In 2008, Tencent established the Investment M & A Department (Tencent Investment), focusing on investment and mergers and acquisitions in the consumer Internet and industrial Internet-related fields worldwide.
On January 16, 2020, at the Tencent Investment IF (Insight & Forecast) conference, Liu Chiping, president of Tencent, said that although the market environment in 2019 is more difficult, Tencent has not contracted Investment scale. Liu Chiping also disclosed the latest transcript of Tencent Investment: As of now, Tencent has invested in more than 800 companies, of which more than 70 have been listed, and more than 160 have become unicorns with a market value or valuation of more than US $ 1 billion.
He said that the core logic of Tencent’s investment is to create value, and the primary goal of creating value is to create user value, so Tencent follows the user first, the invested company second, and Tencent the second Three principles.
What kind of relationship should investors and entrepreneurs maintain? Liu Chiping said that some entrepreneurs mistake financing ability as the core of enterprise development, hoping to use the power of capital to crush competitors, but in fact, capital and flow are only energy raw materials in the process of enterprise development. To build core capabilities, enterprises need to have a clear positioning to create value, and have sufficient product capabilities, technical capabilities, and strategic capabilities. As an investor, we need to build core competencies for the enterprise, and actively provide resources and help when the investee needs to make the most critical strategic choices.
The following is the full text of Liu Chiping’s speech:
As you can see, the overall market situation has changed significantly over the past year. At the last IF conference, I told you that we will face great challenges. The financing environment in 2019 has indeed become very difficult. Many well-known startups and even unicorns have encountered financing problems. collapse. This is relatively rare in the history of Internet development, but it did happen last year.
In fact, we have always thought that the overheating financing environment is actually not the best environment for startups. Being able to face challenges in a controlled environment is the best exercise for a startup.
Fortunately, in such a difficult environment last year, many startups invested by Tencent embraced this opportunity to exercise. Not only did they survive, they also strengthened further. Under the harsh operating environment and the shortage of funds, these startups have faced difficulties and made great progress in product capabilities, organizational efficiency, talents and organizational capabilities.
As an investor, in the past challenging year, Tencent has still kept its promise and provided strong support to the invested companies. As of now, Tencent has invested in more than 800 companies, of which more than 70 have been listed, and more than 160 are unicorn companies with a market value or valuation of more than 1 billion US dollars. Through investment, Tencent has established a relationship with a huge ecology, which contains all walks of life, which makes us proud, but also makes us feel a great responsibility.
Many people will ask, why does Tencent make investment, what value can it bring, and what are Tencent’s investment principles? I have said that investment is one of Tencent’s core strategies and one of its core businesses. The primary goal of Tencent Investment is to create value in the process and share most of the value, leaving only a small part to Tencent. Yourself.
Therefore, the core logic of Tencent Investment is to create value, and the primary goal of creating value is to create user value. Therefore, Tencent follows the principles of user first, investee second, and Tencent third.
Why is this order?
As a practitioner of the “user first” principle, it helps investees
The user is the first. Basically, all companies will put this principle first, because this is really important, and so is our investment. The user is the root of everything. This is why Tencent exists and why all startups here. Only companies that can continue to create user value will have continuous vitality.
The main reason why Tencent can help the investees in the “user first” aspect is that Tencent itself is a practitioner of this principle. From the first day of its establishment, Tencent has taken user value and user experience as the company’s most fundamental values. Therefore, we believe that Tencent has the ability to help the investees do the best thing and make it a long-term culture that the investees have persevered.
Of course, help is also divided into “correct” and “incorrect”. Tencent has many platforms to provide the most correct help for the investee. It is here that Tencent’s biggest contribution to the invested company is also here. We can maintain and develop a fair, open, and viable platform for the invested company to pick up through this platform.Reach and serve users.
Tencent’s social platform, for example, investees can reach hundreds of millions of users through this platform. When investees have good services and good products, it can reach more users because Dissemination will have a great effect of magnifying word of mouth. Another example is the Tencent payment platform. The invested company can rely on this platform to build a business model that conforms to its own principles. In addition, Tencent also has a content platform that allows content creators to better acquire users. All the above can bring value to the invested enterprises. We are also convinced that the company that can create user value will be the best partner of Tencent. For Tencent, we will continue to listen to the opinions of the invested companies, improve these platforms, and work with the invested companies to create services that are valuable to users.
