In 2009, lengthy earlier than Jeff Yass grew to become a Republican megadonor, his agency, Susquehanna Worldwide Group, invested in a Chinese language actual property start-up that boasted a complicated search algorithm.

The corporate, 99Fang, promised to assist consumers discover their good houses. Behind the scenes, workers of a Chinese language subsidiary of Mr. Yass’s agency have been so deeply concerned, information present, that they conceived the thought for the corporate and handpicked its chief government. They stated in a single electronic mail that he was not the corporate’s “actual founder.”

As an actual property enterprise, 99Fang finally fizzled. However it was vital, based on a lawsuit by former Susquehanna contractors, due to what it spawned. They are saying that 99Fang’s chief government — and the search expertise — resurfaced at one other Susquehanna enterprise: ByteDance.

ByteDance, the proprietor of TikTok, is now one of many world’s most extremely valued start-ups, value $225 billion, based on CB Insights, a agency that tracks enterprise capital. ByteDance can also be on the heart of a tempest on Capitol Hill, the place some lawmakers see the corporate as a menace to American safety. They’re contemplating a invoice that would break up the corporate. The person picked by Susquehanna to run the housing web site, Zhang Yiming, grew to become ByteDance’s founder.

Courtroom paperwork reveal a fancy origin story for ByteDance and TikTok. The information embrace emails, chat messages and memos from inside Susquehanna. They describe a middling enterprise experiment, founder-investor pressure and, finally, a strong search engine that simply wanted a function.

The information additionally present that Mr. Yass’s agency was extra deeply concerned in TikTok’s genesis than beforehand recognized. It has been broadly reported in The New York Instances and elsewhere that Susquehanna owns roughly 15 p.c of ByteDance, however the paperwork clarify that the agency was no passive investor. It nurtured Mr. Zhang’s profession and signed off on the thought for the corporate.

Susquehanna has tens of billions of {dollars} at stake as lawmakers debate whether or not TikTok offers its Chinese language proprietor the ability to sow discord and unfold disinformation amongst Individuals. As Susquehanna’s founder, Mr. Yass doubtlessly has billions driving on the end result of the talk.

Mr. Yass, a former skilled poker participant, can also be the only largest donor this election cycle, with greater than $46 million in contributions by the top of final 12 months, based on OpenSecrets, a analysis group that tracks cash in politics.

Susquehanna has turned over Mr. Yass’s emails as a part of the case, based on courtroom paperwork. However these emails will not be included within the trove that was made public, leaving Mr. Yass’s private involvement in ByteDance’s formation unknown.

The information surfaced in a Pennsylvania lawsuit. Former Susquehanna contractors accuse the agency of taking cutting-edge search expertise to ByteDance with out compensating them. Susquehanna denies the accusations, saying that ByteDance didn’t obtain any expertise from the actual property web site. “These claims are with out advantage and we’ll defend ourselves vigorously,” an organization spokesman stated.

The information have been unsealed this month. After The Instances downloaded them and commenced asking questions, attorneys for Susquehanna stated that the paperwork had been inadvertently made public. The decide resealed them on Tuesday.

Attorneys for each events declined to remark. ByteDance, Mr. Yass and Mr. Zhang both didn’t reply questions or didn’t reply to messages looking for remark.

Whereas the 2 sides dispute the origins of ByteDance’s expertise, the paperwork clarify that the corporate itself emerged from 99Fang’s actual property efforts. “Our search, picture processing, suggestion, and so on. are very highly effective,” Mr. Zhang wrote in a 2012 electronic mail, “however these items utilized to actual property are very restricted.”

Quite than match consumers with houses, Mr. Zhang laid out plans that 12 months to match customers with lighthearted content material, growing prototype pages referred to as Humorous Photos and Fairly Babes. He described the brand new undertaking as a “brother enterprise” that will share expertise with the actual property web site.

Years later, a director for Susquehanna in China would write to a colleague that the housing web site deal had led to “the beginning of ByteDance.”

How It All Began

In 2005, Susquehanna created the Chinese language subsidiary, SIG China, to put money into start-up firms.

One early funding was Kuxun, a portal that targeted on job listings, housing commercials and journey. Mr. Zhang, then in his early 20s, was the location’s technical director, and SIG China considered him as a promising expertise.

