leap, said: “We are excited to welcome Alibaba as a strategic partner to help introduce Magic Leap’s breakthrough products to the over 400 million people on Alibaba’s platforms.”
As part of the round, Tsai joined Magic Leap’s board. Tsai was part of Alibaba’s founding team in 1999, along with Simon Xie and Ma, having previously been a private equity investor at Sweden-listed Investor AB. Alibaba’s senior team is experienced in venture investing, with CEO Daniel Zhang leading its strategic investments in Haier, Intime Retail, which he chairs, and Singapore Post. Ma also sits on the board of SoftBank, a major shareholder after its earlier corporate venturing deal to back Alibaba’s growth. US-listed Yahoo also owns a substantial corporate venturing stake in Alibaba.
They are, therefore, well qualified to judge a good investor and rate Ethan Xie highly, as do his peers. When Xie ran a workshop at the GCV Academy in Shanghai, he scored 4.5 out of 5 for the program presentation and was described as having “very good local knowledge and a well-respected brand in CVC”, according to Andrew Gaule, who headed the academy at the time.
Alibaba’s strategic investments fall broadly into three groups – e-commerce, media and online services. E-commerce deals have ranged from department store owner InTime to flash sales company Mei.com and logistics service YTO Express, as well as Lazada and Snapdeal.
The second group consists of both traditional media companies like South China Morning Post, Singapore Post and Shanghai Media, and new technology or online offerings like video-streaming platform Youku, instant messaging companies Sina Weibo and Snapchat, and Magic Leap.
The third group, in which Ele.me and UCar fall, tends to include companies that provide online-to-offline services such as food, transport, mapping (AutoNavi) or domestic services (58 Daojia). These can be connected to Alibaba’s e-commerce services, broadening them at the same time as Ant Financial can extend its online payment empire into new realms.
Based on its activity in the past 12 months, Alibaba seems to have no plans to reduce its corporate venturing efforts. If such dealmaking continues, Ethan Xie, a former science graduate from Tongji University and a post-grad from University of Sydney, could feel he has already packed a 100-year history into his short time at Alibaba.
