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In 2009, years before Jeff Yass became a prominent Republican donor, his company, Susquehanna International Group, invested in a Chinese real estate startup called 99Fang. This startup boasted an advanced search algorithm designed to help homebuyers find their ideal properties. Notably, records reveal that employees of a Chinese subsidiary of Yass’s firm played a significant role in the startup’s inception, even conceptualizing the idea and handpicking its CEO, who they referred to as not the “real founder” in emails.
Although 99Fang’s real estate venture ultimately failed, it laid the groundwork for something more significant. Former Susquehanna contractors claim that 99Fang’s CEO and search technology resurfaced at another Susquehanna venture: ByteDance, now the owner of TikTok and one of the world’s most highly valued startups, worth $225 billion according to CB Insights, a firm that tracks venture capital. However, it faces scrutiny on Capitol Hill, with some lawmakers viewing it as a threat to American security and considering a bill that could potentially break up the company.
…records show a middling business experiment, tension between founders and investors, and the emergence of a powerful search engine in need of a purpose. Moreover, they reveal Susquehanna’s involvement in TikTok’s genesis runs deeper than previously known, with the firm playing an active role in nurturing Zhang Yiming’s career and endorsing the formation of ByteDance
Court documents reveal a more nuanced origin story for ByteDance and TikTok, containing emails, chat messages, and memos from within Susquehanna that detail the beginnings of the companies. These records show a middling business experiment, tension between founders and investors, and the emergence of a powerful search engine in need of a purpose. Moreover, they reveal Susquehanna’s involvement in TikTok’s genesis runs deeper than previously known, with the firm playing an active role in nurturing Zhang Yiming’s career and endorsing the formation of ByteDance.
With potentially tens of billions of dollars at stake, Susquehanna finds itself at the center of a heated debate over whether TikTok gives its Chinese owner the ability to spread discord and disinformation among Americans. Jeff Yass, a former professional poker player and top donor in this election cycle, having contributed over $46 million through the end of last year, has turned over his emails as part of the case, but they are not publicly available, leaving his personal involvement in ByteDance’s formation unclear.
These court records surfaced in a Pennsylvania lawsuit where former Susquehanna contractors accuse the firm of taking cutting-edge search technology to ByteDance without compensation. Susquehanna denies the accusations, stating that ByteDance did not receive any technology from the real estate site.
The records, recently unsealed, came to light this month. Upon review and subsequent inquiries, Susquehanna’s attorneys clarified that the documents were inadvertently made public, prompting the judge to reseal them on Tuesday. Both parties’ legal representatives opted not to provide comments. Requests for input from ByteDance, Mr. Yass, and Mr. Zhang went unanswered or unacknowledged.
While the dispute over ByteDance’s technology origins persists, the documents underscore that the company emerged from 99Fang’s real estate endeavors. In a 2012 email, Mr. Zhang highlighted the potency of their search, image processing, and recommendation tools, albeit acknowledging their limited application in real estate.
Rather than facilitating home purchases, Mr. Zhang outlined plans to pivot towards user engagement, proposing prototype pages like Funny Pictures and Pretty Babes. He envisioned this initiative as a “brother enterprise” sharing technology with the real estate platform. Years later, a Susquehanna director in China attributed ByteDance’s inception to the housing site deal in correspondence with a colleague.
The Origins of a Tech Giant
In 2005, Susquehanna International Group established its Chinese subsidiary, SIG China, to invest in promising startups. One of its early investments was Kuxun, a portal focused on job listings, housing ads, and travel. Zhang Yiming, then in his early 20s, was the site’s technical director, and SIG China saw him as a talented individual with great potential.
Zhang left Kuxun for a job at Microsoft but was lured back by SIG China in 2009 to lead a new venture, 99Fang, which was spun off from Kuxun’s real estate section. Internal memos reveal that SIG China employees viewed Zhang as a top engineer and a promising leader. However, the relationship between Zhang and SIG China was complex, with Zhang describing himself as 99Fang’s founder despite owning few shares.
By 2011, tensions arose between Zhang and SIG China, with a managing director, Tim Gong, expressing frustration over shares. In an email, Gong suggested parting ways with Zhang, stating, “We shall let him go.” By 2012, Zhang had lost interest in real estate and sought a career change, inspired by Steve Jobs’ life story. He believed that 99Fang’s search technology needed a new purpose, and social media opportunities were emerging as people increasingly used cellphones.
The extent to which Susquehanna guided Zhang’s career over the years has never been fully disclosed. However, an SIG employee, Joan Wang, has written about meeting Zhang to discuss his new venture, which would become ByteDance. Zhang mapped out his plan on a napkin, and Wang wrote in an investment memo that Zhang sought Susquehanna’s approval to leave 99Fang and establish a new company.
By March 2012, the project had a new name, Xiangping, which translates to “share comments.” Zhang created a prototype app, Pretty Babes, which users enjoyed, and remnants of Xiangping’s early existence are still archived online
By March 2012, the project had a new name, Xiangping, which translates to “share comments.” Zhang created a prototype app, Pretty Babes, which users enjoyed, and remnants of Xiangping’s early existence are still archived online. The investment memo outlined Xiangping’s plan to select content for users, engineer virality, and increase user engagement. This approach would later become a hallmark of TikTok’s algorithm.
ByteDance’s technology has evolved, but its ability to provide users with enjoyable content remains at the heart of the controversy surrounding TikTok. Some lawmakers fear the influence of a company with Chinese ownership having such a powerful algorithm. In 2012, SIG China valued the startup at around $9 million and invested over $2 million, with its lawyers stating that it had contributed hundreds of millions in further investments.
From there, the company’s story is well-known. It rebranded as ByteDance, acquired the lip-sync app, and used it as the foundation for TikTok. By 2018, ByteDance had become one of the world’s most valuable private technology companies. Susquehanna’s bet on an unproven founder is not unusual, but its success is remarkable. As Steven Kaplan, a researcher at the University of Chicago Booth School of Business, notes, “Part of it is they saw something; part of it is they got lucky.”
What Lies Ahead?
While the Pennsylvania court case may eventually proceed to a jury, no trial date has been scheduled as of now. In March, the House greenlit a bill that could potentially compel the sale of TikTok, with a Senate vote looming as early as next week.
Beyond his political contributions, Mr. Yass has been a key financial supporter of an extensive advocacy effort led by the libertarian Club for Growth to resist the TikTok ban. However, this campaign has yielded mixed outcomes thus far, with several House members backed by the group endorsing the ban.
The bill’s journey through legislation is not without uncertainties, with former President Donald J. Trump representing a wildcard factor. During his presidency, he aggressively pursued the sale of TikTok, only to backtrack on his stance later. While he has acknowledged a brief meeting with Mr. Yass, he maintains that TikTok was not discussed during their interaction.
