Alibaba Group Holdings Ltd. is more than an enormous
e-commerce conglomerate that just held history's biggest IPO. It's also an
increasingly active investor in startups with the ability to influence its
portfolio companies' business models and strategies. The company has backed 12
startups, raising a combined total of more than $1 billion so far this year, up
from three startups that raised a combined $22 million in 2009, according to
industry tracker DowJones VentureSource.
Among its total of 27 technology investments since the
beginning of 2009, Alibaba this year invested $215 million in the messaging
platform TangoMe Inc. and took part in a $250 million financing round for
ride-sharing service Lyft Inc. The financing rounds were among the largest
Alibaba has joined as an investor. Entrepreneurs whose companies are backed by
Alibaba say the company consistently counsels them to forgo short-term revenue
goals for longer-term strategies.
Peel Technologies Inc., a Mountain View, Calif.-based
company that enables smartphones to be used as remote controls, raised an
undisclosed amount from Alibaba in June. Around that time it was considering
hiring a vice president of monetization to boost advertising revenue. He held
off in part because Hongping Zhang, Alibaba Capital Partners managing director
and a Peel board member, encouraged him to reconsider and told him not to worry
about the revenue but focus on the user base.
That strategy has worked well for Alibaba. The Chinese
e-commerce giant steadily expanded its user base during the past decade by
diversifying from shopping to include payment, messaging, cloud computing and
entertainment services.
Transactions on its e-commerce sites totaled $248 billion
last year, or more than those for eBay and Amazon combined. It has also sought
to back startups in a wide variety of sectors with future strategic value for
Alibaba.
Last year, Alibaba led a $50 million financing round in
Quixey Inc., another Mountain View-based company that is building deep-linking
technology to improve mobile search. The technology would enable consumers to
search for information on their mobile devices the way they do on desktops,
without having to download or launch individual apps to get the specific data.
Consumers could also shop and take other actions within various Alibaba apps
without ever downloading them from app stores. Among Quixey's challenges around
the time of the financing was balancing the need for immediate revenue with
more strategic thinking.
Having a patient, deep-pocketed strategic investor has its
benefits, but it can also make partnering with Alibaba competitors more
difficult. Peel's Mr. Arunachalam said his team is sensitive to what he calls a
"perception challenge" when meeting with potential Chinese partners
like Baidu, Tencent and electronics company Xiaomi Inc.
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