Starting today, we will be delivering to you one exclusive thematic newsletter a week. Our new in-focus series will feature in-depth reporting on the latest developments in key areas:
- VC activities and outlook
- a changing landscape in China’s auto industry
- Chinese tech giants’ overseas expansion
- innovations in e-commerce
This week, we start with Expanding Empires, a data-driven, in-depth look at where and how companies like Alibaba, Tencent, and Meituan are investing in up-and-comers around the world.
What do the global empires of China’s tech giants look like? It’s a harder question than you might think.
I’ve been wondering about this since last year, when we took a look at Tencent’s overseas investments. Trying to map out the company’s web of funding rounds and acquisitions, we realized this simple question is actually really hard to answer.
Startup investing is an opaque world—while private companies usually announce the names of participants in their fundraising, no one knows how much the players put in. There’s sources like Crunchbase that compile this data, but getting a full picture is not easy.
That’s why we’re launching a new reporting project: Expanding empires, a monthly newsletter about our efforts to map the global profiles of China’s biggest investors.
I’ve been building web spiders to gather data, analyzing it, and then visualizing the results. Our first focus: Alibaba.
Since 2010, the company, along with its fintech affiliate Ant Financial, have participated in global funding rounds for 66 companies. These funding rounds raised a total of $20 billion and helped drive the success of household names like Magic Leap, Lazada, and Zomato.
So where is Alibaba putting its money? What does its empire look like?
I scraped information about hundreds of Alibaba deals from corporate data platforms, and cross-referenced it with news accounts to identify the 66 overseas companies, revealing an evolving narrative that tells the story of a drastic shift in the company’s overseas strategy.
Corporate giants jealously guard information about their investments in order to avoid tipping off their rivals. As a result, the data is incomplete and presents only the total value of each funding round rather than Alibaba’s individual contributions.
In 10 years, Alibaba went from having no international footprint to making investments around the globe with more frequency and value. In its early days, the company went big on US investments. But later, it pivoted sharply to India and Southeast Asia, where it has placed big bets on well-established companies in developing markets.
In 2010, Alibaba made its first big deal outside China, according to the data I collected.
The company was no stranger to bets on up-and-coming companies, but it had stayed close to home.
In China, it had already participated in funding rounds totaling around RMB 435 million (about $61 million at current exchange rates), investing in companies from appliance giant Haier to courier firm Best Logistics. At the time, Alibaba had been listed in Hong Kong for three years and was operating e-commerce platforms serving millions of people in China. The company’s international footprint, however, was still small.
But this was starting to change. In 2010, Alibaba launched a $100 million investment plan for its global online retail business AliExpress. Under the plan, Alibaba acquired US e-commerce software provider Vendio for an undisclosed amount—the Chinese company’s first major investment in the US.
The deal was a watershed moment for Alibaba, representing a significant advance in its push abroad.
For the five years after its first US acquisition, Alibaba had its eyes trained on American companies. Around 90% of the 17 investment rounds the company took part in between 2010 and mid-2015 involved US firms, according to TechNode’s analysis.
During this time, Alibaba twice invested in ride-hailing platform Lyft, and once in social media giant Snap, both of which were already well established. These three deals totaled $4.5 billion. The company focused mostly on later-stage startups, the majority of which were Series C and above.
Unsurprisingly, a lot of the companies Alibaba invested in operated e-commerce businesses. Alibaba took stakes in companies like 1stdibs and Shoprunner, and Jet.com and Zuily. But many of its investments also focused on industries far from the realm of online shopping.
Alibaba bet on industries that would eventually come to complement its new retail push, as well as those that would later inform features on its massive online marketplace Taobao.
The company invested heavily in augmented and virtual reality technologies, and added to a portfolio of social media and messaging companies, an area where it had already fallen behind in China.
But from mid-2015 onwards, the company went through a drastic shift, broadening its view beyond investments in the US. Instead of looking across the Pacific for opportunities, it began searching closer to home.
Alibaba changes direction
While Alibaba had its eye on the US market, the company itself went through a series of fundamental changes. In 2012, the world’s largest online marketplace delisted from the Hong Kong Stock Exchange.
“Just as the IPO was a starting point for Alibaba.com and not the finish line, [the] privatization is not the end but rather a new beginning,” Jack Ma wrote in a letter to employees early that year.
