Sea, which filed for an IPO on the New York Stock Exchange, is one of Southeast Asia’s most valuable tech companies. It was valued at US$3.75 billion last year and raised another round of US$550 million this year at an undisclosed valuation.
Sea is an acronym for Southeast Asia. It has three big brands under the Sea umbrella: Garena, which owns one of the largest digital content platforms in Southeast Asia, largely around games; ecommerce business Shopee; and fintech company AirPay.
We think much more about where the open oceans are, as opposed to where it’s easy.
“What fundamentally matters for any organization – for profit or non-profit – is, are you doing something useful for people? And we want to be remembered as a company that really served their customers and did so in a really humble, authentic, local way,” Nick Nash, group president at Sea, told Tech in Asia a few months ago. “That’s why we wake up every day and we go to work.”
Nash spoke at length about Sea’s growth philosophy and expansion strategies during the Tech in Asia Singapore 2017 conference on May 18. Here’s an edited excerpt of the interview:
Can you give us some insight into how you assess markets? For instance, let’s say a market doesn’t have a very high level of financial inclusion. Is that a red flag for you or is that a sign: “this is the opportunity we got to go after.” How do you assess a market’s readiness for either services?
A domestic survey done a few months ago said Vietnam is a country where 71 percent of adults above age 25 don’t have a bank account. We look at that and we see opportunity because someone can now only sell a product through an app store with a credit card.
What we have decided to do is to think about where their real disposable income is, regardless of whether people have bank accounts or not. If the demand for services is there, if the population is there, we will find a way to reach those users.
A perfect example is, again, Vietnam. The country would be a tremendous source of anxiety for folks with the Western perspective that are relying on the traditional 16-digit credit card number and 3-digit CVV on the back to do authentication.
What we’ve set up instead was about 40,000 to 50,000 little mom-and-pop location stores within stores, where regular folks can pay cash into a wallet, and that wallet effectively becomes a prepaid debit account which they can use to pay for all sorts of things. The total cost in that is a little bit higher than a credit card payment system, but it is totally worth it in the long-term, in terms of being able to serve that consumer base.
So we think much more about where the open oceans are, as opposed to where it’s easy.
When we are talking about the expansion, you make it seem easy. I understand you have a team of about 5,000. How do you keep everyone moving in the right direction?
There is no perfect solution, but a couple of things are absolute essentials.
Sitting at one spot, no one can manage the business for that many people in many countries. One way is just incredibly frequent travel. We are on the road almost every week, meeting with our teams face-to-face.
We are not huge believers in videoconferencing. It can be a temptation to simply do all your meetings over a screen. But if you are willing to jump on that plane, the AirAsia flight to Bangkok maybe, and spend a day with your team face-to-face, take them out for dinner with their families, there is a degree of this interpersonal familiarity. That is so much better than what you could get over a Skype chat. We do it [videoconference] from time to time, but we certainly use it for short intermittent conversations.
The second thing is, we really like rotating people across the countries. There is somebody we think of as a hero in the company. A very successful young woman in our business, originally from Vietnam. She is in her late 20s. We sent her to Thailand to run a big part of our field operations. She is from Vietnam, mind you. She taught herself Thai, she ran a team of 400 people. Then we sent her to Indonesia. She began learning Bahasa. Now she is back in Singapore. That’s an extraordinary story.
You will hear stories of about a guy from Germany or a girl from France who learned four to five European languages to be multicultural. But you don’t hear that many stories about people in Southeast Asia who speak four Southeast Asian languages. It’s not that common. We love people like that.
Earlier you said you look at barriers as opportunities. Say, you have a country that maybe has a very limited number of young people or where people don’t use credit cards. You still have to change their behavior to make them start using online wallet or buy things online. How do you change those behaviors?
I remember fondly there was a moment in time in the US in the 1990s when it felt like every single household got one of those AOL devices and there was this incredible effort of convincing people to go online. And in many ways, AOL’s efforts became Google’s EBITDA, because they sort of prepped the ground and everybody eventually shifted away for the dial-up service and used open access to these web browsers.
In many ways, I think we are finding that as an ecosystem, we are all collectively encouraging people to get online. Many of the customers of Shopee may or may not be first-time ecommerce customers. They may have tried one of our competitor’s platforms, gotten a little bit of a flavor for it, maybe brought a cell phone from that platform, and now they are ready for the broader set of SKUs that we offer. So I think it’s a collective responsibility we bear.
I also think the biggest issue is going to be consumer adoption. Consumers are really smart. Consumers love to have diversity and they love great services and products. The fact that Shopee can go from A to B in just 23 to 24 months suggests that consumers are really insightful in the way they operate. What I am more concerned about and the conversation I want to have with all of you is, are we making the right decisions from a public policy standpoint? And there are two big things that I am worried about.
The first is, Southeast Asia, in so many ways, has often been less defined by our cooperation as a region and more by who our neighbors are. In fact, even the word Southeast Asia means we are neither South Asia nor East Asia. We’re sort of in the middle. We are Indo-China. And the idea of actually coordinating efforts within our region in – if I can use this word – an EU sort of way, is really, really challenging.
Second, we don’t have the 200- or 300-year legacy of engineering universities that the West or even other parts of Asia, like Japan, has. We have a limited talent base. We have a limited capital base in Southeast Asia. We don’t have a limited consumer base. But because of those two limitations, it’s not realistic to expect that there will be 25 companies in every category, in every country.
