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China's $6 billion tech funding boom signals flight to quality

04/12/2016| 3:16:48 PM|

Investors around the world rein things in after an unprecedented technology financing boom as ride-hailing Didi, Alibaba Group’s Ant Financial and online property service Homelink are close to raising at least $6 billion

The second-largest economy China is avoiding the pitfalls affecting venture capital elsewhere, as investors around the world rein things in after an unprecedented technology financing boom. Ride-hailing app Didi Kuaidi, Alibaba Group Holding Ltd.’s finance affiliate and online property service Homelink are close to raising at least $6 billion, people familiar with the separate deals say. The operator of Alipay, Alibaba’s affiliate, is targeting more than $3.5 billion alone, which would mark the technology industry’s largest single round of financing.

“China’s VC market is becoming very polarized," said Jarod Ji, an analyst at Beijing-based research firm Zero2IPO. “There’s not a lack of money in the market, but investors do feel that there’s a lack of good projects and that’s why companies like Didi are getting so much money.”

Worrying About Bubbles

A sharp global decline in venture deals in the fourth quarter fueled questions about a bubble in tech investing.

But venture capital investments in China surged about 50 percent to $12.2 billion in the first quarter, recovering from the downturn of late last year, according to London consultancy Preqin Ltd. Chinese venture capital firms raised 139.6 billion yuan ($21.6 billion) in 2015, more than double the previous year, according to Zero2IPO.

Didi Kuaidi -- Uber’s biggest rival in China -- is raising more than $1.5 billion and property-lister Beijing Homelink Real Estate Brokerage Co. is shooting for about $1 billion, the people said. That’s on top of the money being raised by Zhejiang Ant Small & Micro Financial Services Group Co., which is controlled by Alibaba founder Jack Ma.

It’s not just private money either.

Government Money

Chinese government-backed venture funds raised about 1.5 trillion yuan in 2015, tripling the amount under management in a single year to 2.2 trillion yuan, according to Zero2IPO data.

Didi is tapping new funding too as it bankrolls an aggressive program for recruiting drivers and keeping fares competitive in its battle with Uber. Its new funding target of more than $1.5 billion is up from initial plans to seek $1 billion.

Ant Financial increased the amount it’s raising to at least $3.5 billion and gained the support of powerful state-backed investors, people familiar with the matter said. China Investment Corp., the country’s sovereign wealth fund, and an investment vehicle of China Construction Bank Corp. are leading the round, the people said.

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TAGS: Didi | Uber | Alibaba
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