He was right. Just two years later the company went public on the New York Stock Exchange. At the time, it was the largest IPO in US history.
But the year following its New York IPO was disappointing. The company was plagued by slowed growth, fierce competition, and a flagging Chinese economy. Alibaba’s share price plummeted by around 40% from a post-IPO high of $115 in the year following its listing as consumer spending slowed at home. At the end of 2015, the company’s total annual sales growth fell to its lowest point in three years. The company began looking for ways to boost its bottom line.
Alibaba began investing in companies with more frequency. Between 2010 and mid-2015, the Chinese e-commerce giant had participated in 17 investment rounds. It took just a year from June 2015 to mid-2016 for the company to reach the same number.
But as it ramped up deal-making, the company was turning from the US to the emerging markets of Asia.
Between 2010 and 2015 Alibaba participated in 17 US-based rounds. In the last three years, from 2017 to 2020, that number dropped to just five. Meanwhile, the company has participated in 19 rounds in India and eight in Southeast Asia (SEA).
Alibaba clearly saw potential for growth in these two regions. Both India and SEA have experienced an explosion of startup founding. In the initial stage of the boom, these areas were similar to China in the early 2000s, with massive populations, underserved markets, and growing pools of tech talent.
It was fertile ground for Alibaba.
The company’s first Indian investment came in August 2015. Unsurprisingly, it was an e-commerce company much like Alibaba’s Tmall. The firm, Snapdeal, was founded in February 2010 and has risen through the ranks to become one of India’s largest e-commerce companies.
Alibaba then went on to invest in a slew of other Indian companies. These included fintech giant Paytm, e-commerce platform Paytm Mall, grocery delivery business Bigbasket, and restaurant aggregator and food delivery platform Zomato.
Alibaba’s bets paid off. At least five of the companies it plowed money into have reached unicorn status. Paytm and e-commerce company Paytm Mall have collectively raised around $3.6 billion in rounds in which Alibaba and Ant Financial participated. Paytm is now worth more than $16 billion.
Alibaba’s most frequent Indian investments focus on e-commerce and food delivery. The company has invested in both Zomato and Bigbasket five times. Bigbasket’s Alibaba-backed rounds have landed the company $650 million.
An e-commerce company is only as strong as its logistics network. Alibaba knew this. So it entered Southeast Asia through Singapore’s publicly-listed postal service.
In 2014, the Chinese e-commerce giant invested nearly $250 million in Singpost. A year later, it followed up with a $148 million cash injection.
Then, it bought one of SEA’s biggest e-commerce companies.
Lazada was founded in 2012 by German entrepreneur Max Bittner with backing from Rocket Internet. In four years, it became the biggest e-commerce company in SEA.
Alibaba acquired a controlling stake in the Singapore-headquartered company in 2016. It was Alibaba’s biggest overseas deal. It followed up a year later with another $1 billion investment, upping its stake from 51% to 83%. Then, in 2018, it plowed in another $2 billion.
Lazada is now Alibaba’s de facto representative in SEA. The company currently has operations in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
Alibaba is attempting to duplicate its success in China, applying what it has learned to new markets. At the time of its last investment, the company said that SEA is a “key part” of its global growth strategy.
But Alibaba didn’t stop there. The e-commerce giant and Ant Financial have participated in rounds worth at least $6.75 billion in the region, though, like in most regions, the value of several funding rounds was not disclosed.
Alibaba also counts Tokopedia, an e-commerce unicorn from Indonesia, as part of its family. The Chinese tech giant has participated in rounds worth $2.2 billion in the Southeast Asian company.
Alibaba: e-commerce empire
With billions spent on dozens of companies in its portfolio, Alibaba has become a major player in the world of startup funding. But unlike peer Tencent, the company doesn’t appear to have aspirations to become a global venture capital firm.
My analysis reveals a simple investment strategy: Alibaba invests in companies to help its mission of global e-commerce conquest. While it primarily focuses on investments in e-commerce, it also branches out into companies that support the industry, including online payment platforms.
The company has mostly abandoned the US, which is dominated by Amazon, in favor of markets it could win yet. Alibaba is betting big on SEA, home to Lazada—its biggest investment yet.
With Lazada, the company has bought a major presence in SEA. But reporting suggests that integrating it into the Ali empire has been a challenge.