It is important to emphasize that not impairing the user experience, infringing on user privacy, and not breaking the fairness and openness of the platform are the prerequisites for all cooperation. When we continue to interact positively with the investee companies, we can help them build and consolidate their core capabilities in the most correct way.
Provide resources and help for the invested enterprises at the most critical moment
The reason why we put the invested company in front of Tencent is because we will not ask the invested company to do things that are good for themselves and not for him. At the same time, we do not have the idea of controlling each other. As investors, what we value most is the founders and teams. We are investing in ideas, not resources. If investors turn their investment targets into resources, they are putting the cart before the horse.
Second, we are very focused on core competencies. We hope that the investees have a clear positioning for creating value, have strong product capabilities, technical capabilities and strategic capabilities, and have high-efficiency and strong organizational supply chain capabilities and talent building capabilities.
You may wonder why I didn’t mention financing capacity and traffic. In fact, many investors, or some entrepreneurs, are hoping to raise a lot of money, take a lot of subsidies, and constantly use the power of capital to crush their competitors, which can easily fall into a misunderstanding.
We believe that the development of an enterprise is a long-distance race. Funds and flows are only the energy raw materials in this process. The most important thing is the physical fitness, skills, and willpower of the enterprise. These are the core capabilities of the enterprise. It is these capabilities that we hope to build for the invested companies.
Finally, what Tencent can create for the invested companies is to actively provide resources and help when they need to make the most critical strategic choices, and they will never give up.
Why Tencent is able to do this, because we have gone through more than 20 years, Has been accompanying more than 800 invested companies to grow together. Therefore, when these companies need to make strategic choices, Tencent can provide some practical experience and help.
Ten a few examples. When JD.com created a mobile experience, when Didi upgraded its technical architecture, when Meituan merged with Public Comment but faced a severe subsidy war, and when Meituan expanded its takeaway business, Tencent Have provided critical help. In terms of overseas companies, during the transformation of Epic Games from a stand-alone game to a mobile game, SEA (Garena) has also provided a lot of help in the process from the agency game to independent research and development to the development of e-commerce. We believe that help at this critical moment is crucial.
At the same time, we are also constantly improving the value-added service system for the invested enterprises. On the one hand, we let the investees and Tencent’s internal business lines generate more organic business cooperation, which may be upstream and downstream collaboration, horizontal cooperation, or open Tencent’s platform capabilities. For example, in the development of cloud business, on the other hand, we hope to carry out more technological empowerment and better provide the technical capabilities accumulated over a long time to the invested enterprises. In terms of organizational capacity building, management capacity building and management consulting, we have also formed a professional team to empower the investee companies.
In conclusion, we hope to truly bring more value to the investee companies.
“Do something, do something” makes Tencent’s strategy clearer and more open
Why Tencent ranks itself third because we have always felt that as long as users and investees are better, Tencent will naturally be better. A good company can not only generate more interaction with Tencent strategically, but also bring an increasingly higher return on investment for Tencent.
Of the more than 800 companies we invested in, 15 companies generated returns of more than $ 1 billion, 6 companies generated returns of more than $ 5 billion, and 1 company generated more than $ 10 billion s return. Maybe everyone will be interested in who these companies are, and what I am looking forward to is that everyone here will be on the list in the future.
In fact, investment has actually helped Tencent’s development, let us “do something and do nothing”. Where Tencent “does not”, we can work closely with the best team in the industry; where Tencent “do something”, we can focus on making the product well and interacting with the investee. Therefore, the investment made Tencent’s overall strategy clearer, and it also allowed us to gain more partners.
Finally, I want to say that we will continue to increase in the futureCapacity building in investment to further expand investment areas. In the past, our traditional investment fields focused on game content and cutting-edge technology. With the development of Tencent’s mini-program ecology and payment platform, we will invest more attention in trading platforms and smart retail in the future. In addition, in terms of the Industrial Internet, we will also increase our thinking on how to use technology to help various industries and focus on the development of vertical fields. At the same time, we will increase investment overseas, and we hope to show Tencent’s power more on the world stage and conduct more exchanges and cooperation with overseas entrepreneurs.
Looking forward to the future, we may still face various uncertainties. The market environment in 2020 may also fluctuate. I hope everyone will maintain a good attitude. When the environment is bad, don’t lose confidence; and when the environment is good, don’t be too optimistic.
Finally, please believe that Tencent Investment will adhere to the principle of “customers first, invested companies second, and Tencent third”. Tencent Investment will always accompany entrepreneurs to move forward.