He left the corporate for a job with Microsoft. However in 2009, as SIG China ready to spin off Kuxun’s actual property part into its personal enterprise, the funding agency lured Mr. Zhang again and put in him because the chief government of the brand new firm, 99Fang.

“We have now recruited the highest engineer of the housing channel again to guide the technical group,” SIG China workers wrote in an inside memo.

However the relationship between Mr. Zhang and SIG China was difficult, information present.

He described himself as 99Fang’s founder however owned few shares, the paperwork say.

In 2011, Tim Gong, an SIG China managing director, vented about Mr. Zhang amid an obvious dispute over shares. “Kuxun and 99Fang have been each NOT based by him,” Mr. Gong wrote to a colleague. The total context is just not clear, however he ends the message by seeming to counsel parting methods with Mr. Zhang: “We will let him go.”

By 2012, actual property not excited Mr. Zhang. After learning the lifetime of Apple founder Steve Jobs, he stated in an electronic mail to SIG China, he realized that he wanted a profession change. Social media alternatives have been sprouting up as individuals purchased cellphones. He steered that 99Fang’s search expertise wanted a special function.

The diploma to which Susquehanna steered Mr. Zhang’s profession over the course of years has by no means been a part of the ByteDance story. In a Chinese language-language blog post, Joan Wang, an SIG worker, has written about assembly Mr. Zhang at a espresso store to debate what would turn out to be ByteDance. He mapped it out on a serviette, she wrote.

Internally, in an funding memo, she wrote that Mr. Zhang sought Susquehanna’s “understanding and permission” to go away 99Fang and create a brand new firm.

‘Fairly Babes’ and a Huge Gamble

Pivots in focus are widespread in enterprise investing. Much less widespread is a change as dramatic as shifting from actual property to social media. Essentially the most profitable start-ups — Fb, WhatsApp, Alibaba — advanced in scope however not drastically in function.

By March 2012, courtroom paperwork present, the nascent undertaking had a brand new identify: Xiangping, which roughly interprets to “share feedback.”

Mr. Zhang created a prototype app, Fairly Babes, that customers appeared to take pleasure in, the memo learn. Fragments of Xiangping’s early existence survive in archived form on the web.

Within the funding memo, Ms. Wang wrote that by deciding on content material for customers, Xiangping may engineer virality and improve “stickiness.” Quite than have customers seek for what they wished, in different phrases, the brand new firm would choose it for them.

“Social community expertise shall be used to trace person habits, predict person curiosity, and construct relevancy and suggestion engine,” the memo reads.

ByteDance’s expertise has advanced, however TikTok nonetheless delivers movies that customers wish to see and share. That curation is on the coronary heart of the hassle to ban TikTok. Some lawmakers worry having such a strong algorithm within the palms of an organization with Chinese language possession.

In 2012, SIG China valued the start-up at about $9 million and invested just a little over $2 million. Its attorneys stated in courtroom paperwork that it had since “contributed a whole lot of hundreds of thousands in additional investments.”

From there, the corporate’s story is well-known. It rebranded itself as ByteDance and acquired the lip sync app Musical.ly, which it used as the inspiration for TikTok. By 2018, ByteDance had turn out to be one of many world’s most dear non-public expertise firms.

Susquehanna’s guess on an unproven founder is just not uncommon. What’s distinctive about ByteDance is that it paid off so effectively.

“A part of it’s they noticed one thing,” stated Steven Kaplan, who researches non-public fairness and enterprise capital on the College of Chicago Sales space Faculty of Enterprise. “A part of it’s they received fortunate.”

What’s Subsequent?

The Pennsylvania courtroom case could finally go earlier than a jury, however no trial date has been set.

The Home handed a invoice in March that would power the sale of TikTok, and a Senate vote may come as quickly as subsequent week.

Along with his marketing campaign donations, Mr. Yass has funded a significant advocacy drive by the libertarian Membership for Progress to stop the banning of TikTok. That has proven blended outcomes to this point, as many Home members backed by the group voted for a ban.

As with many items of laws, former President Donald J. Trump is a wild card within the invoice’s passage. As president, he tried to power a sale of TikTok. However he has since reversed his stance. He has additionally acknowledged assembly briefly with Mr. Yass however stated that they by no means mentioned TikTok.

Liu Yi contributed reporting, and Kitty Bennett contributed analysis.