Silicon Valley Powered American Tech Dominance-Now It Has a Challenger - WSJ - 0 views
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Asian investors directed nearly as much money into startups last year as American investors did—40% of the record $154 billion in global venture financing versus 44%,
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That tidal wave of cash into promising young firms could herald a shift in who controls the world’s technological innovation and its economic fruits, from artificial intelligence to self-driving cars.
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The rise of China’s venture market “signifies a shift from a single-epicenter view of the world to a duopoly,” he says.
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The surge also positions Asia’s investors to win stakes in markets that Western companies covet, or that have national security implications.
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. “If you think that being the locus of invention gives you a boost to your GDP and so forth, that’s a deterioration of the U.S. competitive advantage.”
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Although one of the biggest Asian investors is Japan’s SoftBank Group Corp. , which has tapped Middle Eastern money to create the world’s largest tech-investment fund, it is Chinese activity that is having the greatest impact.
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China is creating unicorns—startups valued at a billion dollars or more—at much the same pace as the U.S., drawing on funding from internet giants like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. as well as more than a thousand domestic venture-capital firms that have raised billions of dollars a year for the past few year
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Chinese-led venture funding is about 15 times its size in 2013, outpacing growth in U.S.-led financing, which roughly doubled in that time period
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Most Chinese-led investment so far has gone to the country’s own firms, the Journal analysis found. Many of them, like the Yelp equivalent Meituan-Dianping, are household names with millions of customers in China, yet virtually unknown elsewhere.
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Many Chinese tech companies are “at this critical size that the China market alone is not enough to support their business and valuation,
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Madhur Deora, chief financial officer for Paytm, one of India’s biggest e-payments firms, says the company approached Alibaba affiliate Ant Financial instead of U.S. backers for funding in 2015 because Chinese mobile-internet innovations are “way far ahead of anything that’s happened in the U.S.
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One reason China’s push into new technologies worries many in the U.S. is that, unlike the hunt for good returns that underpins most Western venture finance, a lot of Chinese investment is driven by strategic interests, some carrying the specter of state influence.
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China is pushing hard into semiconductors, for which the government has provided billions of dollars in public funding, and artificial intelligence, where Beijing in July set a goal of global leadership by 2030
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Mr. Lee, the venture investor, predicts that in the next five to 10 years Chinese tech companies will become pacesetters for tech-related development, vying with the likes of Alphabet Inc.’s Google and Facebook for dominance in markets outside the English-speaking world and Western Europe.
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“The U.S. approach is: We’ll build a better product and just win over all the countries,” says Mr. Lee. The Chinese approach is “we’ll fund the local partner to beat off the American companies.”
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Asia’s rise as a startup financier is even starker in the biggest venture investments—those of $100 million or more. These megadeals have become an increasingly important part of venture finance as valuations have ballooned, with their proportion of deal volume growing from around 8% in 2007 to around half of the total last year.
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In Southeast Asia, a flood of Chinese money into local startups—such as the $1.1 billion Alibaba-led investment into Indonesian online marketplace PT Tokopedia last year—is drawing the region closer to China
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Chinese money is also playing a big role in India, which, with a population of 1.2 billion, has been described as the next big internet market. Chinese and Japanese investors each led nearly $3 billion in venture finance in India last year, ahead of the nearly $2 billion in deals led by U.S. investors
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“Think of strategic investments and M&A as playing a game of go,” said Mr. Tsai, the Alibaba executive vice chairman, at the investor conference last year. “In a game of go the strategic objective is to put your pieces on the chessboard and surround your opponent.”