If I had a dollar for every time someone asked me if I am going to join a venture capital firm or some other investment vehicle, I could afford to pay the tip on lunch at Contonga. Maybe more.
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All that means is that there’s probably too much money in the Valley, and tech as a whole. We’re in overheated times, and there are cracks forming in the flanks of the bull cycle. Sure, there lots of strength in tech as well, but I think the balance is tipping back towards even.
Which is why ByteDance’s latest move is astounding. ByteDance, an app and content-driven Chinese technology giant, is raising its own fund according to The Information. Now, private companies raising a small fund to invest in their own platforms isn’t new. It’s something that companies large and small have done and still do.
“China’s ByteDance […] is in talks to raise the equivalent of more than $1 billion for its first venture fund to invest in artificial intelligence and media content[.]”
The article goes on to note that the fund will be worth the US-equivalent of about $1.45 billion. ByteDance is going to put up 20 percent, while others will pony up the other 80 percent. Yes, billion-dollar venture funds are not new (they are simply part of the landscape now), but as far as yet-private unicorns, I think this would be the largest corporate venture effort I’ve ever seen.
Next question: How does a private company wind up with a nearly 1500 million dollar capital pool for disbursement into other private firms? Well, you raise $3 billion a few months before from KKR and SoftBank and others.
So what we have here is the recycling of investment dollars through ByteDance and, then, partially into other companies. So ByteDance will have managed an equity exchange in which it took other people’s money, and used some of it to buy equity in other startups.
ByteDance is said to be worth $75 billion and has produced a lot of IPO chatter. But with a $1.45 billion vehicle, once it gets sorted out and presuming that it raises the full amount, the company will make headlines regardless of when its IPO lands.
Illustration: Li-Anne Dias