TECHNOLOGY Bloomberg Businessweek August 20, 201819adversely afect our business,” Pinduoduo said in
its iling, a warning typical of the genre.
The power of Alibaba, Tencent, and Baidu
Inc. “to decide which companies succeed or fail
in China’s vast consumer and corporate markets
has become both outsized and unprecedented,”
Henry McVey and Frances Lim of KKR & Co. wrote
in a recent investment report. And if anything,
the Chinese tech giants’ size doesn’t even begin
to indicate the true extent of their inluence. In
some cases, their cash hoards may matter less
than their ability to tilt a given market toward one
startup or another through access to their mas-
sive audiences.
Alibaba says its investments and partnerships
are designed to help companies grow in tandem
with its own services. Tencent didn’t respond to
requests for comment for this story.
Of course, U.S. tech giants have also been crit-
icized for operating like bullying monopolies.
The diference is that Amazon.com, Apple, and
Facebook are more likely to buy companies out-
right and absorb them rather than fund a path
to an IPO, so such conlicts are unlikely. There
are exceptions. Microsoft Corp. was an earlyish
investor in Facebook Inc. and last year invested
in Indian e-commerce leader Flipkart, now a
Walmart Inc. property. Alphabet Inc.’s venture
capital arm, GV (formerly Google Ventures), has
invested in more than a dozen pre-IPO startups
valued at more than $1 billion each, including
Uber Technologies Inc. and Stripe Inc. But while
GV says it’s invested in 300 companies, Tencent
has invested in 600.
Together, Tencent and Alibaba have given
money to 45 percent of the 77 Chinese compa-
nies that researcher CB Insights values at $1 billion
or more. The two megacompanies, which have
a combined $60 billion in cash at their disposal,
have used their vast resources to bankroll inno-
vation and champion China’s tech industry. But
investors who think backing by those companies
automatically signals a quality investment should
beware, says Xu Chenggang, an economics profes-
sor at Cheung Kong Graduate School of Business.
“With such large sums of cash to deploy, it’s hard
to be sure how careful they are with their invest-
ments,” Xu says.
Pinduoduo, or PDD, probably wouldn’t exist
without Tencent’s ubiquitous messaging platform,
WeChat. Tencent’s chat apps helped PDD acquire
344 million customers, who obtain discounts by
lagging products to friends on the service. PDD’s
July public iling warns investors that its business
would take a major hit if cut of from Tencent,which owns 17 percent of the company. “PDD is
captive to Tencent, but as long as its business
does well, Tencent will continue to support it,”
says Brock Silvers, managing director of Kaiyuan
Capital. “If PDD falters or something better comes
up, though, there’s nothing stopping Tencent from
backing another horse.”
PDD spokesman Richard Barton says the com-
pany is “conident that investors understand our
market position and the strength of our partner-
ships in the China market.”
When its own leaders disagree with its big
backers, a startup tends to compromise. Meituan
Dianping counts Tencent as its largest shareholder
(with 20 percent, compared with 11 percent
owned by Meituan founder Wang Xing), and it
uses Tencent’s messaging apps to attract eye-
balls for its restaurant-booking, food-delivery,
and other services. The company says in its IPO
iling that Tencent’s vast user base has helped it
grow immensely, but it also warns investors ofThe Rulers of China’s Internet
Tencent, Alibaba, and Ant Financial have invested in a vast array of
Chinese startups
Valuation
Tencent Alibaba Ant Financial
Controlled by Alibaba Chairman Jack Ma*LISTED OR APPLIED TO LIST IN AN IPO; DATA: BLOOMBERG, CB INSIGHTS
NIO* Autonomous vehicles $2.9b
Hellobike Bike-sharing 1.5
Ofo Bike-sharing 1.0
Cambricon Chipmaker 2.0
Ucommune Co-working 1.7
UrWork Co-working 1.4
VIPKid Education 3.0
ITutorGroup Education 1.0
SenseTime Facial recognition, AI 4.5
Face++ Facial recognition 1.0
Ele.me Food delivery 9.5
Meituan Dianping* Group buying 30
Pinduoduo* Group buying 21
Guahao Tech/Weiyi/WeDoctor Health care, online 6.0
ICarbonX Health data, AI 1.0
Ding Xiang Yuan Health-care social network 1.0
Easyhome Home improvement, furniture 5.7
Douyu Livestreaming 1.5
Zhong An Insurance* Online insurance 6.5
Weiying Technology/Wepiao Online movie ticketing 2.0
China Literature* Online publishing 6.2
Zhihu Online Q&A forums 1.0
Xiaohongshu/Little Red Book Overseas shopping app 3.0
Kuaishou Photo- and video-sharing 3.0
Didi Chuxing Ride-sharing 56
Meizu Smartphones and accessories 4.6
Full Truck Alliance Group Truck-hailing 2.0