Will Baidu Capital Save Baidu's Investment Layout?

摘要: Baidu announced on October 12, this Wednesday, to set up a ¥20 billion fund to throw money at Internet startups in their mid or late phase. Baidu’s CEO Li Yanhong will be Baidu Capital’s board chairman and chairman of the investment committee.

(Chinese Version)

Many people might don’t really understand Baidu’s investment layout. And now Baidu has finally decided to put more efforts into this arena. First Baidu established Baidu Venture on September 13th earlier this year and then founded Baidu Capital on Wednesday. The former is dedicated to startup projects in their early phase while the latter focuses on projects in their mid or late phase in the greater Internet industry.

It’s reported that Baidu’s CEO Li Yanhong will be Baidu Capital’s board chairman and chairman of the investment committee.

Baidu stated that the newly established Baidu Capital will operate as an independent commercial fund, with a scale of ¥20 billion for its first phase. Two or three management partners will be appointed. Baidu Capital will recruit partners from the investment community. Individuals with a background in the Internet industry, abundant experience in PE and investors with excellent achievements will be the first choices for Baidu Capital to choose from.

According to Baidu, Baidu Capital has a diverse fund source. Several major insurance funds, securities companies, a group of mother funds from professional organizations, as well as investment organizations with a connection with the government have shown their interest in cooperating with Baidu. Therefore, analysts believe that Baidu Capital might be a way out for many VC funds.

As a matter of fact, Baidu poured in $2 million to set up Baidu Venture a month earlier to boast tech sectors such as AI, AR, and VR etc., with a focus on early-phase startup projects.

The difference between Baidu Venture and Baidu Capital lies in the fact the former focuses on early-phase projects while the latter focuses on mid and late-phase projects. However, Baidu hasn’t given out detailed explanation for setting up independent companies so frequently.

Some industry insiders believe that the newly founded Baidu Capital is more of a mature fund similar to PE, which is very different from Baidu Venture’s positioning. It shows that Baidu is forging a more comprehensive layout in the investment sector.

Before that, Baidu’s investment moves were conservative and rather, “slow”. Compared with Alibaba and Tencent, Baidu didn’t put much efforts in investing.

According to statistics from FellowData, from 2011 to now, Baidu, Tencent and Alibaba have poured in a total amount of ¥415 billion into the Chinese capital market. It can be found on ITjuzi that Baidu has invested in 96 projects while Alibaba has invested in 171, and Tencent, 311 projects.

Let’s look at the cab-hailing sector war in 2014 for example. In May 2013, Tencent also investedin Dididache during its B round financing while Alibaba moved in the sector earlier and invested in Kuaididache’s angel round financing in April. It wasn’t until September 2015 that Baidu finally invested in Uber, which is like two years behind compared with Tencent and Alibaba.

The result is Tencent’s WeChat Payment took off through DIDI Red Packet sharing while Alibaba also extended Alipay’s use cases and scenarios. As for Baidu, the company only received the exit package due to the acquisition of Uber China.

Similar cases are plenty. Baixing.com is lacking way behind its rivlals, like Dianping and Meituan, in the life service sector. Such failure might also be the incentive for Baidu to have its recent moves in investment.

Baidu Capital and Baidu Venture are independent from Baidu’s current acquisition and merger team. They aim to achieve a more efficient investment operation through innovating its assessment mechanism and enhancing its decision-making process. They plan to utilize new strategies to set up its layout further in Baidu’s upstream and downstream industrial chain, in hopes of covering outstanding mid and late-phase startup projects in the Internet sector.

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Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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