Issue 22 | January 29, 2018

An Original: Chinese Startups Should Consider Tencent and Alibaba Their Allies, Not Enemies
China has two tech giants, Alibaba and Tencent, which have a combined valuation of $1 trillion. This has led to the perception that Chinese startups are only pawns in a game dominated by giants. On the contrary, we argue that Alibaba and Tencent are increasingly willing to let smaller companies in each vertical succeed by strategically investing in them. Here’s why.

A Chart: Alibaba and Tencent’s Ecosystems
Thanks to several years of strategic investments and/or acquisitions, Alibaba and Tencent have each built their ecosystems of companies in almost every field that matters in China’s tech scene. Read more here.
Selected investments by Alibaba and Tencent
Didi Introduces Its Own Bike-sharing Service
Ride-hailing giant Didi Chuxing, a GGV portfolio company, debuted its own branded bike-sharing service called “Qingju” in Chengdu. Didi’s turquoise bikes enter a crowded—and colorful—battlefield already dominated by Ofo’s yellow bikes and Mobike’s orange bikes (earlier this month, Didi bought the cash-strapped Bluegogo, which supplies blue bikes).
Didi bike sharing

Didi is the largest shareholder in Ofo. The introduction of its own bikes suggests that Didi no longer consider its relationship with Ofo exclusive, and the bike-sharing war in China will become even more complicated.

Didi has ambitions in AI as well. This week it said it will open its third deep learning research lab in Beijing dedicated to AI. The company currently operates two AI labs based in Silicon Valley and Beijing. Tweet this

Tencent Will Invest in Carrefour China
Tencent, along with its offline retail partner Yonghui Superstores, said it plans to take a stake in Carrefour China. They plan to work together on data, smart retail, mobile payments, and data analysis.Carrefour, which operates hypermarkets and convenience stores in China, has been experiencing a slump there. Sales declined 5.4 percent in the fourth quarter of 2017 amid increasing competition from local chains. The deal can help Tencent expand its footprint in offline retail to compete with rival Alibaba, and make WeChat Pay even more ubiquitous.It is not hard to imagine that Tencent may help Carrefour make its supermarkets look more like this.  Tweet this

Alibaba Reportedly in Talks to Partner with Kroger

Alibaba and Kroger are considering working together in some capacity, multiple media outlets reported. The talks are not guaranteed to lead to any type of cooperation, but the rumors have sparked a lot of imagination on what a potential partnership could look like.

For Kroger, whose share price has been battered by Amazon, a partnership with Alibaba may help it revolutionize its e-commerce and in-store experiences. A deal with Kroger could give Alibaba access to Kroger’s nearly 2,800 offline stores in the US, instantly creating a physical-store footprint much bigger than Amazon’s.

Such a deal would have to pass the regulatory scrutiny by the Committee on Foreign Investment in the United States (CFIUS), which prevented Alibaba-affiliated Ant Financial from acquiring the US-based money transfer company MoneyGram earlier this month.

Kroger stock rose almost 3% on Thursday after the talks were reported by the media. Tweet this

A Recommendation

Accelerated is a weekly newsletter for students and young professionals interested in tech and VC, curated by two investors at CRV. It provides a breakdown of key news events, career corner features on questions or topics relevant to the recruiting cycle, and a listing of exciting jobs and internships, as well as any other apps or stories that the authors are following. Click here to subscribe.

– Hans & Zara at GGV Capital