This Chinese tech giant was 2018’s most active corporate investor in AI startups

A man takes pictures at the 2018 Baidu World conference and exhibit in Beijing, China, November 1, 2018. REUTERS/Jason Lee – RC1951988F50
A man takes pictures at the 2018 Baidu World conference and exhibit in Beijing, China, November 1, 2018. REUTERS/Jason Lee – RC1951988F50
Image: Reuters/Jason Lee
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China’s largest search engine, with 70% of the search market, has been facing deeply negative perceptions and increased competition for advertising from the likes of Tencent’s WeChat, China’s all-in-one app, and newer arrivals like Bytedance, with its news and short video apps.

Nevertheless, Baidu on Feb. 21 beat expectations on fourth-quarter revenues, which came in at $3.96 billion, even as it posted a 50% drop in net profit for the quarter. It recorded $14.88 billion in revenues for the year and $4 billion in net profit, and reported strong growth in users for its mobile app and voice-recognition software.

Baidu’s heavily reliant on ad earnings for the moment—but it’s trying to change that. It has set high goals for developing artificial intelligence, from self-driving cars to personal assistants, in the hopes that it will dominate the field in China and beyond.

One sign of the strength of that pivot is that Baidu Ventures, the venture capital arm of the Chinese search giant, was last year the world’s most active corporate venture investor in AI, as measured in number of deals, according to report this week from investment research firm CB Insights. The Beijing-headquartered firm invested $1.2 billion in 53 companies last year, according to CB Insights, with 13 of those deals in AI companies. The sector drew $5 billion in corporate venture funding last year, CB Insights said, but didn’t say how much of that was from Baidu Ventures.

The company placed its bets on companies using AI in a variety of ways. Its biotech picks included two San Francisco-based start-ups: Atomwise, which uses deep learning to speed up the drug discovery process, and Engine Biosciences, which applies machine learning to genomics for drug discovery. On the industrial front, it has invested in companies like Beijing-based Aqrose Technology, which applies machine learning to industrial automation, and Shenzhen-based Xuanyu Technology, which also draws on machine learning to improve factory operations. It also invested in companies working on autonomous vehicles, optical chips that boost speeds on computing systems, and high-tech materials discovery.

“The diversification of Baidu’s business from mobile internet into the smart home, smart transportation, cloud and autonomous driving markets will require heavy investments,” said Herman Yu, the company’s chief financial officer, while discussing the results (paywall). “Nevertheless, these investments taken together give Baidu a balanced portfolio… and we hope to see these investments bear fruit and accelerate Baidu’s revenue growth in the coming years.”

Baidu Ventures’ investments made it the fourth most active corporate venture capital investor in 2018, behind only Google Ventures with 74 investments worth $3.7 billion, Salesforce Ventures, and Intel Capital. It also invested in double the number of companies it invested in 2017, and almost nine times the number in 2016, the year it was founded.

Just behind Baidu Ventures, in fifth place, was Shanghai-based Legend Capital, giving China two firms among the world’s top five corporate VCs in terms of number of deals for the first time. Corporate venture financing accounts for over a fifth of overall venture financing, according to CB Insights.