E-commerce services are on fire in Southeast Asia

Asia Tech Review: 11 May 2021

May 11, 2021

Welcome back,

E-commerce is the focus in Southeast Asia this last week, with four massive deals going through. It’s testament to how much things have changed. The region has gone beyond the main platforms to embrace the ‘picks and shovels’ companies. I hate that phrase but it is true: e-commerce aggregators, an enabler and a digital-first brand collectively raised $170M last week. That’s a lot of moolah.

Elsewhere, China’s IPO trail continues to heat up in the US—despite efforts closer to home—and there’s sharp analysis of Zomato’s planned listing in India.

See you next week,

Jon

Southeast Asia

It was a big week for e-commerce in Southeast Asia with four huge rounds landing:

Rainforest is an e-commerce aggregator that raised $36M. That essentially means that it buys small e-commerce brands, the idea being that it can get good deals and develop expertise by running a bunch of them. It was started by former OVO and Fave executives and is among the first to bring this model—also known as ‘e-commerce rollups’—to Southeast Asia
Una Brands raised $40M for a very similar model. It’s also in the market to buy e-commerce sellers, particularly those active across multiple services. It looks for targets with annual revenue of $300K-$20M for acquisitions of $600K-$3M. Ex Lazada CEO Max Bittner, who now leads a European secondhand marketplace, is an investor.
Next is SCI E-commerce which raised $38M. SCI—that’s Singapore China Indonesia—has been under the radar as an e-commerce enabler that helps big brands sell through e-commerce platforms in China and Southeast Asia. Bloomberg reports it is valued at $235M and is shooting for a US IPO.
And last but by no means last, a brand: Social Bella raised $56M for its beauty business. Beyond offline, it runs over 20 stores in Indonesia and one in Vietnam. The company raised $56M last year and this new round is led by US PE firm L Catterton, marking its first deal in Indonesia.

Sticking with e-commerce for a moment, Bloomberg has a feature on social commerce and Indonesian president Jowoki has us confused.

Jokowi implored the population to buy online to help revive the economy after Covid. Just a month ago, he pledged to regulate e-commerce platforms which he said were hurting the country through predatory pricing. So, Mr President, which is it exactly?

We, at The Ken, looked at how WhatsApp is a platform for starting new digital services in Southeast Asia

Singaporean VC Vickers Venture Partners is caught up in an allegedly fraudulent nickel trading scheme. The firm invested in Envy Global Trading, which is being probed for apparent falsification of contracts. “Vickers would be the highest-profile investor yet to have fallen victim to the suspected billion-dollar swindle, which Singapore authorities have said could be the biggest investment fraud the financial hub has ever seen,” wrote Straits Times.

Gojek, meanwhile, snagged $300M from Telkomsel—potentially its last round of funding before it merges with Tokopedia

Smaller ride-hailing player Ryde has said it wants to do an IPO in Singapore—my colleagues Ben and Kay looked at its chances and life in the shadows of giants

In other funding deals: SME loan platform Validus raised $38M; Amartha raised $28M for its platform that provides community lending in Indonesia; Fewcent, a micropayment service for media, iraised $1.6M; Facebook announced its second community accelerator program

Hong Kong billionaire Li Ka Shing is turning his attention to startups in Southeast Asia

Singapore Press Holdings made waves with a restructuring that will see its loss-making media business made into a standalone not-for-profit unit

We interviewed Pandu Sjahrir, Indonesia’s Mr Connected who works with Sea, Gojek, the IDX and more

China

China has made big strides to keep its big companies from listing overseas, with the launch of the Star Market and growth of Hong Kong two examples. Now Beijing is said to be weighing tighter rules for Chinese firms who opt to list overseas. That’s ironically not a million miles from the US and its efforts to tighten rules for Chinese listings on its soil. Both have different motivations of course.

But, as written in past ATR editions, the US continues to be the number one choice for ambitious IPOs, particularly in the world of tech:

Waterdrop, the mutual insurance platform backed by Tencent, raised $360M from its US IPO but it flopped with the stock trading below its list price
Two more Chinese firms filed for US IPOs: podcast and audio platform Ximalaya, which claims 250M MAUs and is backed by Tencent, and Qiniu, a cloud computing and storage service for enterprises that’s backed by Alibaba.

More will follow suit:

Snowball, a social platform for investments that’s backed by Ant Group, is reportedly planning to raise $300M from a US listing.
Didi Chuxing has been linked with a US IPO this summer but it is reported to be planning a separate IPO for its grocery delivery business. That could be 2-3 years away since the unit—Chengxin Youxuan—just raised $1.2B.

