The China-based internet major romped ahead of rivals Alibaba and Baidu this year when it came to corporate venturing, investing in two billion-dollar deals and three more $500m+ rounds.
China-based internet group Tencent had another active year in 2016, making a flurry of investments that were joined for the first time by a clutch of exits.
Founded in 1998, Tencent leveraged the success of its extremely popular instant messaging platform, QQ, and its successor WeChat, and a range of strategic investments to build an internet services group with a market cap of over $220bn that revolves around WeChat.
Tencent is one of three major internet companies in China, the other two being e-commerce specialist Alibaba and Baidu, which originally found success through its internet search engine. Both have been active in corporate venturing but 2016 was the year Tencent definitively blew past them, racking up a stack of deals at both early and late stage.
Although it is gradually reaching overseas, the brunt of Tencent’s deal flow is still in China. Its two biggest deals this year involved homegrown companies Didi Chuxing, which closed a $7.3bn debt and equity round in June as it acquired Uber China to become the undisputed leader in China’s ride hailing sector, and local services platform Meituan-Dianping, which closed a $3.3bn round in February.
Tencent made a number of large investments in its home country’s internet space this year, taking part in rounds for real estate services provider Lianjia ($927m), online ticketing portal Weiying ($693m), automotive information provider Bitauto ($550m), group buying company Pinduoduo ($110m), bike rental app Mobike and automotive auction platform Tiantianpaiche ($100m each), and truck rental service Huochebang, which today raised $115m.
Media was a particularly significant destination for the firm’s capital. In addition to co-leading a $360m private equity investment for film studio Bona Film Group this week, Tencent joined a $76m series C round for TV production company Linmon Pictures and an $85m round for record company YG Entertainment earlier in the year, and led a $100m round for game livestreaming platform Youdu in February before co-leading the same company’s $227m series C round in August.
Outside of China, India proved fertile ground for the company. It led the $175m series D round closed by instant messaging platform Hike in August, and exited travel services platform Ibibo Group in a deal that involved its 9% stake being converted into a 3.6% stake in competitor MakeMyTrip, which acquired Ibibo in October.
Ibibo was one of half a dozen exits recorded by Tencent this year, a significant uptick from previous years and perhaps a sign its investments are starting to reap direct financial rewards. Other notable exits included genomics software provider Tute Genomics, which was bought by PierianDx in October, and contextualised search technology startup Vurb, which was acquired by Snap for $110m the same month after raising only $10m.
In addition to direct investments, Tencent also inserted financing into the $500m fund raised by venture capital firm DCM in July, after backing its $110m Android fund in July 2015.
Tencent will be looking to continue its investment spree next year, and is already one of the founding partners of HeTai, a $217m online life insurance venture set to launch in 2017. The year after could then herald a major exit as portfolio company Garena, a Singapore-based mobile and internet services provider, is lining up an initial public offering in which it plans to raise $1bn.
