Although the impact of Alibaba’s listing on the global capital market is still unclear, there are reasons why Kiwi businesses involved in ecommerce solutions and payment solutions should sit up and take note.
Forbes, in a recent article, predicted Ali Baba’s listing will have a big impact on the venture capital and private equity world. Alibaba raised $21.8 billion from its IPO.
Closer to New Zealand, there is opportunity for Kiwi ecommerce and payment solutions technology to be spotted and snapped up, industry watchers say.
Gilles Ubaghs, senior analyst, Financial Services Technology, at Ovum, a global technology research company: “Alibaba will likely be looking for partners in foreign markets, particularly from a payments perspective via sister company AliPay, as it has for some time now with companies like Stripe and WorldPay.”
Stripe provides solutions for online and mobile payment solutions, including solutions for Apple's payment platform, ApplePay. Worldpay provides payment processing solutions for internet transactions and point-of-sale transactions.
Alipay is already one of the world’s largest mobile payments platform with 100 million users. According to Alibaba’s IPO documents lodged with the Securities Exchange Commission, Alipay settled US$5.8 billion on Singles Day in 2013. Singles Day is the equivalent of the US’ Cyber Monday and Click Monday in New Zealand.
Ubaghs expects Alipay to make further inroads internationally and rise in importance as a global payments solutions player.
Alibaba is also likely to target the Chinese community outside of China as it seeks to grow its global business, he says.
In 2013, Alibaba transacted an annual US$248 billion worth of retail trades over 11.3 billion orders from 231 active traders.
Alibaba, was started in an apartment by Jack Ma, in 1999, with funds pooled from friends and family. In the many interviews given by him, Ma says his technological advantage is limited to sending and receiving email.
Alibaba operates the Taobao marketplace, China’s largest online shopping destination; Tmall, China’s largest third-party platform for brands and retailers, and Juhuasuan, China’s most popular group buying marketplace.
Tim Bennett, CEO of NZX, is of the view that any Chinese liquidity that will flow on through into New Zealand will go towards unlisted and private assets. He adds that Chinese foreign direct investment in New Zealand is about 5 per cent of the total FDI, compared 50 per cent for Australia.
Chinese companies are hot on the trail of Kiwi assets, according to Johnathan Chen, head of division (Asia) at patent attorneys James and Wells.n
“The Chinese are hungry for IP (intellectual property). They are already an ecommerce giant. Kiwis have the opportunity to get their IP out there (when the Chinese come shopping),” Chen says.
He notes that, recently, a group of cash-rich Chinese investors were in New Zealand, holding among them between $20 million-$30 million ready to be invested in the food and beverage sector. He added that given China emergence as an IP creator, Kiwi companies would do well to form partnerships or alliances.
Below is Chen’s checklist for Kiwi companies looking to deal with potential Chinese investors:
- Make sure all discussions are confidential – though the timing of when the NDAs (non disclosure agreements) are signed needs to be determined on a case by case basis.
- Know your value proposition (not just your idea/product), what makes your business attractive, what's its competitive edge? Is there a steady revenue stream already, or do you offer something that no one else can?
- Record your IP and register it where possible – this becomes your bargaining chip, and don’t be afraid to use them.
- Know the rules, i.e. are there any governing laws or rules which may hinder the investment and/or your project?
- Do not rush – the Chinese often likes to get to know their partners before making commitments.
- Be smart to read between the lines, better to get a quick “no”, than getting sucked in for a long “no” – It is in their culture to not bluntly say “no”. The Chinese have a million and one ways to say “no”, and they all sound like “yes”.
- Be prepared to build relationships with investors, and share.
- Be prepared to listen to what your investor is interested in, and have a number of propositions for each scenario.
- Know and prepare the exit strategy.
- Know the bottom line of what you are willing to give up (% of shares) and how much you need (not want).