A member of the top 25 from the Global Corporate Venturing Powerlist
China-based online retailer Alibaba aims to be a company that lasts at least a 102 years so it will have operated across three centuries, and many of the company’s current plans hinge on the abilities of youthful Ethan Xie, who joined Alibaba in January 2013 and is now managing partner of its corporate venturing unit.
Xie, a former speaker at the Global Corporate Venturing Academy in Shanghai, China, runs Alibaba Innovation Ventures, the investment arm of Alibaba Group that provides venture and growth-stage funding to technology companies.
Last month alone, Alibaba’s deals included paying $1bn for a 67% stake in Singapore-based e-commerce company Lazada. Half the price consisted of new equity and half was provided as a secondary investment including shares from Rocket Internet.
Alibaba also took part in a $568m round for chauffeured lift ordering service UCar. It also invested $1.25bn in Ele.me, an online platform for ordering food deliveryies from restaurants and takeaways. Alibaba invested $900m while its financial services affiliate Ant Financial supplied $350m, the two taking an aggregate stake reported to be 27.7% in size.
Alibaba first began investing heavily in 2013 when Xie joined. Joe Tsai, executive vice-chairman of Alibaba, summed up the vision when he said in 2013: “Alibaba is run by entrepreneurs, and we believe in supporting entrepreneurs with great vision and a strong sense of mission for their companies.”
At that time, Alibaba was launching an investment arm in the US to seek startups working in the e-commerce and emerging technologies spaces. It has since scaled up in the US, including leading the $793.5m series C round for augmented reality company Magic Leap in February this year.
Leading such a high-profile round affirms Alibaba’s status as one of China’s, and the world’s, corporate titans. Rony Abovitz, founder, president and CEO of Magic Leap, said: “We are excited to welcome Alibaba as a strategic partner to help introduce Magic Leap’s breakthrough products to the over 400 million people on Alibaba’s platforms.”
As part of the round, Tsai joined Magic Leap’s board. Tsai was part of Alibaba’s founding team in 1999, along with Simon Xie and Ma, having previously been a private equity investor at Sweden-listed Investor AB. Alibaba’s senior team is experienced in venture investing, with CEO Daniel Zhang leading its strategic investments in Haier, Intime Retail, which he chairs, and Singapore Post. Alibaba’s founder, Jack Ma, also sits on the board of SoftBank, a major shareholder after its earlier corporate venturing deal to back Alibaba’s growth. US-listed Yahoo also owns a substantial corporate venturing stake in Alibaba.
They are, therefore, well qualified to judge a good investor and rate Ethan Xie highly, as do his peers. When Xie ran a workshop at the GCV Academy in Shanghai, he scored 4.5 out of 5 for the program presentation and was described as having “very good local knowledge and well respected brand in CVC”, according to Andrew Gaule, who heads the academy.
And given such depth of board experience of venture investing, and with $17.9bn of cash on its books as of its last annual report, it is perhaps no surprise that Ethan Xie has the mandate to find growing companies.
Alibaba has been building its own online-to-offline operations, called Koubei, having invested $6bn to develop the restaurant review website, and affiliated providers, such as Alipay, but it is experiencing slower growth of its e-commerce websites, such as Taobao and Tmall, in the face of stronger competition from rival JD.com, analysts told news provider Caixin.
But with growth at payment platform Alipay, which is owned mainly by Alibaba’s founders, Jack Ma and Simon Xie, rather than Alibaba, and financial unit Ant Financial Services Group the group has strong potential inside and outside of China.
Last month, Ant raised $4.5bn in its B round from mostly state-backed investors, including a unit of China Investment Corp and a subsidiary of China Construction Bank, and existing shareholders, including the parent company of Postal Savings Bank of China, the private equity arm of China Development Bank, and private equity fund Primavera Capital Group.
Alipay has invested in India-based Paytm, while, also in India, Foxconn and Alibaba itself have put money into Indian online retailer Snapdeal. Elsewhere, Alibaba committed to VC firm Jerusalem Venture Partners in March 2015, having two months earlier made its first Israel-based investment, in Visualead, a mobile barcode scanning company.
Alibaba’s strategic investments broadly fall into three groups – e-commerce, media and online services. E-commerce deals have ranged from department store owner InTime to flash sales company Mei.com and logistics service YTO Express, as well as Lazada and Snapdeal.
The second group consists of both traditional media companies like South China Morning Post, Singapore Post and Shanghai Media, and new technology or online offerings like video streaming platform Youku, instant messaging companies Sina Weibo and Snapchat, and augmented reality developer Magic Leap.
The third group, where Ele.me and UCar fall, tends to include companies that provide online-to-offline services like food, transport, mapping (AutoNavi) or domestic services (58 Daojia, another Alibaba portfolio company). These can be connected to Alibaba’s e-commerce services, broadening them at the same time as Ant Financial can extend its online payment empire into new realms.
Based on its activity in the past 12 months, Alibaba seems to have no plans to reduce its corporate venturing efforts – the year was its busiest for funds since Global Corporate Venturing began tracking the business.
The year before, in 2014 and after its record flotation, Alibaba made nine-figure investments in microblogging platform Sina Weibo and sports merchandise supplier Fanatics, as well as acquisitions.
Those deals included the $1.5bn acquisition of mapping technology provider AutoNavi and the purchase of the 34% stake in internet browser provider UCWeb it did not yet hold, as well as hefty investments in several companies including Meituan, in which its stake was reduced following the merger with Tencent-backed Dianping, bricks-and-mortar retailer InTime Retail, financial software provider Hundsun Technologies and Haier, an appliance manufacturer with a large logistics operation.
If such dealmaking continues, Ethan Xie, a former science graduate from Tongji University and a post-grad from University of Sydney, could perhaps feel he has already packed a 100-year history into his short time at Alibaba.
Alibaba’s investment activity since the beginning of 2015
