At this year’s Global Corporate Venturing Symposium, Jeffrey Li, managing partner of Tencent Investment, a subsidiary of China-based internet group Tencent, said the corporate is looking to build an ecosystem of long-term partners instead of chasing quick cash.
In a discussion with Michael Redding, managing director at Accenture Investments, an investment vehicle for consulting firm Accenture, Li explained that rather than go for the buying or investing in companies as a ‘get rich rich scheme’, Tencent is trying to build an ecosystem of strong, long-lasting partnerships.
“We are creating an ecosystem because whether it is gaming or mobile payments, we cannot run these business ourselves. It just not in our DNA. That is the way we provide the best service to the end user,” he said.
With $10bn in cash flow in the corporate’s wallet, Redding questioned his fellow panellist on Tencent’s investment approach and how much firepower the firm has in its arsenal.
Li said the majority of the time the investment capital comes from the balance sheet, with a focus on minority investments, though it has occasionally formed co-investment partnerships and backed fund-of-fund vehicles.
Tencent has more than 700 companies in its portfolio, spanning several industries and regions. With some ‘fantastic’ technology startups emerging from China, Redding wanted to find out Li’s advice on the best way to enter a new market or approach collaboration.
Li stressed the importance of ‘knowing a topic really well’ in addition to creating partnerships and tapping into local and expert knowledge. He said: “Many times when we invest in a new geography, we will invest in a fund first. We have done this in Israel, India and many other areas.”
In the early days of its investments in particular, Tencent used local partners and formed co-investment vehicles to accelerate its entry into new countries.
Redding was also keen to tap into Li’s view on the which areas he thinks are ripe for investment in terms of trends and technology.
“My takeaway is that technology is a combination of personnel and capital,” Li replied. “For instance, I heard (people talk) in an earlier panel about artificial intelligence technology, but for us it is the technology and the user case.
“I also think retail has huge potential, in particular the convergence between offline and online experience. In a few years no retail company will be defined as online or offline.”
The panellists both agree that channels are less crucial than content, whether that is digital content or physical content like, for example, food.
Redding said Accenture loves augmented reality, especially in regard to the enterprise sector and the concept of the connected worker. However, despite the software side being ready, Redding said the hardware is ‘breaking his heart’.
In response to which sector or technology is letting him down or cooling off, Li described payments as a hot topic, though the hardware is not there and the software is still in progress.