By Dan Strumpf
HONG KONG -- In its quest to expand its global reach, Tencent
Holdings Ltd. has quietly become China's top corporate investor in
Silicon Valley, pouring money into everything from electric cars to
moonshot ventures such as space tourism and asteroid mining.
Tencent's best-known investments are gaming companies ,
including "Clash of Clans" maker Supercell Oy of Finland and
"League of Legends" maker Riot Games Inc. But the internet giant
hasn't stopped there.
People close to Tencent, China's most valuable listed company
with a market capitalization of $328 billion, say the approach
reflects the company's desire to remain abreast of even the most
far-fetched ideas and products out of Silicon Valley -- and its
fear of missing out on the next big thing.
While several Chinese firms have jumped into hot areas such as
artificial intelligence and driverless vehicles, Tencent hopes an
active investment arm will offer a window into even more
outside-the-box developments in Silicon Valley, people familiar
with the company said.
The strategy underscores Tencent's broader ambitions after
rising to dominance at home with its ubiquitous WeChat app -- which
hasn't gained much traction overseas amid competition from the
likes of Facebook Inc. The WeChat social-media platform boasted 938
million monthly active users in the first quarter, 23% more than a
year earlier.
"If you want to be a top-10 corporation on a global scale -- and
Tencent is already a top 10-type of corporation -- I don't think
there is any aspect of technology that you should leave behind,"
said Sinovation Ventures's Chris Evdemon, of Tencent's U.S.
approach. Mr. Evdemon is a partner at the venture-capital firm,
which has made investments alongside Tencent.
Tencent's top U.S. executive, David Wallerstein, said the active
U.S. investing presence is aimed at finding companies tackling
big-picture problems. "I deliberately seek to push out on the
frontier a little further than the other teams" in Tencent, he
said.
Based in the southern Chinese technology hub of Shenzhen,
Tencent competes on many fronts with China's two other tech giants,
Alibaba Group Holding Ltd. and Baidu Inc. Each has ventured
overseas as part of their appetite for growth outside China, though
none has invested as aggressively in the U.S. as Tencent.
Since 2011, Tencent has invested in 41 tech startups in the
U.S., joining fundraising rounds worth $3.5 billion. The figure
excludes investments in public companies.
That makes it the second-biggest foreign investor in the sector
-- behind only Korea's Samsung Group -- and tied for 11th biggest
corporate investor overall, up from 18th four years ago, according
to research firm CB Insights. Google parent Alphabet Inc. is at the
top of the list.
In May Tencent reported a 58% rise in first-quarter profit and a
cash pile of $4 billion.
Mr. Wallerstein, whose official title is "chief exploration
officer," is a key figure in the company's overseas push. The
California native joined Tencent in 2001 and spent more than a
decade shuttling between China and the U.S. before settling full
time at the company's U.S. headquarters in a converted church in
Palo Alto, Calif.
People close to Tencent said Mr. Wallerstein and his team of
roughly half a dozen executives take a hands-off approach after
buying a stake, investing just a few million dollars at a time or
less, typically alongside other big companies or well-known Silicon
Valley investors.
"We get behind the founder and the executive team and help the
company become the best company they can become," Mr. Wallerstein
said. "We will work with the company to bring their technology to
China when they're ready, but we do not push the company."
These investments differ from the handful of big-ticket stakes
that Tencent has taken in the U.S. Those deals have been led by the
company's China-based deals team, people familiar with the company
said, and include its acquisition of Los Angeles-based Riot Games
as well as its $1.8 billion investment in Tesla Inc.
"Chinese companies are now wanting to go global more than ever
before," said Connie Chan, partner at the Menlo Park, Calif.,
venture-capital firm Andreessen Horowitz.
Among recent investments, Tencent led a $10 million investment
round in Academia.edu, a San Francisco-based company that operates
a platform for scientists and academics to publish and review
papers online.
Richard Price, the company's founder, said he hopes to give
researchers an alternative to the longstanding model of publishing
papers in physical journals. "Tencent itself as an organization has
made its money through gaming," but it's venturing elsewhere, he
said of the previously undisclosed investment.
Other smaller stakes include: a $3 million investment disclosed
earlier this year in Innovega Inc., a Bellevue, Wash.-based company
building an "augmented reality" device into a contact lens. A
former Tencent executive now sits on the company's board, and Chief
Executive Steve Willey says he plans to first launch the final
product in China with Tencent's help.
Some of Tencent's early investments paid off big, like its
investment in Snap Inc. in 2013, four years before the Snapchat
parent went public. But not every investment has taken off.
Since 2014 the company has participated in $25 million worth of
fundraising by Kamcord, a San Francisco social-media company.
Kamcord has had ambitions to expand in Asia, but last year
discontinued its live video-streaming service. Kamcord wasn't
available for comment.
In March Tencent participated in a $900 million funding round
for Grail Inc., a Menlo Park, Calif., firm aiming to build tests
for genetic evidence of cancer. Other investors in the round
included Johnson & Johnson and Merck & Co.
One investment that went further afield for Tencent: In 2015 it
joined in a funding round for Planetary Resources Inc., an asteroid
mining venture whose backers include Larry Page and Eric Schmidt,
CEO and executive chairman, respectively, of Alphabet.
In an email, Planetary Resources CEO Chris Lewicki said there is
"mutual respect for each of our pursuits whether it be mobile
gaming or asteroid mining."
Write to Dan Strumpf at daniel.strumpf@wsj.com
(END) Dow Jones Newswires
June 04, 2017 12:15 ET (16:15 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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