Alibaba, Rakuten Push Into U.S. Startups With Snapchat and Lyft

Major competitors from Asia are vying for a large stake in online car-booking and other tech markets. Japanese e-commerce company Rakuten announced today it is piling $300 million into San Francisco-based Lyft, the mobile-app car service that competes with Uber.

Chinese retail giant Alibaba Group has had a stake in Lyft since April of last year, reportedly putting $250 million into the app-based car provider. Lyft’s latest financing round, which Reuters said totaled $530 million when including other investors such as Fortress Investment Group, values the company at about $2.5 billion.

Baidu, the Chinese search company, meanwhile has invested an unknown amount in Uber, which is one of the highest valued startups in the world at $40 billion, according to Bloomberg. The wire service reported that the amount could be as much as $600 million, citing Chinese National Radio. (Complicating the picture further is that Tencent is a backer of Chinese car-hailing app Didi Dache, while SoftBank has invested in GrabTaxi and Kuaidi Dache.)

It’s not just car services that are driving Asian investors to look at the U.S. Alibaba’s reported $200 million investment in Snapchat values the social media app at $15 billion. Alibaba, which Xconomy’s Benjamin Romano profiled the January before its IPO, has spent the last year making multiple other investments in startup companies—from paying $590 million for a minority stake in Chinese smartphone maker Meizu in February to tossing $250 million into Lyft itself in April of last year.

What’s driving these international conglomerates to invest? Part of it, especially for Alibaba, is having tons of cash, says Anand Sanwal, the CEO of research firm CB Insights. Alibaba, the online commerce site that also owns payment processing and social media tools, raised $25 billion last year in the world’s largest initial public offering.

These investments can provide strategic and financial benefits to businesses like Alibaba and Rakuten, Sanwal wrote in an e-mail.

“Facebook’s late investors ended up doing very well, so there is a precedent for these late stage rounds doing quite well from a returns perspective,” Sanwal wrote.

Alibaba has not been alone in its dealmaking, of course. Rakuten bought Viber Media for $900 million last year, according to Reuters, and also added Slice, a Palo Alto, CA-based e-commerce and tracking app developer. And back in 2013, Rakuten became a majority owner of The Grommet, a Boston-area company that runs a product-launch site.

One other factor can often lead to big investments, Sanwal says: fear of missing out. What if you could have gotten in on Lyft when it was worth just $2.5 billion, instead of $40 billion like its competitor?

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at [email protected] Follow @xconholley

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