2-8-18 9:14 AM EST | Email Article
By Alyssa Abkowitz 

BEIJING -- Chinese internet giant Tencent Holdings Ltd. says it wants to improve the world through technology. David Wallerstein is on it.

Mr. Wallerstein, 43, is Tencent's chief exploration officer. The unusual title reflects his mission: To find so-called moonshot investments that could lead to big payoffs down the road. Mr. Wallerstein, a native Californian, has guided Tencent's investments in startups such as Lilium Aviation, which hopes to cut down on travel time with its electric flying cars, and Phytech Ltd., which helps farmers figure out when their plants need water.

"People who don't know him that well can make a mistake and say, 'This is an odd pocket of utopian money coming out of China'," said Matt Ocko, a Silicon Valley venture capitalist and friend of Mr. Wallerstein's. "Ten minutes, an hour, a day later -- depending on how astute they are -- they realize he and Tencent mean business."

Tencent, which built an empire on videogames and the popular WeChat social-media app and QQ messaging service, can afford to take some risks. It has a market value of nearly half a trillion dollars and about $24 billion in cash on hand, and has invested nearly $9 billion in enterprises outside China in the past five years, according to Dow Jones VentureSource. Last year, it snared a 5% stake in Tesla Inc.

The company is committed to "improving human life," said Tencent president Martin Lau in an emailed statement, adding that Mr. Wallerstein is advancing that agenda through exploratory investing in health care, agriculture and transportation.

"We basically need to take our planet back," Mr. Wallerstein said in a recent speech in Beijing. "This is how we're doing it at Tencent."

Tencent chairman and chief executive Ma Huateng -- also known as Pony Ma -- and his co-founders know Mr. Wallerstein's sharp investment eye firsthand. In 2001, Tencent was an unprofitable startup with a popular messaging service called QQ. Mr. Wallerstein was working in Beijing for the investment arm of Naspers Ltd., the South African media conglomerate.

Seeing QQ's potential, Mr. Wallerstein flew to Shenzhen, where Tencent is based, to propose an investment. Mr. Ma "politely declined," Mr. Wallerstein recalled. "I was very shocked."

Ultimately, Naspers bought 46.5% of Tencent for $32 million from two of the company's earliest investors. Naspers's stake is now worth nearly $180 billion today, even after being diluted to 33.4%.

Mr. Wallerstein soon joined Tencent, becoming the sixth man on its leadership team and helping in its early growth, including forging deals with Nokia and Motorola to integrate QQ into their handsets. After about a decade overseeing international business, Mr. Wallerstein moved into his current role, which he says allows him to work with entrepreneurs around the world. He remains the only foreigner on Tencent's 15-member management team, and is its main conduit to Silicon Valley.

Today, the guitar-playing vegan is based in Palo Alto, Calif., where he and his five-member team work out of a converted church. A fluent Mandarin speaker, he visits China every six weeks. Longtime associates say Mr. Wallerstein's quirky personality -- he once welcomed guests to a San Francisco dinner party by asking them to share their most embarrassing moments -- and unusual role at Tencent belie an investor who is dead serious.

Silicon Valley angel investor Ron Conway calls himself a fan. Mr. Conway said the two meet and trade notes on investment prospects several times a year.

"He encourages us to make the leap and invest in new market areas that normally we wouldn't look at," Mr. Conway said. Both their firms have invested in Watsi, a crowdsourcing platform to fund medical care in developing countries, and Skymind, an artificial-intelligence startup.

In September, Tencent led a $90 million investment in Lilium, the air-taxi company. "I wasn't thinking about it as a cool technology," Mr. Wallerstein said in an interview. "I was thinking, how do you solve the problem of cities being overcrowded and no roads in developing areas?"

Mr. Wallerstein also oversaw Tencent's 2011 acquisition of Los Angeles-based Riot Games, whose "League of Legends" is among the world's most popular games. Riot Games co-founder Marc Merrill said Mr. Wallerstein mediated between the two companies when Tencent wanted to use "League of Legends" characters in other content they owned, including comics and fiction. Riot had resisted on grounds that it would diminish its brand.

"David has helped contextualize things and Tencent has stayed true to allowing Riot to remain independent," Mr. Merrill said.

Mr. Wallerstein is using Tencent for other creative pursuits as well. A fan of heavy metal, he has recorded an album of original songs that he plans to release on Tencent's music streaming service this spring. One song, entitled "The Last Chance," opens with nature sounds, and ends with Mr. Wallerstein singing, "This is a chance to face the reality/One last dance for all of humanity," before fading out with the sound of a clock ticking.

Write to Alyssa Abkowitz at alyssa.abkowitz@wsj.com

 

(END) Dow Jones Newswires

February 08, 2018 09:14 ET (14:14 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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