For India and Southeast Asia, the e-commerce battle has always been between a US company Amazon and its Chinese rival, Alibaba. The battleground changed with the entry of another Chinese company in the two markets. In early April, Tencent invested in Flipkart, India’s leading e-commerce startup. The Indian market was about to consolidate with Amazon trumping both Flipkart and Snapdeal. Now Tencent has added a new battleground in Indonesia when it invested in ride-sharing startup Go-Jek.

Key Insights:

  • Tencent is entering the Southeast Asian ride-sharing sector which is dominated by Grab and Uber in a tightly run race. It is betting that the Indonesian market will not tolerate Grab and Uber as foreign entrants. Unlike China, Indonesia is an open market. A key issue is how the Indonesian government will regulate the transportation industry.
  • Tencent’s investment means it will own 40% of Go-Jek based on a US$3 billion valuation. For earlier investors like NSI Ventures (series A investor) to exit well, much depends on the liquidation preferences Tencent will impose on Go-Jek. If it is a 2x, then the early investors will find it hard to exit profitably unless the acquisition price is magically raised to at least US$6 billion.
  • India and Southeast Asia are facing a tough battle of Amazon versus Alibaba and Tencent who have different competitive advantages and are not allied to each other. Dipping their toes in the key startup unicorns in India and Southeast Asia is part of expansion plans. It is common knowledge that SoftBank often invests hand in hand with Alibaba. There is also a dark horse in the game too. South African media conglomerate  Naspers is an institutional investor of Tencent. Naspers’ Thai internet lifestyle portal, Sanook, was acquired by Tencent in 2010. Will Naspers enter the India and Southeast Asian e-commerce market through Tencent? The e-commerce tussle in this region has suddenly become much more exciting.

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