It's no secret that Tencent, the Chinese tech giant behind WeChat and a handful of blockbuster video games, is an aggressive investor. Even during 2020, when the pandemic slowed economic activity in many parts of the world, Tencent continued with its investment ambitions.
During the year, the company participated in more than 170 funding rounds totaling 249.5 million yuan ($ 38 million), according to Chinese startup database ITJuzi. This made 2020 the busiest year to date for Tencent's investment team, which had delivered superior results over the past decade.
By January 2020, more than 70 of Tencent's 800 portfolio companies had gone public, and more than 160 of them had passed the $ 100 million valuation, Martin Lau, president of Tencent, told a room of investee companies. The result could very well put Tencent side by side with some of the best venture capital funds in the world.
Tencent set up an investment and M&A unit in 2008 and began seriously ramping up funding around 2012. Since 2015, it has funded more than 100 companies annually, data from ITJuzi shows. 
The social and entertainment giant has long kept its financing business close to its chest, and data collected by third-party organizations like ITJuzi is often not exhaustive. The company didn't immediately answer ProWellTech's questions about its investment in 2020, and the story draws mostly from public disclosures and interviews with people of knowledge.
B2B interest
While Tencent's overall investment strategy has remained consistent - a diversified portfolio with a focus on digital entertainment - it has quietly stepped up efforts in areas outside its main gaming arena. For example, the company has paid more attention to business services since it announced a B2B pivot in 2018, focusing more on cloud computing, fintech and the like. The number of investments made in enterprise software went from five in 2015 to 28 in 2020, according to ITJuzi.
In line with its new focus on the enterprise, Tencent has also upped its game in fintech. In 2019 and 2020, it supported 18 and 15 fintech startups respectively, ITJuzi shows, compared to just four in 2015. The increase, although incremental, reflects the company's growing interest in an extremely profitable area but also with many constraints. .
In China, Tencent has long competed with Ant Group, Alibaba's fintech subsidiary, to woo users in terms of payments, loans, wealth management and even insurance. Regulatory issues Ant are not unique to the Jack Ma empire and will likely come to discourage its smaller competitors, including Tencent's fintech segments.
That said, Tencent is "not as aggressive" as Ant when it comes to strengthening its position in the Chinese financial market, a person working with Tencent's overseas fintech business told ProWellTech.
Fintech abroad
The company is also cautious with its fintech expansion overseas in times of geopolitical tensions. So far, it has mostly limited its ambition to provide cross-border payment services to tourists exiting China, rather than serving the locals directly.
"There is a lot of control over what Tencent and Alibaba are doing in the US and that presents challenges," said the CEO of a US-based Tencent-backed startup that declined to be named.
Through investing, however, Tencent has become familiar with overseas financial markets. In 2015, the company made a fintech investment outside of China. In 2020, it funded eight, according to public data gathered by Crunchbase.
A significant portion of Tencent's external investments have no strategic significance and the company tends to let the startups in its portfolio operate autonomously. Partly for this reason, Tencent was criticized for prioritizing investment and financial return over product development and innovation in a viral article in 2018, ominously titled "Tencent Has No Dream." The non-intervention stance is in stark contrast to Alibaba's practice of the death grip, which prefers to buy controlling stakes in companies and shake up their top management, as it did for Lazada.
But many investments in Tencent add value to its business, even when the press announcements overlook potential strategic synergies. Over the years, Tencent has made a number of small investments in the United States and other Western countries. Few of them appear to offer short-term collaboration opportunities, but Tencent will still invite the executives of these companies to China, where they will learn from each other.
"Tencent made those investments just to learn what people are doing in the United States and how it could be applied in China," the Tencent-backed startup executive said.
"We have no short-term plans to do anything in China. But Tencent is a very reputable name, both in China and in the United States. And you know, it's good to have the ability to do something more strategic in partnership with Tencent along the way. "
Tencent's fintech investments outside of China could also help expand the game overseas, according to a Hong Kong-based fund manager. The goal is for half of its players to be foreign users, Tencent said in 2019.
"For the gaming industry in Latin America and Southeast Asia, the biggest bottleneck is, surprisingly, not hardware but payments," the fund manager told ProWellTech. "Of course, localization and compatibility are also important."
