How much is Alibaba ramping up its investment and M&A activity?

Alibaba’s IPO is expected to be the largest tech public offering ever.  As the Hangzhou-based Chinese eCommerce juggernaut preps investors, we wanted to analyze the firm’s investment and acquisition activity to see what it might suggest about their strategy and general areas of focus. Specifically, we cover:

• Alibaba steps up its investment activity
• Investment focus remains eCommerce
• Investment Analysis – Staying Local
• Syndicate Analysis
• Alibaba also gets more acquisitive
• Acquisitions are diverse

Alibaba steps up its investment activity

Alibaba has significantly increased its investment pace over the past two years with 23 investments since 2013 totaling over $1.45B. In the five years prior (2008-2012) Alibaba averaged 1 investment per year, and none were publicly disclosed as being over $50M. This is in line with the general trend of Chinese firms investing more in emerging startup companies.  Of note, our analysis focuses primarily on private company transactions and so we did not include investments into any public companies such as Sina Weibo, who Alibaba invested $586M.

Investment Focus Remains eCommerce

Since 2008 Alibaba has invested in its core business of commerce with nearly 40% of all deals coming in the eCommerce or Mobile Commerce industries. Much like Japanese commerce company Rakuten, Alibaba’s investments in eCommerce come across a diverse group of companies all specializing in different products. Meituan, who saw Alibaba participate in their $50M Series B and $300M Growth Equity financing is a group discount platform, while 1stdibs who raised a $15M Series C from Alibaba among others is a marketplace for antiques and vintage furniture.

Also of note, Alibaba made a $249M investment in public company Singapore Post Office in May 2014 (not included in the charts given it was public). This investment, as well as partnerships with Australia Post, are part of an effort from the Chinese-based retailer to expand its online marketplaces into countries with a high percentage of Chinese populations.

Within the Internet Software & Services industry, search saw the most investments from Alibaba, with both TaoTaoSou, a China-based shopping search engine, and Quixey, a search engine for apps, raising money from Alibaba and other investors. Other notable sub-industries within internet were Music (Peel Technologies) and Travel (Qyer, Byecity Technologies). It’s branching out of eCommerce in these areas also highlights the threat Alibaba may be to Google.

Investment Analysis – Staying Local

Since 2008, Alibaba’s investments have largely remained local with 68% of deals in China-based companies. On a funding ($) basis, it is notable, however, that three of their four largest investment rounds in which they participated have been in US companies (and specifically California-based companies). These investments include TangoMe’s $280M Series D, Lyft’s $250M Series D, and ShopRunner’s $206M investment round.

Alibaba Syndicate Analysis

We used the Investment Syndicate Dashboard in Investor Analytics to look at the investors that have most often invested before and with Alibaba. Due to the fund’s heavy concentration in China, it is no surprise that Sequoia Capital China has invested in 3 companies before Alibaba including Meituan, AutoNavi (who Alibaba ultimately acquired), and Shanghai Paipaidai Finance.

TransLink Capital, a Silicon Valley based firm with an Asia focus, led all investors who co-invested alongside Alibaba with investments in Peel Technologies’ $20M Series C, Quixey’s $50M Series C, and Shanghai Paipaidai Finance’s $35M raise.

Alibaba also gets more acquisitive

Alibaba has spent a large amount on acquisitions so far in 2014, with four acquisitions totaling north of $4B. At just the midpoint of the year, Alibaba has already outpaced prior year investment pace and if the pace continues, this will be the firm’s most active M&A year by a significant margin.

The largest reported (and most recent) deal was the June 2014 $1.9B acquisition of UCWeb, the developer of mobile web browser UC Browser. This acquisition followed previous investments into UCWeb from Alibaba including a 2009 seed investment and then secondary market purchases in 2013 that were rumored to bring Alibaba’s stake in the company near 60%. Alibaba has been an acquirer of firms it has invested in previously. UCWeb and AutoNavi being two examples.

Acquisitions are diverse

Of the ten acquisitions that Alibaba has done since 2008, 4 (40%) have been within eCommerce. Three of the four eCommerce deals came in 2010 including eBay auction management software company Auctiva, online sales management platform Vendio (which allowed Alibaba to integrate private sourcing with Vendio’s sales platform), and data feed management tool company SingleFeed. More recently, the company also acquired Aslan, a China-based B2B airfare service provider, in May 2014.

In industries outside of eCommerce, Alibaba’s other notable deals include the previously mentioned $1.9B acquisition of UCWeb, the April 2014 $1.58B acquisition of AutoNavi, a public company that provides navigation and digital map solutions in China, as well as the $804M corporate majority investment of ChinaVision Media Group. The diversity of Alibaba’s acquisitions into these other adjacent spaces highlighs the diversified tech conglomerate that Alibaba has become and which causes comparisons to Google and GE.

Despite their global footprint and investments in various geographic markets, Alibaba has only acquired companies within two countries. China and the USA account for 70% and 30% of acquisitions respectively.

The logistics of Alibaba’s public offering include seven investment banks, a multi-country roadshow, multiple law firms, and a team of people across three continents. Irrespective of where Alibaba falls on the post IPO valuation spectrum (estimates range wildly from $100B to $230B), it will be massive. Given the firm’s increasing investment and M&A appetite, this should portend good things for emerging tech startups as there will now be another well-heeled investor & acquirer of tech companies outside of the usual suspects.