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>>>In early June, news broke that Ant Financial, an electronic payments service company affiliated with Alibaba, had raised a staggering $14 billion in what’s t

>>>In early June, news broke that Ant Financial, an electronic payments service company affiliated with Alibaba, had raised a staggering $14 billion in what’s technically a Series C round. To date, it’s the largest venture funding round in history. Led by Temasek Holdings and GIC (a Singaporean sovereign wealth fund), the round reportedly values Ant Financial at $150 billion. For perspective, that’s roughly twice Uber’s valuation and within spitting distance of Amazon founder Jeff Bezos’s current net worth. Hmmmm, just shows how little I understand about evaluation and/or VC because this seems crazy to me.

adventured 8y ago
Ant Financial is handling ~$4 trillion in payment processing annually. They have about half of the Chinese mobile payments market in Alipay (WeChat has something like 35-40%). They've moved into numerous financial segments. They had about $9 billion in revenue in 2017, and are nearing a billion users. The $150b valuation is rich, however it's about 1/3 to 1/4 the PE ratio that Amazon and Netflix are being given currently. At $150b it's trading for ~85 times net profit. The business is wildly profitable as you might expect. In terms of size, consider how big Visa, Mastercard, PayPal, etc. are. Visa now has a $294 billion market cap. That's based on $18b in sales and extremely high margins. Mastercard is worth $204 billion. PayPal is worth $100 billion; Ant Financial will be larger than PayPal in terms of sales within 12-24 months (and is comparable now in profit). The big risk regarding Ant Financial, is that the Chinese authorities are afraid of it and have begun boxing it in with controls. As one might expect, they don't like the idea of a single corporation controlling so much of China's financial flow (unless it's very firmly under the boot of the government).
- skohan 8y ago
  Why would a company with such massive revenue need to bring in so much external capital? Wouldn't the current stakeholders be better off keeping more of the pie?
  - adventured 8y ago
    Keep in mind $9 billion in sales is not quite massive revenue in the pool that Ant is now swimming. Their financial footing is not nearly so large as their scale of processing, they've only begun generating meaningful profit in the last year or two. Google is at $110 billion in sales, JP Morgan is at $94 billion, those are massive. The dilution of current stakeholders is intentional. I believe it was required by Chinese authorities (my speculation). I've been following Ant / Alipay with curiosity ever since Jack Ma stole it from Softbank and Yahoo (along with the rest of Alibaba shareholders). There have been a lot of bizarre things done with the company over time. Jack Ma for example gave himself the large majority share of ownership in the spun off entity, and then proceeded to voluntarily debase his ownership dramatically with no compensation. And now, having screwed Alibaba over with the Ant Financial spin out, Alibaba was recently forced by Jack Ma to buy a chunk of Ant again (33% of it). My guess on some of these choices, is that it's about nationalism (taking Ant away from foreign owners of Alibaba) and the requirement by Chinese authorities that Jack Ma not have too much power (and that Ant's ownership not be so concentrated in general). If he had held onto the stolen position in Ant Financial + his stake in Alibaba, he'd be closing in on the world's richest person title (~$100b in Ant, ~$30b in Alibaba + cash). That's a spotlight you do not want right now if you're under Xi. I'm certain the Chinese authorities do not want one person owning the majority control of something like Ant Financial, given its size and importance to the economy. There's no other rational reason for Ma to have voluntarily given up so much ownership in Ant, he's shrinking himself as a target (plausibly he was given no choice; I suspect it was always the plan from the moment Ant was taken from Alibaba). Or put it simply: Ant may end up being worth several hundred billion dollars. Imagine Jack Ma owning 2/3 of something worth $400 billion. Now picture the target on his back, that would go along with such power and control over the Chinese economy. It'd be Jack Ma vs Xi, and Jack Ma would lose; a very dangerous game to play if you're a simple civilian. Better to stay smaller and get to continue doing what you want to do (operate Alibaba and Ant), by giving up some power, ownership, and not being in any way perceived as a meaningful threat to the authorities and their absolute control.
