China-California Deals Endure Growing Pains, Ask Tesla And Quixey

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TeslaIn a strong indication of the links in tech between China and Silicon Valley, social network giant Tencent has acquired a 5 percent stake in U.S. electric car maker Tesla for $1.8 billion. The rationale behind the deal is potential collaboration on automated ride-sharing and delivery services as well as related information, entertainment and e-commerce content. The investment moves Tencent further into U.S. tech terrain, in concert with the BAT (Baidu and Alibaba).

Alibaba-backed search engine startup Quixey in Silicon Valley has failed with strategic misalignment, cultural differences and disagreements over a commercial contract to blame. Quixey was one of Alibaba’s first bets in Silicon Valley tech startups, and the Chinese conglomerate led financing of well more than $100 million in Quixey, starting from 2013 and ending with a $30 million loan and $10 million in cash last summer. It’s a high-profile fail for Alibaba and its U.S. investment strategy.

Hit the pause or stop button for two China-to-Hollywood deals that are not happening now.  A deal to buy Dick Clark Productions by Chinese conglomerate Dalian Wanda for $1 billion is off. A deal to buy TV maker Vizio for $2 billion by China’s LeEco has also hit the skids. The breakups come as Chinese regulators curb outbound “irrational” investments and as Congress scrutinizes the impact of China deal making in Hollywood.

A slowdown in revenue growth last year to only a 6.3% gain at Chinese search engine Baidu has led to reports coming that this tech leader has failed to keep pace with trends toward mobile commerce and social networks. Moreover, the loss of artificial intelligence expert Andrew Ng from Baidu, which has been counting on AI to broaden its business, was another blow.
On the plus side, Baidu Ventures has teamed up with Comet Ventures to invest exclusively in AI and machine learning technologies from its new fund of $200 million. Baidu hired Liu Wei, a co-founder of Comet Labs and a former partner at Legend Holdings’ venture arm to pilot the investments. Saban Farid, managing partner and founder of Comet Labs, detailed the fund strategy at the Israel Dealmaker Summit this past week in Silicon Valley and outlined test cases for AI’s use.

AirBNB may be the rare American success story in China, at least based on initial results that showed booking increases of 80+ over the past six months. A key to its beginner’s luck is hiring locally and setting up an in-country operation.

DEALS
HealthEngine, $10MDCM and Sequoia Capital China have invested $11 million in a B round of financing for big data analysis startup Sensors, founded by a former tech manager in Baidu’s data department.

INDIA
Sequoia Capital India
, venturing from its usual investments, has funded an online healthcare startup in of all places, Perth, Australia. Sequoia led the $21 million, Series C financing for the fast-growth Aussie startup, HealthEngine.