Speaking of US-China tensions, Tencent is in talks with the US government to retain its investments in gaming firms Riot Games and Epic Games after previously being told (during the Trump administration) to divest them. Apparently, CFIUS—the Committee on Foreign Investment in the United States—is assessing if there’s any national security risk around the handling of personal data.

Another giant battling government push back is, of course, Ant Group which is working to reform its ‘mutual aid’ business—a crowdfunded medical coverage service called Xianghubao—to the satisfaction of regulators. It claims over 90M users and is likely to become a regulated business.

How an exploit attacking iPhones that was conceived at, and won, a hacking event in China was quickly adopted by the Chinese government to spy on Uyghurs

Related: seven Apple suppliers stand accused of using forced labour from camps in Xinjiang

US-China tech war: Beijing's secret chipmaking champions—how Washington's sanctions boosted China's semiconductor sector

ByteDance is hiring thousands to develop an e-commerce business before the firm goes public. Early results are promising: “It sold about $26 billion worth of make-up, clothing and other merchandise in 2020, achieving in its maiden year what Alibaba’s Taobao took six years to accomplish,” reports Bloomberg.

EV maker Nio is branching overseas for the first time into Norway

Meanwhile, Innovusion, a five-year-old lidar company that supplies Nio, closed a $64M Series B

SoftBank Ventures Asia led a $15M investment in autonomous mobile robot maker Youibot

Myst, an e-cigarette company co-founded by a scientist from US firm Juul, raised “tens of millions” in a Series B

Taiwan

TSMC, the world’s largest chip firm with over 50% market share, is finally expanding its operations to the US. Now reports have emerged that its planned Arizona plant may be the first of many for the firm

Bloomgberg’s Tim Culpan, who has relentlessly chronicled the company, says it is a strategy that is long overdue

For more context: Nikkei Asia Review looks at how TSMC pulled ahead of Samsung

As if to drill the point home, Taiwan’s drought is being tipped to worsen the current shortage of semiconductor component supplies

India

My colleague Sumanth went through the Zomato IPO documents and his takeaway is a doozy, including. It’s well worth a read, some brief points:

Zomato saw average order volume jump during Covid as contribution margins turned positive—BUT the numbers show its number of users and revenue both fell, nearly 50% and 33% year-on-year respectively
Zomato’s 17X multiple is more generous than international rivals like Doordash, which are growing at a rapid rate
Are these developments the reason it is opting to go public in India—which should still be celebrating—over the US?

Side note: it appears that Zomato may invest $100M into Grofers—an interesting potential deal since Zomato had held talks to buy Grofers and it appears that Grofers won’t be going public in the US as it had aimed. The investment is apparently part of a larger round for Grofers so stay tuned for more.

Flipkart’s IPO isn’t expected until the end of the year but that isn’t stopping it from raising $1B from investors, according to a report from Economic Times

China is not happy that there are no Chinese companies among the more than dozen firms handed approval to conduct a six-month trial to test the use and application of 5G technology. India maintains that the list was selected based on vendors picked by its telecom operators.

India has also reportedly “held up” approvals for the import of Wifi modules from China that form an essential part of many devices from firms including Dell, HP, Xiaomi, Oppo and others. That means potential delays in releasing products to market.

Imports from China of finished electronic devices - like bluetooth speakers, wireless earphones, smartphones, smartwatches and laptops - containing wifi modules are being delayed, the sources said.
The Communications Ministry's Wireless Planning and Coordination (WPC) Wing has withheld approval since at least November, according to the sources, who were familiar with lobbying efforts by firms seeking clearance.

Here’s one story of a Chinese company overcoming government-led issues: Hugely popular game PUBG Mobile has returned to India following its ban due to Chinese links last year. Battlegrounds Mobile India—as it is now called—”uses the color scheme of the Indian flag and is largely a replica of PUBG Mobile,” according to TechCrunch. Game maker Krafton and its publisher/investor Tencent were also forced to release a bespoke (and highly national) version of the game for China back in 2019, albeit for different reasons.

Online teaching platform Teachmint landed $16.5M led by US-based Learn Capital

South Korea

Korea’s messaging apps are doubling down on content with some big deals:

Kakao has splashed out nearly $1B on two storytelling apps, buying online comic app Tapas for $510M and serialised fiction app Radish for $440M
At the same time, rival Naver completed its $600M acquisition of Wattpad, a storytelling app based in Canada