There is a much, much easier explanation for the obscene valuation:
> The round was led by Greenoaks Capital with participation from Firstmark, ___Tencent___, IVP, Index Ventures and Technology Opportunity Partners.
All and every big Chinese company seeks to exfiltrate cash out of the country no mater what the justification is.
That way you have China Rail buying Canadian casinos, tech companies buying American pig farms, and a farming cooperative buying Dutch semiconductor fab equipment maker.
I will not be surprised that Tencent will dump them upon first opportunity. I am almost certain that all other players on board the deal are there just to provide the justification and legal cover for otherwise nonsensical deal.
can you substantiate more here.. it reads like they made one good bet on Tencent and you suddently regard them as "the savviest and most forward-thinking players in tech investment ". have you looked at their other bets?
This was not a capital raise. Read the filing. Tencent acquired most of the shares on the open market and the remainder in the round that was announced earlier this month.
They probably have a significant investment from Chinese LPs. It could put those investors in a very awkward situation if YC was more explicit with their statement -- we've all seen how childishly defensive the Chinese government can get.
> Prosus, one of Europe’s most valuable tech companies, is best known as the largest shareholder in Chinese internet and videogaming giant Tencent Holdings Ltd. Listed in Amsterdam, Prosus signaled its appetite for deal making when it sold a small portion of its equity stake in Tencent in April for $14.6 billion. The Stack Overflow deal ranks among Prosus’ biggest acquisitions.
It reads to me as pretty much entirely an end-run around Chinese capital controls. Chinese investors can't just go and buy US assets, but they can buy Chinese companies that have engineered a purchase of US assets. This is the fundamental driving force for the price difference.
Expect a lot of these companies to take a bath if/when capital controls get eased.
> Sure, he worked at Baidu and led a team there, but this is a LOT of money for a very small chance at anything competitive.
There's much more macroeconomics/geopolitics at play on this one and likely more behind the scenes action than anyone here has knowledge of.
Honestly, I don't question what Chinese investors do anymore. They don't play by the same rules as everyone else - they expect lower returns than western firms, they want to get their money out of china and into the US, many of them have political ties, they use capital as a means of status/power (at the expense of financial ROI), and god only knows what is happening behind the scenes in terms of digital espionage.
I don't know the details of the situation so I'd be happy to hear from someone who knows more, but this deal could've been a huge win for Chinese financial markets. Down the road, unexpected government action like this could hurt investor confidence and depress the amount of money Chinese companies will be able to raise from foreign investors.
That’s what I don’t get. Tencent in particular has seemed like a fairly benevolent investor in Western companies so far, and I don’t see why that would change.
> Chinese investor cash is effectively Chinese government investment.
Agreed. I've said this before and say it again - if a Chinese acquirer is willing to buy your company for a much higher multiplier than their Western counterparts then there is an obvious reason.
> 1) A good chunk of Discord is owned by Tencent, a big Chinese conglomerate
The most credible source from this is this article[0], but since it's VC we have no idea what the ownership looks like. For all we know Tencent owns 5% or less of Discord, especially given two companies are listed before them in the article:
> The round was led by Greenoaks Capital with participation from Firstmark, Tencent, IVP, Index Ventures and Technology Opportunity Partners.
In general Tencent has more pull in other big gaming companies[1], which is more concerning imo.
> The round was led by Greenoaks Capital with participation from Firstmark, ___Tencent___, IVP, Index Ventures and Technology Opportunity Partners.
All and every big Chinese company seeks to exfiltrate cash out of the country no mater what the justification is.
That way you have China Rail buying Canadian casinos, tech companies buying American pig farms, and a farming cooperative buying Dutch semiconductor fab equipment maker.
I will not be surprised that Tencent will dump them upon first opportunity. I am almost certain that all other players on board the deal are there just to provide the justification and legal cover for otherwise nonsensical deal.
reply