TikTok owner ByteDance dissolves strategic investment unit amid Beijing’s Big Tech scrutiny
- The Beijing-based unicorn is disbanding an internal unit in charge of external deals
- ByteDance says employees from the unit will be reassigned to other departments after a business review
ByteDance, owner of popular short video app TikTok and its Chinese sibling Douyin, is dissolving its strategic investment unit and reassigning about a hundred employees, partly in response to Beijing’s increased scrutiny of the “irrational expansion of capital”, according to three people with knowledge of the matter.
The strategic investment unit, which handles ByteDance’s major business deals such as mergers and acquisitions, has been a core part of the world’s largest unicorn, which is privately valued at about US$350 billion.
Unit head Zhao Pengyuan has moved to the chief executive’s office to oversee strategic planning, according to a source who declined to be named because they are not authorised to speak to the media.
Two other sources said that some employees would be laid off, although it remains unknown how many would have to leave.
The closure of the strategic investment unit stemmed from its failure to invest in digital marketing service provider GrowingIO, according to Chinese media outlet Caixin, citing unnamed sources close to ByteDance.
In a statement, ByteDance said it has decided to “distribute employees from the strategic investment unit to various business lines” after a review and analysis of the company’s business earlier this year. Relevant planning and discussions are still under way, the company said.
The unit’s disbandment comes as the Chinese government continues efforts to limit the reach of Big Tech companies in the country. China’s top leadership concluded at a core economic planning meeting at the end of last year that the country would set up “traffic lights” to control the flow of capital and tame “barbaric growth”.
Social media and video gaming giant Tencent Holdings recently divested its holdings in JD.com, a major Chinese e-commerce platform, and trimmed its stake in Sea, a Singapore-based e-commerce operator that owns Shopee.
For years, Chinese tech giants have pursued a strategy of growth through external acquisitions and investments, building their business empires in a relatively short period of time.
ByteDance, founded by entrepreneur Zhang Yiming in a Beijing residential flat a decade ago, has developed into one of China’s most powerful enterprises. Its flagship Chinese app Douyin counts more than 600 million daily active users.
While Chinese authorities have not published any regulations or directives for Big Tech companies to downsize, Beijing has made it clear that tech firms are not welcome in some industries, such as children’s education and consumer finance.
The government is also requiring tech firms and any digital platforms with more than a million users in China to pass a cybersecurity review before applying to go public in overseas stock exchanges. The South China Morning Post reported last year that ByteDance had to delay its listing plan until at least late 2022 for regulatory reasons.
Amid the tighter regulatory environment, ByteDance embarked on a major business reshuffle last year. Co-founder Liang Rubo succeeded his college roommate Zhang as CEO, while the company’s once-sprawling operations were consolidated into six business groups, with TikTok being one of them.
It remains to be seen how the shutdown of the strategic investment unit will affect ByteDance’s external investments. The company’s major deals last year included the purchase of virtual reality start-up Pico for an estimated 5 billion yuan (US$772 million), and the acquisition of game studio Moonton Technology for around US$4 billion.