Money, Money, Money: How Rakuten And Alibaba Are Going International

Money

Rakuten bought the messaging and VoIP service Viber in February of 2014 for $900m. In Germany Rakuten took over local marketplace Tradoria in 2011 (German) to expand its business to the country. In France Rakuten similarly took over PriceMinister.

But these aquisitions are not (yet) the modus operandi on how Rakuten, the biggest online retail player in Japan, or Alibaba, the biggest online retail player in China, for that matter are trying to gain a foothold internationally.

Instead, over the last few years both companies started to invest venture capital in startups, acting more like investors than like companies building out an international business.

In June 2014 Rakuten set up a “Global Investment Fund” consisting of $100m:

the Japanese consumer Internet conglomerate also made investments in several companies based in Southeast Asia or Japan, including CarousellVisenzeCoda Payments, and Send Anywhere, from its $10 million fund dedicated to the region. 

Now Rakuten is eyeing companies in the rest of the world with the launch of its new $100 million global investment fund, which will focus on startups in Israel, the U.S., and the Asia Pacific region.

The new fund, which is based in Singapore and will be run by Rakuten Ventures managing partner Saemin Ahn, supports “Rakuten Ventures’ broader goal of long-term investments with startups that have the technology and potential to enable better user experience and facilitation,” says Ahn. “Over time, this will include an increased focus on growing the ecosystem, technology, membership, and financial returns.”

The most strategically interesting investment by Rakuten happened in 2012 when Rakuten invested in Pinterest.

In May 2015 Rakuten invested in payments startup WePay. In March Rakuten led an investment round in Uber rival Lyft, the number two in the US.

A -very incomplete- overview of investments by Rakuten can be found on Crunchbase.

How these investment activities can directly and immediately -not just indirectly and longterm- affect the global online retail sector can be observed with Alibaba:

In August of this year Alibaba invested in India’s Snapdeal which is directly competing with Amazon in India. It is likely for Alibaba to give more money to Snapdeal and others who are competing with Amazon in local markets. The enemy of my enemy gets my money, seems to be an investment thesis for Alibaba. Alibaba invested in Amazon challenger Jet.com. Alibaba has also invested in Chinese Uber rival Didi Kuaidi.12

In May of this year Alibaba took part in an investment round in Snapchat. In September Alibaba invested in Indian payments startup Paytm.

There is again a incomplete overview of investment activities by Alibaba at Crunchbase.

In July 2014 the New York Times wrote in an portrait of Alibaba’s investment activities:

Alibaba Group, the Chinese Internet retailer, is coming to America with its checkbook wide open. (..)
Though they may appear loosely connected, many of the stakes that Alibaba has taken have focused on mobile and e-commerce. (..)
For the American start-ups in Alibaba’s embrace, there are benefits beyond the investment. Kabam, for instance, receives a direct line into China, one of the fastest growing smartphone and gaming markets of the past decade. Some 40 percent of global smartphone shipments in the first quarter of 2014 were bound for Chinese consumers, according to IDC, a research firm.

It is not, however, a simple market for a Western company to enter. Alibaba’s knowledge of China’s web-connected consumers could help American start-ups navigate the unfamiliar landscape.

Even if these companies have not found the right way to expand internationally they have the money to help shape online retail markets. If they themselves can not expand everywhere why not help local startups then with venture capital? Especially Alibaba is willing to use that strategically.

Both companies, Rakuten and Alibaba, are serious e-commerce investors now.


  1. Or rather in one of its predecessors before the merger of the two biggest transport startups in China. 
  2. Didi Kuaidi itself has also invested in Indian taxi company Ola, itself also an investor in Lyft. Don’t ask. 

4 comments

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