This week, we’re taking a look at some of the biggest players in China’s tech venture capital (VC) world: tech companies. Corporate VCs are known to invest lavishly in chosen startups, but these deals come at a cost to entrepreneurs: taking a giant’s money means being locked up in their “ecosystem” and losing access to funding from their rivals.

The winners of Chinese big tech’s investments include Nasdaq-listed social e-commerce company Pinduoduo, ride-hailing platform Didi Chuxing, and e-commerce giant But there are also losers who failed because they chose the wrong side.

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How tech giants build ecosystems

On July 21, scooter maker Ninebot, a company backed by Chinese smartphone maker Xiaomi, won final approval from the Shanghai Stock Exchange to register on its Nasdaq-style STAR Market tech board. If the registration is approved by the China Securities Regulatory Commission, the country’s top securities watchdog, Ninebot will become the fourth company within the so-called “Xiaomi ecosystem” to go public.

The Xiaomi ecosystem is a group of startups the smartphone maker has invested in, who are allowed to leverage its sales channels to distribute their products. Joining the group also means startups, which are often makers of smartphone accessories such as headphones, power banks, and cameras, can utilize Xiaomi resources like brands, supply chain management, and design.

The clique has incubated three publicly traded companies, including smart home appliance maker Yunmi, cleaning robot maker Roborock, and smart wearable devices maker Huami. Meanwhile, three more companies are in the pipeline to go public on the high-tech STAR board. 

Click the image to enlarge. (Image credit: TechNode/Wei Sheng)

The Xiaomi ecosystem is one example of how big Chinese tech companies expand their empires through investments. During the past decade, corporate venture capital has thrived under the wings of big tech firms like Xiaomi, Tencent, Alibaba, as well as rising stars like Bytedance and Didi Chuxing. 

While, like all VCs, corporate VCs hope to invest in promising startups that generate returns for their parent companies, they’re also pursuing strategic objectives for their companies that shape their priorities.

In the first six months of this year, corporate VCs participated in 15% of venture capital investments in China, according to Chinese venture market research firm Jingdata.

Big deals

  • In July, grocery delivery startup Missfresh raised $485 million from investors including Tencent and China Capital Investment Group.
  • In May, Tencent participated in Chinese social fitness app Keep’s $80 million Series E led by Jeneration Capital Management. 
  • In April, Tencent injected $17 million into a unit of Chinese navigation software provider Navinfo that specializes in high-precision positioning technology development and services.
  • In June, BYD Semiconductors, the semiconductor unit of electric car giant BYD, raised $114 million from investors including South Korean conglomerate SK Group and Xiaomi.
  • In March, Chinese podcast platform Qingting FM raised several hundred million RMB from Xiaomi.
  • In April, Bytedance co-led a Series B of nearly $14 million into Chinese cleaning robot maker Narwal Robotics.
  • In March, Chinese big data company Mingninglamp raised $300 million in a funding round backed by Singapore’s state investor Temasek Holdings and Tencent.

Big tech investment strategies

Like Xiaomi, all Chinese tech giants use their investments as a way to build their ecosystems, and they are usually incompatible with those of their rivals’. For example, users of Tencent-backed cannot pay with Alibaba’s Alipay on the e-commerce platform.


Social media and online gaming giant Tencent is one of the most active corporate VCs in China. The company has invested in 741 companies around the world as of July 24, according to venture capital data provider Itjuzi (in Chinese).

  • Tencent’s investment arm favors companies in the gaming, entertainment, e-commerce, and fintech sectors. The company has invested in some 165 companies that fall into the culture and media category, accounting for 22% of its total portfolio companies. It has also started investing into enterprise service and artificial intelligence (AI) companies in recent years.
  • Some of the company’s biggest investment successes are social e-commerce platform Pinduoduo, electric vehicle maker Nio, ride-hailing app Didi Chuxing, and online literature platform China Literature.


Apart from online market place Taobao and Tmall, the e-commerce titan also operates cloud computing platform Aliyun Cloud and Cainiao, a logistics platform. Alibaba’s investments also focus on these areas: e-commerce, enterprise services, and logistics.

  • Alibaba has invested in 528 companies as of July 24 with 87 companies belonging to the enterprise service category, according to Itjuzi. 
  • The company has stakes in food delivery platform Eleme, video-streaming platform Youku, Didi Chuxing, and Southeast Asian e-commerce company Lazada.


Bytedance was founded in 2013, but it started to make investments in 2014. The owner of short video app Tiktok and news aggregator Jinri Toutiao started its VC activity by investing in a series of blogs and media companies such as AI-focused blog Xinzhiyuan, and Caixin Globus, an international news site founded by Chinese finance news outlet Caixin.

Bytedance started to expand its investment portfolio outside of China in 2017 as overseas markets became more and more important to the company, but it tended to make acquisitions rather than simply investing. 

One of the most successful examples of Bytedance’s global expansion was the acquisition of lip-syncing app in 2017, which was later rebranded to Tiktok and became a global hit.

In recent years, Bytedance pivoted to invest in enterprise services and online education companies such as edtech company Fclassroom in 2019 and online word processor Shimo in 2018.

Few intersections

Chinese tech giants’ investment strategies show a strong tendency toward exclusiveness, as they deploy capital to build out ecosystems. This means that when a startup gets money from Tencent, Alibaba’s door slams shut.

Click the image to enlarge. (Image credit: TechNode/Wei Sheng)
  • Most startups have to choose a side when they raise money from tech giants. Deciding on one tech giant’s ecosystem means that, besides cash, a startup will likely gain access to its backer’s existing user base, data, and tools, while being blocked from rival companies’ networks.
  • Zhu Xiaohu, managing director of venture capital firm GSR Ventures, which focuses on early-stage technology companies, said in May 2019 that it was “extremely difficult” (in Chinese) for startups to avoid choosing a camp among tech giants when raising funds because the combined market value of BAT (Baidu, Alibaba, and Tencent), and companies they invested in “account for more than 90% of the market cap of all Chinese internet companies.”
  • One of the exceptions is ride-hailing platform Didi Chuxing, which is a result of a merger between Tencent-backed Didi Dache and Alibaba-backed Kuaidi Dache in 2015. Didi appears to have avoided taking a side, accepting both Alipay and Wechat.

Pick a side

Even though Chinese unicorns only accounted for 15% of deals in the first half of the year, nearly all startups have to align with a tech giant as they scale.

There are a few unicorns, such as drone maker DJI and Tiktok owner Bytedance, that have managed to succeed without joining any of the BAT camps. But 80% of Chinese tech startups have taken a form of investment from BAT by the time they reach $5 billion in valuation, according to a report by The Economist.

And sometimes, trying to please more than one giant can be dangerous. One example is failed bike-sharing platform Ofo, another intersection of Tencent and Alibaba’s investments.

The company received money both from Tencent, via Didi Chuxing, and Alibaba. A 2019 article by Chinese magazine GQ Report argued that the resulting clashes between the two giants in the startup’s boardroom ultimately led to Ofo’s failure.

“Experienced entrepreneurs know: Under normal circumstances, do not accept investments from two (or more) of Tencent, Alibaba, or Baidu at the same time,” GQ Reports wrote. “It is dangerous to violate common sense.”

Writing about semiconductors and telecommunications.