Author：Hellen Wang
As China’s largest Internet company, Alibaba is one of the most important exit channels for many investment institutions. Statistics show that Alibaba’s M&A cash outflows for the past three fiscal years were US$30.2 billion, so the investment in Ali investment is well-concerned.
On September 10, 2018, Jack Ma announced that he plans to step down as chairman one year later on September 10, 2019, which also falls on Alibaba’s 20 th anniversary,
Then, after Jack Ma leaves, where will Ali Investment go?
The ultimate investment goal of Ali: investment value
“I have put a lot of thought and preparation into this sucession plan for ten years.”
On September 18, a week after the announcement of the succession plan, Jack Ma made a public appearance at the Alibaba Global Investors Conference. In the face of global investors, Jack Ma first talked about the decision to step down as Chairman of the Board of Directors of Ali, and at the same time, Executive Vice President Cai Chongxin gave a deep explanation of the future investment and direction of Ali to global investors.
Then, would the direction of Ali investment change in the post-Ma era?
Obviously, Ali Investment’s investment strategy and direction remain unchanged, because Ali’s strategic investment has always positioned itself as an industrial capital.
“Unlike ordinary VC, the original intention and interests of industrial capital and entrepreneurs are not exactly the same. Ali investment projects will consider whether the target company’s own business is strong enough, whether it can cooperate with Ali to help Ali’s existing business development; “An insider explained the difference between Ali investment and ordinary VC.
Therefore, in the network of Ali Investment, many investors are willing to become friends with Ali Investment, such as IDG Capital and Jinshajiang Capital, although they also participate in Tencent’s dinner party, they are more intimate to Ali, because through Ali investment, many of the projects they invested can be withdrawn through mergers and acquisitions.
For example, although Alibaba has paid $30.2 billion in cash flow in the past, its free cash flow remained at $33.8 billion over the same period, which means that Alibaba still has sufficient ammunition for acquisitions and investments.
As an industrial capital, obviously, Ali Investment has a clear goal . Regardless of whether Jack Ma is the chairman of the board of directors, the industrial capital is still serving the industry, that is, Ali Investment will always serve Alibaba.
Regarding the direction and strategy of future investment, which is the concern of global investors, Alibaba executive vice president Cai Chongxin uses a simple formula to explain to participants the investment logic of Alibaba – “1+1>10″, Alibaba’s investment is to empower the invested companies through digital capabilities and technology to produce explosive growth effects.
As Cai Chongxin said: “The two core objectives of Alibaba’s strategic investment and mergers and acquisitions are to further consolidate and improve the company’s core business advantages; second, to make forward-looking layouts in the technology field. These are essentially aimed at bring long-term strategic value to the company, Alibaba focuses on strategic investment to empower the real economy and help global companies achieve digital transformation.”
Therefore, the investment standard of industrial capital is seriously different from the market-oriented investment institutions. For example, the Ali investment indicator is not the IRR or DPI commonly used in the investment circle, but the created value for the industry. Of course, this is the highest goal of many investment institutions, pursue the true ideal of investment, and make valuable investment.
“To make early VC investment, I must quantify whether my investment results are good or not, but the strategic investment is completely different. How to evaluate the performance of investment? The main objective of the investigation is to make investment projects mainly considering cooperation strategies and cooperating the maternal business, rather than a quantitative result, such as making money or not,” the investor said.
The same is true for Ali Investment.
“When others ask us about the ROI (return on investment) or IRR (annualized rate of return) of investment, I will say that the success of our investment lies not only in the return of funds, but also in the value that investment brings to people. How to use digital transformation to serve a large consumer group and gain more consumer insights.” As the helm of Alibaba’s strategic investment, Cai Chongxin believes that Alibaba has the ability to achieve the goal of strategic investment “1+1>10”.
Let us look at the facts.
As a typical investment case, Youku has become an important representative of Alibaba in the investment field. After Ali invested in Youku, relying on the base of Alibaba Cloud, Yuku cut the technical cost of Youku Video by 60%. At the same time, with the help of ecological effect between Taobao, Tmall, Alipay and Youku, Youku Video’s paying users grew at a high rate. In 2018 alone, Youku’s paying users reached a year-on-year growth rate of 200%.
Ali Investment: imagination of the future
In another goal of Ali Investment, investing in the future is also an important option.
In Ali’s investment layout, technology and future direction are the factors they value. For example, through new retail and strategic investments such as cloud computing and digital media, this has laid a solid foundation for Alibaba’s future development.
“Investing in new retail, Cainiao, globalization, cloud computing and digital media is very necessary. From a financial point of view, the current value of Alibaba Group’s strategic investment in Ant Finance, Sun Art Retail, Sina Weibo, etc. has also exceeded 80 billion US dollars. The synergy effect of Alibaba’s ecology will create better long-term returns for shareholders.” Alibaba Group CFO Wu Wei said that Alibaba’s strategic investment also lays a solid foundation for future business development.
According to media reports, there are currently 5 teams in the strategic investment department of Ali, including 3 teams in China, 1 team in the US, and 1 team in Southeast Asia. Xie Ying, Zhang Feiyan and Gang Feng are respectively the managing director of three investment teams in China, where the Gang Feng team mainly engaged in retail project investment mergers and acquisitions; Zhang Feiyan team, in the past mainly looking at O2O and IOT, now responsible for the cultural media field; Xie Ying team, mainly focusing on the technical field. The Investment Department has set up an investment committee consisting of 7 people including Jack Ma, Cai Chongxin and Xiao Yaozi. When the business department and the Strategic Investment Department disagree, the investment committee will make the final decision.
In other words, the specific investment direction of Ali Investment is mainly new retail, cultural media and technology.
The new retail business in Alibaba is closely related. The cultural media is obviously a guarantee of traffic, while the technology represents the future trend. The emphasis on technology can be seen from the strategy of Ali Investment – in the field of new technologies. The measures taken by Ali Investment are forward-looking investments, focusing on such investments as AI, chips, IoT, biometrics, etc. In this area of investment, Ali Investment adopts a strategy of adopting minority equity investment to form an ecological environment.
For example, Ali has almost covered every aspect of AI. Ali has taken three out of four top CV enterprises, including Sense Time, Beijing Megvii, YITU.
Of course, Ali investment in other areas is also focused on the future:
Take Ali Investment in Sun Art Retail Group Ltd. as an example – it is the representative of Alibaba’s new retail investment. Alibaba has improved the consumer insight of Sun Art Retail with digital technology, and then on the business level Tmall, Fresh Hema et al. also made business connections with Sun Art Retail, helping Alibaba expand from the online to the offline, realizing the reconstruction of people, goods and fields.
Just as RT-Mart’s new retail COO Yuan Bin once told the media about his evaluation of Ali Investment: “Ali is our major shareholder. I once mentioned in the early days that there’s a rumor that Ali cooperates with others in a “taking eggs out of nest” way. Rumors goes that Alibaba will drive away all of your management if it cooperate with your company. In fact, this is nonsense. The cooperation between us and Ali is very tacit. They share with us all its previous experience and lessions with us without reservation. They will practice in a small area first. If they succeed, they will let us know and we will follow up.”
Likewise, Yao Junhong, the founder of Hangzhou Souche Automotive Services, once commented that Alibaba is one of the few companies that can make idealism, strategy, and organization good. He is studying Ali’s organizational management method every day. Although Jack Ma’s influence on Ali is still very large, Yao Junhong feels that Ali’s partner mechanism is a unique collective decision-making method.
With the help of capital, Alibaba itself has created a new era of business. In the future, Ali Investment hopes to empower more companies and help more people to have a better life.
