Alibaba Group might as well call be called Alibaba Investments.
From high-fashion furniture, film productions and messaging apps — to Lyft and Snapchat — Alibaba’s lengthy, and growing, list of investments show it’s more than just an Internet giant and more than a eCommerce powerhouse.
As Jack Ma’s homegrown company develops into an empire that not even he would have predicted, Alibaba has gotten its namesake as an investor in a myriad of ventures, and it’s done so while posting its record-breaking $25 billion IPO in September 2014 and amidst the regulatory questions that arose during the first two months of 2015. But Alibaba has managed to wade the negative press, provided a PR-style defense ensuring the company is complying as regulators request, and still continued to invest its millions into up and coming companies.
So what makes companies like this Chinese eCommerce giant think it has the Midas Touch? Well, as Alibaba has learned, competition in the tech space moves quickly and so does the opportunity to capitalize on what’s going to be the next billion dollar company. Alibaba’s got the cash, and now an endless list of investments — particularly in a burgeoning Silicon Valley where everyone is launching the “next big thing.”
In an interview with The Wall Street Journal, Tim Chang, managing director with Mayfield Fund — a Silicon Valley-based early-stage venture capital firm — suggested that Alibaba’s deep pockets ($21 billion deep) have given it the leeway to compete with the candidates who are throwing money toward big investments like the U.S. tech startup scene.
“[Asian companies] can write major checks, and they can move really fast when they are seriously interested,” Chang said, later noting that, “These Asian digital power platforms want to extend their reach globally. …They are flush with cash and they want to put it into the digital equivalent of beachfront property.”
Take, for example, Alibaba’s recent Snapchat investment, which is rumored to have been $200 million. There was even an indication that Alibaba once had interest in buying Snapchat outright, but that never happened. With Alibaba now as a major backer, Snapchat is now valued at $15 billion. And it has an estimated 100 million users, but not a lot of revenue. Alibaba has also recently invested in Lyft and Tango messaging app. Interestingly, Alibaba’s biggest Chinese rival, Tencent, is a Snapchat investor and just recently invested $300 million in Lyft.
What else has Alibaba dipped its hands into? According to a list rounded up by Tech In Asia, just in 2014 alone, Alibaba’s investment list included: New York-based American retailer 1stdibs ($15 million); international online education company TutorGroup (part of $100 million); Yinman clothing (undisclosed); ChinaVision movie production company ($804 million); ByeCity travel service ($20 million); Tango ($280 million); Intime Retail ($280 million) and China’s video-streaming site Youku ($1.22 billion). And that’s just a sliver of 2014’s list.
Oh, and then there’s this one.
It was announced in January that Alibaba has invested in the neighborhood of $10 million in Israel-based QR code developer Visualead. Currently, the deal is for Visualead to use those funds to work on the next wave of QR technology, while Alibaba will use the patents and technology from the startup across its business holdings, especially eCommerce. Visualead is a young startup that specializes in offline to online marketing between customers and brick-and-mortar establishments.
Expanding its investment dollars outside of China and across borders does more for Alibaba than just give it another business to watch. Investment in thriving startups gives Alibaba a quicker way to get their presence expanded across the globe. Even when it comes to its own marketplaces, Alibaba’s ultimate goal is to become the focal point of a global ecosystem growing far beyond its strong customer base in its homeland and far beyond just good and services for sale in an online mall.
And fast. Once Alibaba finds a company they like, they act.
“A lot of strategic investors take a long arduous approach,” Toshi Otani, a managing director at venture firm TransLink Capital in the Silicon Valley, said in an interview about Alibaba’s investment strategy. “Alibaba seems to be much more quick and decisive. If there are enough synergies they can foresee, they tend to invest at a much faster pace.”
Alibaba also has its eye on India, where it has identified the next wave of innovation given the country’s rich potential to use mobile devices to motivate commerce.
Rumor has it that this may include a $1 billion investment in online marketplace Snapdeal. Snapdeal is already backed by Japan’s SoftBank and a number of U.S. investors including BlackRock, eBay and Intel Capital. The company competes against larger rivals Flipkart and Amazon, and if Alibaba became a major shareholder it could set the stage for Alibaba to carve out a piece of the second-largest eCommerce market. Alibaba’s Ant Financial affiliate, which now controls Alipay, acquired 25 percent of Indian payment services provider Paytm in February.
Although that deal isn’t yet finalized, it does provide good indication that Alibaba is eyeing the opportunity in India’s marketplaces. Recently, Alibaba and its financial-services affiliate have agreed to invest $575 million jointly in India’s One97 Communications Ltd.’s online-payment and marketplace businesses.
Ma once said: “Our mission is helping others do business easier. …China changed because of us and we hope that in the next 15 years, the world changes because of us.” Ma announced earlier this month (March 2), that Alibaba was banking $316 million to help Taiwanese entrepreneurs get their businesses up and running through Alibaba’s marketplace.
This investment is suspected to be geared toward Taiwanese and Hong Kong entrepreneurs, but by Alibaba investing in the small business owners, they are essentially investing in building its merchants on its own online marketplace. Alibaba has been involved in the Taiwan mobile payments markets for years through its Alipay service, but it recently showed its commitment to the market by saying it would fund Taiwanese mobile-commerce startups. This investment is aimed at helping merchants outside China’s mainland reach more customers, but it’s also helping Alibaba grow its own merchant customer base.
And that’s exactly what Ma said his company set out to do when he founded it in 1999: Be a business that helps other businesses grow. Ma once spoke about the problem of being the richest person in China (now in Asia), saying “it’s a greater pain because when you’re [the] richest person in the world, everybody is surrounding you for money.” But like Ma’s own personal wealth (est. $22 billion), Alibaba may have more money than it knows what to do with.
Its investment strategy certainly would suggest so.
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