China’s tech giants are doing everything. Here’s what it means

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This is a Discuss post, where we feature short but insightful opinions from the Asian tech community on startup, entrepreneurship, and tech topics.

Whether through product development, investment, or acquisition, China’s tech giants are doing everything—from content and fintech to esports and autonomous vehicles. What does this mean, especially to smaller startups? How will things play out in the end?

We asked Benjamin Joffe (general partner at Hax) and Max Parasol (lecturer on Chinese innovation) for their thoughts.

Editor’s note: Answers have been edited for clarity.

Benjamin Joffe, general partner at SOSV’s Hax

Each ecosystem has a different trajectory. The US has a long experience with tech M&A’s, while this is fairly new in China. Large companies in the US also do hundreds of investments, but generally at early stage.

It is also possible that Chinese giants don’t really find other ways to make use of their cash. Capital movement restrictions may also be forcing them to invest the majority domestically, driving up valuations.

Another thing is that the “winner takes all” mentality gave rise to a “kingmaker” investment behavior (i.e. mega rounds to dominate the market, thanks to the power of capital). Softbank also did that and even removed the “leader cost premium” as they can just pick the second or third leader and make it first.

One other special thing in China which we don’t see elsewhere is the “mega-merger,” where two companies would end a price war by joining forces:

• Meituan-Dianping (Groupon+Yelp)
• Youku-Tudou (YouTube+DailyMotion)
• Didi-Kuaidi (Lyft+Uber)

I haven’t seen much of this elsewhere.

Let’s discuss