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China Pouring Money Into America’s Hottest Startups

TechCrunchJD.com has become the latest internet company in China to venture into the consumer credit space, after the NASDAQ-listed online retailer — a rival to Alibaba — launched a joint venture alongside LA-based financial services company ZestFinance.

The aim is to offer new microloan options to Chinese consumers, particularly those who not have credit history and other credentials traditionally required to land a credit card or other finance options. JD-ZestFinance Gaia, as the JV is called, will use ZestFinance’s machine learning underwriting technology to make credit decisions based on JD.com’s consumer data, which the company claimed spans 100 million monthly customers.

Shengqiang Chen, JD Finance’s CEO, said the partnership will help make credit fairer for many in China:

Chinese shoppers are hungry for convenient, reliable and fair credit channels. This requires both a systematic method for making decisions and a robust infrastructure that enables lenders to share data — neither of which is sufficiently developed yet in China.

Today’s announcement with ZestFinance is a foundational step toward building a reliable system for assessing credit risk that will help meet the huge market need.

The coming-together also sees JD.com made an undisclosed investment in ZestFinance, which was founded by ex-Google CIO and VP of engineering Douglas Merrill and has raised nearly $100 million from investors — including its most recent $20 million Series C round which closed in July 2013.

JD.com is not the first company in China to jump into this space by any means. Alibaba’s Ant Financial affiliate — which this week launched an online bank — has run investment fund Yu’e Bao for two years (accumulating $92 billion in its first year) while it has offered loans for even longer. Indeed, it launched an $80 million micro-loans program for female entrepreneurs in January of this year.

Tencent is also active in the financial space. It began trialling its WeBank online bank service earlier this year. WeBank’s first financial product — a microloans service — went live earlier this month, offering loans of $3,225-$32,250 using the company’s own big data solution. Unlike its two bigger rivals, JD.com has opted to pull in a third-party to provide the underwriting and big data tech. Read the full article

Forbes: Alibaba and its two giant Chinese Internet rivals–search engine Baidu and gaming/messaging firm Tencent–a trio known as BAT, are pouring money into all manner of firms at every stage from seed to late rounds. Since 2012 we count more than 50 investments totaling $2.3 billion. In the past 18 months alone Alibaba has plowed more than $1 billion into just ten U.S. firms. The three BAT companies each monopolize a sphere of China’s desktop-style online behavior, but they risk falling behind in mobile. This is a problem in a country where tens of millions of people skip PCs entirely. Hence the landgrab–the Big Three don’t much care where the innovations on this new intertwined platform come from or, it seems, how much they have to shell out to secure them.

Many of the investments are bizarre on the surface, smacking of dumb money rushing in late in the cycle and driving up valuations for everyone. Why would an e-commerce giant spend tens of millions of dollars on a startup like Peel that’s outside of its core business, not to mention its core country?

In a word: smartphones. The three BAT companies each monopolize a sphere of China’s desktop-style online behavior, but they risk falling behind in mobile. This is a problem in a country where tens of millions of people skip PCs entirely. Hence the landgrab–the Big Three don’t much care where the innovations on this new intertwined platform come from or, it seems, how much they have to shell out to secure them. Read the full article

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