Southeast Asia becomes a target for China technology companies but is a tough nut to crack
The region, home to some 655 million people in 11 countries, has become an investment hotbed for major hi-tech players like Alibaba, Tencent and JD.com
Southeast Asia is becoming one of the focal points for global investors and Chinese technology conglomerates looking to expand outside their home market. The region’s diversity and population have made it both an attractive and difficult target to crack.
Typically defined as the region east of India, west of New Guinea, north of Australia and south of China, Southeast Asia is home to some 655 million people in 11 countries that range from a city-state like Singapore to archipelagic nations like Indonesia and the Philippines, to landlocked Laos, speaking different languages and practising different religions.
China’s largest hi-tech companies have made forays into the region, with Alibaba Group Holding buying the Southeast Asian e-commerce firm Lazada Group and signing cooperation deals with Malaysia and Thailand. Tencent Holdings, the gaming-and-social media giant, has invested in Singapore-based Sea, which operates the Shopee e-commerce site and Garena gaming and esports platform. JD.com led an investment round into Thai online fashion brand Pomelo last year, while the region’s two biggest internet platform start-ups, Singapore’s Grab and Indonesia’s Go-Jek, count Chinese tech unicorns Didi Chuxing and Meituan Dianping as investors, respectively.
Southeast Asia “is becoming a proxy war for large Chinese internet companies like Tencent, Alibaba and we think going forward this will increase”, said Hian Goh, who founded Openspace Ventures in 2014 and has invested in start-ups such as Go-Jek, Halodoc, Redmart and Chope. “Already, we see Go-Jek, our portfolio company, receive investments from JD.com as well as Meituan, and JD has done a joint venture with Central Group in Thailand. We think a lot of the capital funding could come from these strategic sources as well as venture capital.”
While the increasing interest in Southeast Asia has boosted valuations, they are still more “reasonable” compared with Silicon Valley or China, according to several venture capitalists interviewed.
“There’s a joke that start-ups in Silicon Valley would add a zero behind their asking price if they knew Chinese investors were interested because of their reputation for being willing to bet large sums of money,” said Grace Yun Xia, Singapore-based principal at Jungle Ventures, which is looking to raise US$200 million for a third fund targeted at Southeast Asia.