Tencent’s investment arm has been buying up stakes in platform companies poised to drive growth in online services
Tencent Investment, the investment arm of Tencent Holdings, is seeking to invest in a new breed of platform companies that will have the capacity to serve more users than those supported by the mobile internet.
Tencent Investment managing partner Forest Lin said the fund will invest in a wide range of platform companies, starting from early-stage start-ups that are raising series-A financing, all the way up to more mature companies seeking C-round financing, as well as those which have already listed on the stock market.
Internet platform companies match suppliers of services with demand aggregated by the platform. Tencent Holdings itself, which runs China’s largest messaging app WeChat and is a leading online game provider, is an aggregator of multiple platform companies.
Lin said his firm has been actively identifying the next generation of platform companies that could yield attractive returns. So far this year the investment entity has been involved in 60 investment deals globally, many of which it took part as one of multiple buyers acting in a consortium, with total deal value of US$25.34 billion, according to Bloomberg data.
“I believe that there is an emergence of a new breed of platform companies, and now the right time to find them,” Lin said, speaking on the sidelines of SuperReturn Asia conference in Hong Kong on Tuesday. “The ability to identify and access the most prominent platform companies would yield attractive financial and strategic returns from a corporate investor’s perspective.”
Annual revenue per employee of companies that run online platforms, such as Pinduoduo, Didi Chuxing and Tencent Music, is on average three to 50 times higher than that of many Chinese domestic firms, even though some of these listed companies, including large Chinese banks and mobile operators, enjoy near monopolies, he said.
The next generation of platform companies will need to respond to the evolution of the current computing platform, the mobile internet, which has nearly five billion internet users globally thanks to the advent of smart phones. The next generation computing platform will also make use of technology such as artificial intelligence cloud service, he said.
Lin said he has a preference for platform companies that successfully integrate online e-commerce with offline services, and enterprise software driven by artificial intelligence.
One such example is Tuhu, a Chinese online platform for automobile services and products. Tencent Investment is one of the investors in the Shanghai-based company, alongside others such as Sequoia Capital, and Carlyle Group.
“With online and offline [services integration], there is enhanced efficiency in Tuhu’s [operating model], as their throughput … per day is five times higher,” he said, referring to competitors which do not follow a similar online-offline operating model. Tuhu allows users to order car parts online and get them delivered to offline shops for repair and maintenance.
Lin said artificial intelligence will drive the next generation of enterprise software, owing to its ability to assist with decision making.
Tencent Investment has bought a stake in MiningLamp, which builds artificial intelligence solutions for the financial, public security and the industrial internet-of-things sector.
Tencent Investment is also exploring investments in blockchain companies in China, although there are no plans to invest in initial coin offerings, Lin said.