What the Alibaba-Lazada deal means for Southeast Asia’s startups

Alibaba snapping up Lazada, which operates in six countries across Southeast Asia, is set to have a huge impact on ecommerce and tech in general across the region. Photo credit: Pexels.

The tech world was in shock yesterday at the news of Chinese internet giant Alibaba’s largest overseas acquisition to date – a US$1 billion controlling stake in ecommerce startup Lazada.

While the spotlight was on Rocket Internet’s Lazada, someone else was also basking in the glory – Southeast Asia’s startup community.

It will attract more global investments into the region.

The acquisition serves as a “validation” that the region is very attractive to strategic investors, and it will trigger a lot more others to look at Southeast Asia for investments and acquisitions, said experts today.

“We’re just at the beginning,” said Stefan Jung, founding partner at Indonesia-based Venturra Capital. “[The deal] will kickstart the whole cycle. It will attract more global investments into the region, and attract more entrepreneurs who now see this region as a great place to start a business.”

Hanno Stegmann (left), Stefan Jung (center), and panel host Dmitry Levit onstage this afternoon in Singapore. Photo credit: Tech in Asia.

Stefan was talking to a packed hall this afternoon at Tech in Asia Singapore 2016.

Also onstage on the panel was Hanno Stegmann, co-CEO of Rocket Internet’s Asia Pacific Internet Group. He agreed with the assessment. “It will raise additional attention for Chinese strategic buyers to say that ‘yeah, Southeast Asia is a great next step. Why should we look at the US or Africa, when we can look at Southeast Asia first?’”

“You can also interpret it as a wake-up signal to western players like Amazon,” he adds, which will now be pondering if they’re “missing a great opportunity” by not looking at Southeast Asia.

Stefan, who was founder and managing director of Rocket Internet in Southeast Asia before setting up the US$150 million Venturra fund, believes the Alibaba buyout benefits both investors and tech entrepreneurs in the region.

For entrepreneurs, it means more funding. For investors, “it’s a proof that there can be exits,” he said.

But there’s a caveat: a flood of money brings the risk of an overheated market. Not only are more funds expected to enter the scene after the Alibaba-Lazada deal, VCs which have been around a while still have cash in their pockets. That’s good for startups, but bad for VCs, explained Stefan.

Getting in early

The big picture