- Alibaba, Tencent and Didi see the region as a starting point
- Deals are rising as the largest players chase virgin territory
Isaac Ho and several investors were watching a pitch from a cancer-detection startup in Singapore when one of the Chinese billionaires present got up and — without a word — scrawled “Speed x Market Share” in Chinese characters on a whiteboard. It was a simple formula that meant: be first and be largest, no matter the cost. But that’s when Ho understood how the Southeast Asian tech scene was about to change.
“It was the moment that I understood the Chinese strategy,” said the founder of Venturecraft Group who’s known in local medtech circles for whiskey-fueled networking parties. “If you are not the No. 1, you will become obsolete; if you are the No. 1, you can buy the newer technology. It’s a winner-takes-it-all game.’’
Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Didi Chuxing became titans of industry through a land grab whose velocity and scale took many by surprise: the first two now rank among the world’s 10 largest corporations. Five-year-old Didi out-gunned Uber Technologies Inc. in part through a willingness to spend untold amounts of cash. Now, seeking growth as their home market slows and saturates, the country’s tech overlords are shifting their gaze toward the rest of the planet. First stop, Southeast Asia: a region with twice the population of the U.S. and the largest Chinese diaspora in the world.
Chinese investments in technology abroad more than doubled to $37.8 billion last year, PricewaterhouseCoopers estimates. Among those, Alibaba paid $1 billion in 2016 for control of Singapore-based e-commerce player Lazada Group SA, now its beachhead for the region. WeChat-operator Tencent — already a backer of Sea Ltd., Southeast Asia’s most valuable startup — is said to be close to investing in Indonesian ride-sharing giant Go-Jek. Even Didi, Asia’s most valuable startup, backs car-hailing peer Grab and has declared its intentions to go global.
“What you are seeing is a change in mindset,” said Thomas Tsao, founding partner of early stage investor Gobi Partners. “They’re starting to aspire, not just to be the biggest Chinese company, but they are thinking globally.”
China’s laid the groundwork to take the helm of the regional economy for decades. Its ever-wealthier investors have poured billions into everything from transport to real estate, transforming the region. China almost doubled foreign direct investment into the six biggest Southeast Asian nations in 2016 alone, Credit Suisse Group AG estimates.
Little of that largesse went to a tech sector in its infancy. But with deepening mobile penetration and an emergent middle class, the country’s tech giants are beginning to take note. The region hosts the largest ethnic Chinese population on the planet — a comfort to would-be financiers craving cultural similarities. Growth in the Asean-5 of Indonesia, Malaysia, the Philippines, Thailand and Vietnam is projected to exceed 5 percent annually through 2022, the International Monetary Fund says, outstripping North Asia’s 3 percent on average.
The territory’s still up for grabs. Grab and Go-Jek vie in ride-sharing, Tokopedia and Lazada in e-commerce, but no single player has emerged dominant in any segment. Compare that with China, where just a handful control the major spheres of search (Baidu Inc.), e-commerce (Alibaba), social media (Tencent) and ride-sharing (Didi).
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