Corporate tech VC funds launch in China

On Wednesday, Tencent announced the creation of it own private equity fund, called the Tencent Industry Win-Win Fund, with an expected corpus of RMB5 billion ($760 million) to foster external digital application developers. That same day, Alibaba Group Holdings announced that its popular e-auction site, Taobao.com, would launch an RMB300 million ($45.6 million) fund. Both vehicles will be exclusively funded by their parent companies.

Alibaba and Tencent's foray into venture is natural in the digital and technology space. Intel, Cisco Systems Inc., Microsoft, Korea's LG and Japan's Softbank have all gone the same route. Regional VC major SAIF Partners itself launched in 2001 as a JV between Cisco Systems and Softbank Corp.

For each of these industry groups, the goal is largely to find the next, new technology that can be incorporated into operations. Tencent, for example, will inject money into companies dealing in online gaming, social networking, wireless internet, e-commerce opportunities and other new media fields, further aiming to maintain a two-to-three year investment period.

Such investments are largely hit-or-miss, but these are companies with riches to spare. According to Analysys International, Taobao.com, which operates much like eBay, accounted for 75% of all consumer-to-consumer transactions in China in the third quarter of last year. Meanwhile, Tencent also claims approximately 75% share of China's instant messaging sector, with 636.6 million active IM users by September of last year. That has categorized the Hong Kong-listed company as the world's third-largest internet company trailing Google and Amazon.

Speculators suggest that a move into the venture space is about new revenue streams. Intel was seen as doing this when it launched Intel Capital, investing in companies whose own success could boost the demand for computers, and hence Intel's chips.

For Chinese digital players, there is also value in joining the game, as the existing corporate VC players are nabbing deals on Alibaba and Tencent's own turf. Weeks ago, Intel Capital made an investment into Beijing-based mobile software integrator Borqs Ltd. In November it invested in WinChannel, also based in Beijing, and in May Softbank China Venture Capital injected capital into Henghui Technologies Co., Ltd.

 

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• Topics
• Greater China
• Technology
• Venture
• Media
• Intel Capital