Investors who once turned down Alibaba and lived to tell their stories.

Nvest
Nvest
Sep 19, 2014 · 4 min read

There were over 1000 investors who attended the roadshow of Alibaba at Waldorf Astoria hotel, and the elevator queue was over 40 minutes. The popularity of Alibaba had brought an “Ali Storm” to New York.

During the roadshow of Alibaba, Jack Ma said “I was here to seek for $2 million 15 years ago, but was rejected by over 30 VCs, here I am again to seek for $20 billion”. Based on prospectus, Alibaba IPO is to be sold around 320 million shares with total value of $24.3 billion. The corresponding market value of Alibaba is $162.7 billion.

Alibaba! Shut up and take my MONEY!!!!

Initial reactions from major venture capitalists

Back in the days when Alibaba was still very young, finding a venture capitalist for Alibaba was a nightmare. As a result, Jack has to take its financing aboard. When Jack positioned Alibaba in front of Masayoshi Son, the CEO of Softbank, it took Masayoshi Son no more than 6 minutes to decide to invest $20 million dollars in Jack Ma and Alibaba. Later when people questioned what made him so sure about this investment, he said, “I saw the light of determination in Jack’s eyes”.

On the other hand, the decision made by Charles Xue (a famous Chinese-American angel investor) was rather in the other extreme, he thought Jack with such determination won’t have any future. We know later that Charles really regretted this decision. Many more people had an opportunity of a lifetime to invest in Alibaba. Their reasons for rejecting Alibaba were very different, but their reactions toward their initial decisions are filled with regret.

Charles Xue turns down investment opportunity

Hugo Xiong: “It is our biggest failure that we missed Alibaba.”

Hugo Xiong missed out on Alibaba

In 2007, Hugo Xiong, president in Asian pacific region from IDG venture capital said in the e-commerce conference “IDG had invested in many dot com companies, including Baidu, Ctrip etc. Leaving out Alibaba is our greatest failure”

Hugo Xiong said: “It is not that I did not want to invest in Alibaba, It is just that I did not have chance to come across with Alibaba during its early stage, now even if I put all the money into Alibaba, it will only account for few shares.”

October 1999, Jack got his first angel investment of $5 million. That was led by Goldman Sachs and leading fund companies from America, Asia, and Europe. Unfortunately, it was finalized in Silicon Valley, and IDG Asia missed that first opportunity to invest in Alibaba. During second round of financing, Softbank kicked in. Since then, Softbank kept financial support to Alibaba and became the biggest shareholder of Alibaba.

After 2000, venture groups led by Japan’s Softbank have been Jack’s guests of honors. In 2005, Alibaba acquired Yahoo China, and exchanged 40% original stake with $1 billion in cash. This has completely closed the door to IDG Asia.

Pony Ma: “I truly regret it.”

Pony Ma, regretting every moment of turning down Alibaba

As a main competitor as well as a venture capitalist, Pony Ma had a chance to invest in Alibaba, but he passed it.

During 2013, Pony said “when TaoBao was still in the early stage, I have been offered 15% investment opportunity. But I wasn't quite optimistic with it, meanwhile, I think the share offered is too small, if was 50% instead, I would have invested.”

Nobody knows what will be the next big thing

The internet world is always filled with uncertainty, but also has many legendary stories. Here are a few examples for everyone:

  1. In 2009, co-founder Brian Acton of WhatsApp approached Facebook for angel investment and got rejected. In 2014, Facebook spent $19 billion to acquire WhatsApp.
  2. Pony Ma had considered to sell QQ for $600,00 rmb ($100,000 USD), and have negotiated with four companies that all ended with failure. In 2014, Pony Ma accumulated $15.4 billion net worth upon the highly successful internet platforms, QQ and WeChat, and became the second richest man in mainland China.
  3. In 1999, Richard Li has held 20% shares of Tencent, but he sold them after two years. If Richard could have held until today, then he will absolutely become the richest man in China. (He is currently #1 in China, but only ahead of Pony Ma by a small margin).

If you have any questions about the article, feel free to contact Yang Liu at yang@nvest.me

Nvest

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Nvest

Nvest is a crowdsourced stock recommendation platform that makes it easier to find reliable stock advice

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