Week in Review: The Chinese are coming

• Alibaba’s acquisition of Lazada just the first salvo
• Expect Baidu, Tencent to make direct presence felt in SEA

MANY players in the startup ecosystem are looking in the wrong direction. The honeypot lies East, in the Middle Kingdom, not in the West, in Silicon Valley.
 
Most media reports have startup founders and venture capitalists (VCs) in South-East Asia hailing Alibaba’s acquisition of Lazada as validation that the region’s e-commerce market has great potential.
 
They are also urging Silicon Valley VCs to up their game in the region. And of course, the South-East Asian VCs urging them on would be happy to offer their portfolio companies to them.
 
“The Chinese are coming,” declares Bikesh Lakhmichand, founder and chief executive officer of technology accelerator and early-stage VC 1337 Ventures.
 
“I think Alibaba acquiring a majority stake in Lazada was more the first salvo in a fight between China’s giants Baidu, Tencent and Alibaba to stake their claim in South-East Asia’s Internet space.”
 
With Alibaba having made the move first, Bikesh expects the big three to one-up each other as they establish their foothold in the region.
 
1337 Ventures, which also runs the Alpha Startups pre-accelerator programme in a number of countries in South-East Asia, already counts Baidu as a sponsor for its Indonesian programme.
 
And here’s another contrarian view on the Alibaba-Lazada deal. Whether you believe the honeypot lies in the East or West, FashionValet chief executive officer Fadzarudin Anuar is sure that the pot won’t be as sweet as expected.
 
“I think the Alibaba deal is really bad for e-commerce startups. You’re talking about the so-called ‘Amazon of South-East Asia’ getting acquired at a US$1.2-billion valuation? When its last funding round two years ago saw it raise money at a US$1-billion valuation?
 
“That’s only a 20% growth in two years. What does that tell you?” he poses.
 
What it tells Fadzarudin, especially with various performance metrics over the next four years tied to Alibaba making a full acquisition, is that it is uncertain whether the region’s touted e-commerce potential will actually pan out.
 
The ripple effect will be that “it could potentially scare away investors, and that valuations of existing players will have to become more conservative,” he says.
 
And Fadzarudin is already seeing that. “My conversations with other founders raising funds now is that they are reducing their valuations,” he says.
 
For sure the presence of Alibaba, which up to this deal was actually more an enabler of e-commerce than an actual e-commerce company, now raises the competition for all existing e-commerce players in the region, and it will be interesting to see how they react.
 
How this shapes the region’s e-commerce landscape remains to be seen.
 
And finally, I am sure most of us have reacted with shock to the news that the first Internet startup in South-East Asia to list on Nasdaq in more than 10 years, MOL Global, is now going to delist from that bourse, after a mere 19 months.
 
Aside from MOL’s announcement on the reasons, information has been scarce, with MOL founder, chief executive officer (though he stepped down in March 2015) and former executive chairman Ganesh Kumar Bangah declining to comment.
 
However, the impact of this is likely to be minimal as I remember how surprised I was at the muted reaction to the startup community on MOL getting listed in the first place.
 
Finally, enjoy your weekend and have a productive week ahead.
 
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Previous Instalments:
 
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