Startup in­vest­ing helps Alibaba ex­pand foot­print out­side China

The Pak Banker - - BUSINESS -

BEI­JING: Alibaba Group Hold­ing Ltd. is be­com­ing a more ac­tive startup in­vestor. The Chi­nese in­ter­net gi­ant is will­ing to spend money in hopes of find­ing the next Snapchat or Lyft -- so long as the tar­get uses Alibaba's tools and ser­vices. Alibaba made at least two dozen in­vest­ments in pri­vate com­pa­nies last year, ac­cord­ing to re­search firm CB In­sights. The num­ber of deals has nearly dou­bled since 2013, and the e-com­merce com­pany has con­tin­ued spread­ing money around this year.

Through a pair of not-for-profit funds set up in late 2015, Alibaba is look­ing to use ven­ture cap­i­tal to ex­pand its reach be­yond the main­land and get busi­nesses hooked on its ser­vices early. Last Novem­ber, Alibaba es­tab­lished a NT$10 bil­lion ($312 mil­lion) fund to sup­port Tai­wanese en­trepreneurs and an HK$1 bil­lion ($129 mil­lion) fund tar­get­ing Hong Kong star­tups. Any re­turns from suc­cess­ful bets will be rein­vested into the funds, which are meant to en­cour­age en­trepreneur­ship in those re­gions, ac­cord­ing to Alibaba.

How­ever, the funds could one day pay off for Alibaba in a dif­fer­ent way. En­trepreneurs that ap­ply for in­vest­ment are re­quired to use at least one of Alibaba's ser­vices. For in­stance, the com­pany needs to sell through Alibaba's e-com­merce mar­ket­places, such as Taobao or Tmall, or use Alibaba's cloud com­put­ing ser­vice, which is try­ing to break into a mar­ket dom­i­nated by Ama­zon.com Inc., Al­pha­bet Inc.'s Google and Mi­crosoft Corp.

The Tai­wan fund made at least two in­vest­ments re­cently, ac­cord­ing to peo­ple with knowl­edge of the mat­ter. Health2Sync, a startup in Tai­wan that makes an app for di­a­bet­ics, raised $3 mil­lion in a fi­nanc­ing round led by Alibaba, said the peo­ple, who asked not to be iden­ti­fied be­cause the mat­ter is pri­vate. Alibaba also kicked $2 mil­lion into IS­tag­ing, another Tai­wanese startup, which makes vir­tual and aug­mented re­al­ity soft­ware, the peo­ple said. The two in­vest­ments were sourced and man­aged by WI Harper Group, a ven­ture firm with op­er­a­tions in Taipei, San Fran­cisco and Bei­jing. An Alibaba spokesman con­firmed the two in­vest­ments but de­clined to com­ment fur­ther. Health2Sync and IS­tag­ing de­clined to com­ment. While Alibaba is known for mak­ing high-pro­file in­vest­ments in more ma­ture up­starts such as Lyft Inc. and Snapchat Inc., the Hangzhou-based com­pany has been in­creas­ingly turn­ing its at­ten­tion to younger star­tups. "It's a great way to keep your eyes on emerg­ing tech­nol­ogy and keep seed­ing cap­i­tal on it over­time," said RJ Hot­tovy, an an­a­lyst at Morn­ingstar Inc. "In an in­dus­try that moves quickly, it's good to take a smaller stake and see how it evolves."

The in­vest­ments may also give an in­di­ca­tion of Alibaba's strate­gic in­ter­ests. Health2Sync of­fers an app to help di­a­betes pa­tients mon­i­tor and man­age their blood glu­cose lev­els. The three-year-old startup lets each user con­nect with fam­ily and health care providers through the app so they can view the pa­tient's lat­est ac­tiv­i­ties. The soft­ware works with a cable that con­nects a glu­come­ter to an iPhone.

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