    - baybal2 8y ago
      >JP Morgan is at $94 billion By the way, their C-Suite has just been to China to attend a humiliating "Handshaking Ceremony" with some "serious official"
- seanmcdirmid 8y ago
  Ant Financial has been involved in some very dodgy crowd funding schemes (though it is definitely the least dodgy of the bunch), the government has a right to be weary of them.
  - eaenki 8y ago
    Any source? I'm genuinely interested
    - baybal2 8y ago
      Ant is effectively a bank, and a huge one at that. The showstopper there is its staggeringly low capital ratio of ~0.5% - this is not a typo. If it were to be classified as a bank, it will have to be instantaneously closed down for violating just every banking regulation China has. And this is the true contention point, if they were to close Ant or arrest Ma with his Robin Hood image, it will be extremely unpopular.
galuggus 8y ago
China is going cashless -mobile payments are increasingly the norm. There are two main ways to pay with your phone wechat pay and Alipay(run by ant financial). It will potentially handle a huge percentage of ALL payments in a country as big as china.Maybe 150bn isn't such a crazy valuation
- DanAndersen 8y ago
  How rapidly are cashless transactions spreading in China? When I was there back in 2011-2012 everything was exclusively cash-only. I'd be interested to learn the rate of change in recent years.
  - fekunde 8y ago
    https://www.wsj.com/articles/chinas-mobile-payment-boom-changes-how-people-shop-borrow-even-panhandle-1515000570 https://www.wsj.com/articles/chinas-mobile-payment-boom-chan... What surprised me was the proliferation of Alipay in premium outlets near touristy areas in SF.
  - dmoy 8y ago
    Extremely fast. I agree with ~2011 being cash only, but the last time we were back (last year?), there was tons of wechat pay usage in restaurants, convenience stores, etc.
  - baybal2 8y ago
    >How rapidly are cashless transactions spreading in China? Basically overnight. Reason? 1. Alibaba and Tencent basically paying cash for people using their system; 2. POS terminal charges for them are near nil in comparison to rapacious rents Visa/MC processing banks were demanding just a year ago.
    - Latteland 8y ago
      It seems reliance on electronic pay is a big vulnerability, whenever there's a hickup everything stops. You can make the systems work reasonably well but there will be an outage eventually. In any kind of cyber battle you'd think this would be a huge problem. In the US I noticed most young people also carry little cash, while I'm often paying with cash. I know in China they also like ubiquitous tracking of people, and maybe the us govt would like that too.
azewail 8y ago
One of the reasons US-based startups grow so quickly is that the ones with traction here tap into a (relatively) homogeneous 300+ million market. A Chinese company with similar market share potential has tapped into about 4X that market. Growth rate is much faster in such a market, as opposed to global growth that has to deal with diverse sources of friction (e.g. Uber's challenges in London, Paris, etc. vs in the US).
- riku_iki 8y ago
  China is 4x larger users-wise, but what about revenue/gdp?
  - godzillabrennus 8y ago
    Still much lower but going up. American wages are overall flat for 40 years.
    - usaar333 8y ago
      Real average wages are up 25% since 1990. https://www.ssa.gov/oact/cola/central.html https://www.ssa.gov/oact/cola/central.html
  - coldtea 8y ago
    It's the momentum that matters not the absolute numbers.
- dopamean 8y ago
  I'm curious about how much of the considerable Chinese population is actually available to market tech products to. Something tells me comparing the populations straight up is misleading.
  - killjoywashere 8y ago
    > Something tells me comparing the populations straight up is misleading. Totally agree: once chosen by the Communist Party, a company is likely to enjoy state-sanctioned monopoly status. Not only will they have access to the entire population, the population may have no access to any other service provider in the same sector.