You do have a team of around 5,000 and you are expanding even more rapidly. How do you handle HR? How do you find the right people? Or is your emphasis on training people up? What’s your approach to this issue?
We do a lot of internal training. Frankly, one of our learnings as a company is that we should get better at lateral hiring. There are certain companies that are really good at hiring laterals into their business. A lateral is somebody that somebody else has hired. So, hiring somebody in at a senior level that wasn’t home-grown.
Most of our leaders in the company, with a couple of exceptions, have grown up through the ranks, which I think is very special. You create an integrated, cohesive culture, and what not. If someone is working for seven or eight years in the company, it can be demotivating to have somebody else parachute in from outside.
But there is a balance in every company. What we really want to encourage is: hiring people who have lived or worked in more than one country. I have said publically that if anybody going to college in Singapore takes a year abroad and doesn’t go to London School of Economics or Stanford, but instead goes to Thammasat or Chulalongkorn or the University of Manila, I will personally interview them and jump them to the final rounds.
So is there also an issue of educating your people about the fantastic opportunities right here?
Many people view higher education as a luxury good. It’s a brand and we are all good to hear that. I mean, of course, you want to sort of go to a place with a nice t-shirt and what not, but…
The t-shirt is half the reason why they go.
The t-shirt is half the reason you go, come on! But truth be told, if you have a chance to go to one of the big colleges in Singapore and then you get that offer for a junior year in LSE, mom and dad will be proud of you for taking that. But what if instead you went to Thammasat or Chulalongkorn and you become incredibly plugged into the culture of Thailand? That probably has a longer term career benefit and certainly is more beneficial to us as a local employer.
More unique is something very, very valuable on the job market.
Unique and relevant.
In an interview, you had said you want to be the first US$100 billion company coming out of Southeast Asia. Is that something that’s going to be happening within the current three brands, Shopee, Garena, and AirPay? Will you be bringing more members into the product family?
Here’s one way to think about it is, in very practical and American terms: there are three companies that our business has a lot of similarity to up in Mainland China. Tencent has roughly US$270 billion in market capital. It could be a good proxy for Garena in the video and entertainment space. Alibaba has roughly US$270 billion in market capital, very good proxy for us again as Shopee does an open marketplace ecommerce. And then of course Ant Financial has built this magnificent business around payments, product distribution, insurance, and more. It’s hard to say exactly what they are worth, but let’s say US$75 billion.
And if we think about GDP as Gross National EBITDA – literally GDP is sort of the profitability of a country – then China, relative to what we call Greater Southeast Asia, Asia, and Taiwan, is about a 4:1 ratio.
So you have those three businesses up and you divide by four, you do get a number of greater than US$100 billion dollars. So if we were to simply grow into the current potential of those three businesses, it’s an achievable goal.
Now, there is a lot of work ahead of us. In terms of other areas, we don’t think the mission is done yet. But picking your major pillars is a very disciplined and focused process. You should say no to most ideas and we are really good at it. But we are thinking about other expansion areas, sometimes very closely related to what we do right now. It just will make our users happier. We want the users to be satisfied and delighted and served in the different needs they have in their lives. I think there’s still some juice in the lemon to keep it going.
Sea sometimes shows up as an investor in other companies. Is it part of the vision to get to US$100 billion? You mentioned earlier in this conversation that having 20 to 25 companies in the same vertical, in the same country, is ultimately self-defeating. So what role does your company have in creating a more positive outcome in this scenario?
The way we see it is, once you launch a startup and once you hit at least five products or your first million users, and then once you have got good revenue, there are a couple of paths you have.
One path is, you go all the way through. You raise lots of capital, become an independent company, and eventually reach scale. That’s an awesome goal, which we all work very hard towards.
Another path is, you think about selling your business to be strategic partner or maybe you take private equity money from an investor and you do many different things. We really think that there should be a different path, which is that we should be able to team up here in Southeast Asia.
From our perspective, and again this may sound a little self-interested, it is sort of a sales pitch at some level, but we really believe this. We have a very large base of users, we have the financial plumbing for businesses that are part of our ecosystem to get paid by users. We have some really neat capabilities around infrastructure, talent, development, and whatnot. And we have the regional footprint. So, we have often talked to smaller companies or companies that we deeply respect as they have done a great job in Vietnam or Indonesia.
We talked to them and said, why don’t you join our family and have an equal seat in the table, really be part of the decision-making committee, as opposed to being a subsidiary of a subsidiary of something rolling up into the head office in some other country? And I think some of those conversations will materialize over the coming decade.
But it goes back to earlier conversation about how splintered Southeast Asia is. And why is it that sometimes everybody in Southeast Asia wants to have their own kingdom and sort of be in charge and as long as capital is available? Of course, that’s a playbook that sort of makes sense for people. But we look forward to maybe three or four years into the future and we’d love to envision a world we are building something really significant. If we can bring a team together to do this, we would be even more pleased.
That’s something that we should think about as an ecosystem. Because if it’s just individual startups here trying to eke out an existence versus the Facebooks, the Googles, the Amazons, and the Alibabas, we may not individually have the firepower to do that. But together, boy, there’s a lot that we can do.
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