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Alibaba’s 9 most high-profile investments in US start-ups

Zoe Henry, special to cnbc.com
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Jack Ma, Alibaba Group
VCG/VCG | Getty Images

Over the past several years, Alibaba has been investing serious cash into U.S. start-ups, in industries ranging from transportation to augmented reality. The Chinese e-commerce giant in 2013 set up a Silicon Valley branch, headed up by former Liberty Media executive Michael Zeisser, to oversee its investments. It's just one way the company — which raised a staggering $25 billion in its 2014 U.S. IPO — is rapidly increasing its American presence.

Yesterday's letter to shareholders from executive chairman Jack Ma emphasized the company's globalization strategy and plans to grow each reach all over the world — including the U.S.

Here are some of the headline-grabbing investments Alibaba has made in U.S. companies recently.

Fanatics

Workers pull Fanatics' customer orders for shipping.
Source: Sabrina Korber

In 2013, Alibaba participated in a $170 million financing round in Fanatics, which valued the online sports retailer at a whopping $3.1 billion. The Jacksonville, Florida-based company says it generates more than $1 billion in annual revenue from licensed sports merchandise and has raised $600 million in venture capital funding to date from such firms as Andreessen Horowitz and Insight Venture Partners.

ShopRunner

ShopRunner web page
Source: ShopRunner

Also in 2013, Alibaba led a $206 million funding round in ShopRunner, a members-only online shopping service then run by former Yahoo CEO Scott Thompson. The investment continued a long-term relationship between Alibaba and Yahoo; at the time, Yahoo owned nearly a quarter of the e-commerce giant. ShopRunner, a competitor to Amazon's Prime business, currently works with roughly 150 merchants and has more than 3 million users — a huge number but still a far cry from Prime's roughly 50 million.

Quixey

A Quixey display at a trade show.
Getty Images

Quixey, a business that makes a search engine to find apps based on their functionality, raised $50 million from Alibaba and other investors in 2013. The company raised an additional $60 million last year, including from Alibaba, which valued the company at $600 million.

In August of this year, however, Quixey turned to the debt market for an additional $30 million, a move that suggests the company could be struggling to make ends meet. Its challenge: competition from such Goliaths as Google. Quixey's founder and CEO, Tomer Kagan, had stepped down from the top job in April, when Quixey reportedly failed to meet its revenue goals. Kagan stayed on as chief strategy officer and was replaced as CEO by Mark Lazar, a veteran exec from several enterprise and networking companies.

Tango

Tango app screens on a mobile phone
Source: Tango

In 2014, Alibaba invested $215 million in Tango, a popular mobile messaging app that counted 70 million active users at the time. The funding round, which raised a total of $280 million, valued the Mountain View, California-based Tango — a competitor to Alibaba rival Tencent Holding's WeChat app — at around $1 billion.

Tango was forced to lay off more than 20 percent of its staff in 2016 after an unsuccessful attempt at starting an e-commerce store. (It had already laid off about 9 percent of its staff in November of 2015.) Earlier this year, the company simplified the app by stripping away the social networking features that made it unique in the first place. The company's co-founder and CEO, Uri Raz, stepped down as chief executive officer in January and was replaced by founding CTO Eric Setton. As of October 2015, Tango had around 48 million users.


Lyft

A Lyft car drives along Powell Street in San Francisco.
Getty Images

The San Francisco ride-sharing company won investment from Alibaba in 2014 as part of a $250 million round. Other investors included Andreessen Horowitz, Founders Fund and Mayfield Fund. Lyft's valuation continues to grow, reaching $5.5 billion following a $500 million investment from General Motors. The company has cash in the bank to continue operating and expanding; it reportedly has been in talks recently to sell itself to companies including GM, Apple, Amazon, Google, Didi Chuxing and Uber.

Kabam

A screen image from Kabam's Global Warfare
Source: Kabam

In 2014 Alibaba invested $120 million in Kabam, a San Francisco-based mobile game studio. The deal increased the start-up's valuation to $1 billion, from $700 million. As part of the agreement, Kabam migrated titles such as "The Hobbit: Kingdoms of the Middle-Earth" and "Fast & Furious 6: The Game" to Alibaba's messaging app, Laiwang.

Today, Kabam has six games that have generated more than $100 million in revenue. Its game "Marvel Contest of Champions," which is free to play, makes more than $25 million a month through sales of virtual goods. Currently, Kabam is working with Hasbro to create a mobile game based on the Transformers series, set to debut in 2017. Despite these successes, though, the company laid off about 8 percent of its workforce in February and another 3 percent in July, in an effort to reduce operational costs.

Jet.com

An employee pushes carts of empty boxes at the Jet.com fulfillment center in Kansas City.
Daniel Acker | Bloomberg | Getty Images

Alibaba quietly participated in Jet.com's $140 million financing in February of 2015, marking its first notable investment in an Amazon challenger. The round valued Jet.com at around $600 million. Wal-mart acquired Jet.com in August for a staggering $3.3 billion. The deal was the largest-ever purchase of a U.S. e-commerce start-up, and at the time, Jet.com was on track to sell $1 billion worth of merchandise for the year.

Snapchat

Patrick T. Fallon | Bloomberg | Getty Images

Last year Alibaba invested $200 million in social media company Snapchat, a deal that valued it at $15 billion. Today, Snapchat is said to be worth more than $20 billion. The disappearing-messages app has 150 million active users, who consume more than 10 billion videos each day. The company, which recently changed its name to Snap, is reportedly on track to bring in $300 million in 2016 revenue. It's said to be planning an IPO for early 2017.

While Snapchat is currently banned in China, Alibaba may be interested in using the messaging service to expand its mobile operations with cross-border payments, for instance. Mobile payments start-up Square has already partnered with Snapchat to let users send money via "Snapcash." Users can sync their debit card with their account and then make a transfer by typing in a dollar sign and the desired sum.


Magic Leap

An image used by Magic Leap on their website.
Source: Magic Leap

Earlier this year, Alibaba led a $793.5 million funding round in Magic Leap, a virtual reality start-up based in Dania Beach, Florida. Magic Leap has yet to come out with its consumer product — widely expected to be a virtual reality headset — but has raised more than $1 billion in venture capital funding to date from other investors, including Google, Andreessen Horowitz and Kleiner Perkins. After the most recent infusion of cash, Magic Leap was valued at an impressive $4.5 billion. The company plans to sell its devices in China via Alibaba's websites, leveraging Alibaba's platform and knowledge of the market.