adventured 8y ago

Ant Financial is handling ~$4 trillion in payment processing annually. They have about half of the Chinese mobile payments market in Alipay (WeChat has something like 35-40%). They've moved into numerous financial segments. They had about $9 billion in revenue in 2017, and are nearing a billion users. The $150b valuation is rich, however it's about 1/3 to 1/4 the PE ratio that Amazon and Netflix are being given currently. At $150b it's trading for ~85 times net profit. The business is wildly profitable as you might expect. In terms of size, consider how big Visa, Mastercard, PayPal, etc. are. Visa now has a $294 billion market cap. That's based on $18b in sales and extremely high margins. Mastercard is worth $204 billion. PayPal is worth $100 billion; Ant Financial will be larger than PayPal in terms of sales within 12-24 months (and is comparable now in profit). The big risk regarding Ant Financial, is that the Chinese authorities are afraid of it and have begun boxing it in with controls. As one might expect, they don't like the idea of a single corporation controlling so much of China's financial flow (unless it's very firmly under the boot of the government).

skohan 8y ago
Why would a company with such massive revenue need to bring in so much external capital? Wouldn't the current stakeholders be better off keeping more of the pie?
- adventured 8y ago
  Keep in mind $9 billion in sales is not quite massive revenue in the pool that Ant is now swimming. Their financial footing is not nearly so large as their scale of processing, they've only begun generating meaningful profit in the last year or two. Google is at $110 billion in sales, JP Morgan is at $94 billion, those are massive. The dilution of current stakeholders is intentional. I believe it was required by Chinese authorities (my speculation). I've been following Ant / Alipay with curiosity ever since Jack Ma stole it from Softbank and Yahoo (along with the rest of Alibaba shareholders). There have been a lot of bizarre things done with the company over time. Jack Ma for example gave himself the large majority share of ownership in the spun off entity, and then proceeded to voluntarily debase his ownership dramatically with no compensation. And now, having screwed Alibaba over with the Ant Financial spin out, Alibaba was recently forced by Jack Ma to buy a chunk of Ant again (33% of it). My guess on some of these choices, is that it's about nationalism (taking Ant away from foreign owners of Alibaba) and the requirement by Chinese authorities that Jack Ma not have too much power (and that Ant's ownership not be so concentrated in general). If he had held onto the stolen position in Ant Financial + his stake in Alibaba, he'd be closing in on the world's richest person title (~$100b in Ant, ~$30b in Alibaba + cash). That's a spotlight you do not want right now if you're under Xi. I'm certain the Chinese authorities do not want one person owning the majority control of something like Ant Financial, given its size and importance to the economy. There's no other rational reason for Ma to have voluntarily given up so much ownership in Ant, he's shrinking himself as a target (plausibly he was given no choice; I suspect it was always the plan from the moment Ant was taken from Alibaba). Or put it simply: Ant may end up being worth several hundred billion dollars. Imagine Jack Ma owning 2/3 of something worth $400 billion. Now picture the target on his back, that would go along with such power and control over the Chinese economy. It'd be Jack Ma vs Xi, and Jack Ma would lose; a very dangerous game to play if you're a simple civilian. Better to stay smaller and get to continue doing what you want to do (operate Alibaba and Ant), by giving up some power, ownership, and not being in any way perceived as a meaningful threat to the authorities and their absolute control.
  - baybal2 8y ago
    >JP Morgan is at $94 billion By the way, their C-Suite has just been to China to attend a humiliating "Handshaking Ceremony" with some "serious official"
seanmcdirmid 8y ago
Ant Financial has been involved in some very dodgy crowd funding schemes (though it is definitely the least dodgy of the bunch), the government has a right to be weary of them.
- eaenki 8y ago
  Any source? I'm genuinely interested
  - baybal2 8y ago
    Ant is effectively a bank, and a huge one at that. The showstopper there is its staggeringly low capital ratio of ~0.5% - this is not a typo. If it were to be classified as a bank, it will have to be instantaneously closed down for violating just every banking regulation China has. And this is the true contention point, if they were to close Ant or arrest Ma with his Robin Hood image, it will be extremely unpopular.

galuggus 8y ago

China is going cashless -mobile payments are increasingly the norm. There are two main ways to pay with your phone wechat pay and Alipay(run by ant financial). It will potentially handle a huge percentage of ALL payments in a country as big as china.Maybe 150bn isn't such a crazy valuation

DanAndersen 8y ago
How rapidly are cashless transactions spreading in China? When I was there back in 2011-2012 everything was exclusively cash-only. I'd be interested to learn the rate of change in recent years.
- fekunde 8y ago
  https://www.wsj.com/articles/chinas-mobile-payment-boom-changes-how-people-shop-borrow-even-panhandle-1515000570 https://www.wsj.com/articles/chinas-mobile-payment-boom-chan... What surprised me was the proliferation of Alipay in premium outlets near touristy areas in SF.
- dmoy 8y ago
  Extremely fast. I agree with ~2011 being cash only, but the last time we were back (last year?), there was tons of wechat pay usage in restaurants, convenience stores, etc.
- baybal2 8y ago
  >How rapidly are cashless transactions spreading in China? Basically overnight. Reason? 1. Alibaba and Tencent basically paying cash for people using their system; 2. POS terminal charges for them are near nil in comparison to rapacious rents Visa/MC processing banks were demanding just a year ago.
  - Latteland 8y ago
    It seems reliance on electronic pay is a big vulnerability, whenever there's a hickup everything stops. You can make the systems work reasonably well but there will be an outage eventually. In any kind of cyber battle you'd think this would be a huge problem. In the US I noticed most young people also carry little cash, while I'm often paying with cash. I know in China they also like ubiquitous tracking of people, and maybe the us govt would like that too.

azewail 8y ago

One of the reasons US-based startups grow so quickly is that the ones with traction here tap into a (relatively) homogeneous 300+ million market. A Chinese company with similar market share potential has tapped into about 4X that market. Growth rate is much faster in such a market, as opposed to global growth that has to deal with diverse sources of friction (e.g. Uber's challenges in London, Paris, etc. vs in the US).

riku_iki 8y ago
China is 4x larger users-wise, but what about revenue/gdp?
- godzillabrennus 8y ago
  Still much lower but going up. American wages are overall flat for 40 years.
  - usaar333 8y ago
    Real average wages are up 25% since 1990. https://www.ssa.gov/oact/cola/central.html https://www.ssa.gov/oact/cola/central.html
- coldtea 8y ago
  It's the momentum that matters not the absolute numbers.
dopamean 8y ago
I'm curious about how much of the considerable Chinese population is actually available to market tech products to. Something tells me comparing the populations straight up is misleading.
- killjoywashere 8y ago
  > Something tells me comparing the populations straight up is misleading. Totally agree: once chosen by the Communist Party, a company is likely to enjoy state-sanctioned monopoly status. Not only will they have access to the entire population, the population may have no access to any other service provider in the same sector.