There is an elite band of venture investors who have returned more than $100bn in profits from their deals. Ask them who they rate and why always elicits some smart answers.
Their pick often turns to Forest Lin who had taken with Jeffrey Li China-based gaming and internet group Tencent’s corporate venturing portfolio to be valued at nearly $300bn, excluding realisations such as the $16bn of shares in JD.com just before Christmas.
Lin moved just before the pandemic to run as president Tencent’s then-nascent financial technology group and he has been busy ever since (Li stayed as sole general or managing manager of Tencent Plus Partners and became corporate vice-president in summer 2019).
Tencent’s latest deal in this area came just before the new year when it joined a $600m funding round for UK digital bank Monzo, which has about five million customers.
Tencent’s fintech deals include a who’s who of startups in the space and around the world, including Rakuten, Nubank, Uala, N26, Lunar, Qonto, Tyme, Ozow, Viva wallet, Airwallex, Fenbeitong and Lydia.
Revenues from Tencent’s FinTech and Business Services unit increased by 40% on a year-on-year basis to RMB41.9bn ($6.6bn) for the second quarter of 2021.
Tencent recorded net other gains of RMB20.8bn for the second quarter of 2021, compared to RMB8.6bn on a year-on-year basis, mainly due to increased valuations of investee companies in fintech and other sectors, such as transportation and local services, and before recent uplifts, such as Brazilian digital bank Nubank’s flotation just before Christmas on the New York Stock Exchange. Shares rose 15%, valuing the company at $45bn and making Tencent’s 8.1% stake worth about $3bn.
Tencent has built its portfolio internationally and continues to invest almost all its free cashflow in corporate venturing.
During the six months ended 30 June 2021, Tencent invested about RMB42bn in listed and unlisted entities.
As at 30 June 2021, the fair value of these investments in associates which are listed entities was RMB1,145bn (31 December 2020: RMB981bn) excluding potentially another $100bn or so in unlisted holdings for a total portfolio of about 800 companies.
(Robin Zhu, an analyst at Sanford C Bernstein asset managers, estimated Tencent’s listed and unlisted investments were worth some $259bn in total as of March 2.)
Even before these latest results and investments Morgan Stanley valued Tencent’s own fintech business at $157bn so even if its position is eventually affected by China’s use of a digital currency for electronic payments (DCEP) and regulatory crackdown its global eminence seems secure.
