Chinese firms outpace rivals in VC funding on startups

Chinese companies bet as much as $30.9 billion of venture-capital funding on startups in the quarter ending in June, surpassing their North American rivals' $27.2 billion for the first time, according to data from Goldman Sachs, Business Insider reported on Sunday.

Chinese e-commerce giant Alibaba's Ant Financial, operator of the country's biggest online payment platform, raised $14 billion in its Series C round, which market observers called the largest-ever single fundraising globally by a private company.

"While corporate venture capital has been a major driver of growth in venture as an asset class globally, nowhere has that been more evident than Asia, where Alibaba, Baidu, JD.com, and Tencent have followed the lead of SoftBank, creating massive ecosystems of venture investments under their umbrellas," said a team of analysts led by Heath Terry in a recent note to clients.

"Nearly every major private company in China has at least one of those five companies as an investor, and the level of influence these ecosystems have in steering the development of new technologies and business models is unprecedented."

From fintech to logistics, Chinese giants often use investments to expand their industry footprints, while backing competitors in the same industry is a strategy to achieve the goal.

"For instance, Ofo and Mobike (acquired by Meituan-Dianping), which are the top bike-sharing brands in China, each received funding from Tencent in the past," Heath said.

"Similarly, Baidu Waimai, an online food delivery business once backed by BATJ, merged with Ele.me, which counted Alibaba, JD.com and Tencent among its investors. Ele.me has since then been acquired by Alibaba."

Along with China's tech giants, governments also put venture capital into entrepreneurialism, as they sought to cash in on companies' success before they went public, Heath said, adding that more companies tend to list earlier than before, given valuations keeping soaring in the private markets.

Meanwhile, Chinese global VC investing boom is partly being driven by the government's efforts to reduce its dependence on the manufacturing sector and promote a consumption-driven economy for combating slowing growth, according to Heath.