In 2009, Susquehanna International Group, founded by Jeff Yass, invested in a Chinese real estate start-up called 99Fang which aimed to help buyers find their perfect homes. Employees of a Chinese subsidiary of the firm were deeply involved in the company’s conception, handpicking its chief executive, Zhang Yiming. Although 99Fang ultimately failed, it led to the birth of ByteDance, the owner of TikTok, now one of the world’s most highly valued start-ups. ByteDance is under scrutiny in the U.S. as lawmakers view the company as a threat to American security, considering a bill that could potentially break up the company.
Court documents reveal a complex origin story for ByteDance and TikTok, involving Susquehanna’s deep involvement in the company’s genesis. The records include emails, chat messages, and memos from inside Susquehanna, shedding light on a middling business experiment, founder-investor tension, and a powerful search engine that needed a purpose. Susquehanna’s founder, Jeff Yass, potentially has billions riding on the outcome of the debate surrounding ByteDance’s security risks in the U.S. Yass is also the single largest donor in the 2020 election cycle, contributing over $46 million.
The records were unsealed in a Pennsylvania lawsuit where former Susquehanna contractors accused the firm of taking cutting-edge search technology to ByteDance without compensating them. Susquehanna denied the accusations, stating that ByteDance did not receive any technology from the real estate site. While the two sides dispute the origins of ByteDance’s technology, the documents indicate that ByteDance itself emerged from 99Fang’s real estate efforts. The evolution of Mr. Zhang’s career under the guidance of Susquehanna has been previously unknown in the ByteDance story.
In 2005, Susquehanna created the Chinese subsidiary, SIG China, to invest in start-up companies, one of which was Kuxun, where Zhang Yiming worked as the technical director. In 2009, SIG China spun off Kuxun’s real estate section into a new venture, 99Fang, installing Zhang as the chief executive. By 2012, Zhang decided to shift the company’s focus from real estate to social media, leading to the formation of ByteDance. The degree to which Susquehanna influenced Zhang’s career decisions over the years was not widely known in the ByteDance story.
ByteDance evolved from 99Fang’s real estate efforts, transitioning to social media with the creation of a prototype app called Pretty Babes. The tech company prioritized user-engagement and curated content selection to drive virality and increase user stickiness. The curation element of TikTok’s algorithm has sparked concerns among lawmakers about national security risks due to its Chinese ownership. The success of ByteDance, valued at $225 billion, has proven Susquehanna’s bet on an unproven founder to be highly lucrative. The outcome of the Pennsylvania court case and legislation in Congress regarding TikTok’s potential sale remain uncertain.
