Photo modified by Tech in Asia; original photo credit: UN Climate Change.

Ever since Jack Ma’s Alibaba took control of Lazada in a US$1 billion deal last year, there’s been speculation about what the ecommerce titan might do next.

I think the natural choice is Daraz, an online store for Pakistan, Bangladesh, Myanmar, and Sri Lanka, which encompasses a combined market worth US$610 billion. Like Lazada, Daraz is born out of the Rocket Internet empire.

So far the Chinese billionaire has played his cards close to his chest about what comes after the Lazada deal for Southeast Asia. He’s preferring to impart “ecommerce training” to thousands of small businesses spread across Lazada’s six countries.

He’s also reportedly excited at the prospect of sharing knowledge with Lazada’s management, which fits in with his wider vision of using Alibaba to sell directly to consumers – slashing costs and eliminating the cut any shady middlemen might be pocketing.

But that’s easier said than done. Trade across much of Asia is riddled with bottlenecks such as potholed roads, decrepit railways, inefficient logistics, and quirky customs processes. If Alibaba and its Taobao and Tmall marketplaces are really to act as the engine for consumer purchases in this region, then they’ll need to figure out a lasting solution.

And it’s not like Jack Ma doesn’t want to expand his business. Ant Financial, his mobile wallet app, has made investments in India, Thailand, South Korea, and the Philippines. It also bought US-based remittance company Moneygram for a cool US$880 million.

Anecdotal evidence seems to suggest that Ma wants to make it extremely easy for consumers to have access to millions of products and pay for them via their phones. And while he’s not completely there yet, the broader vision is to muscle out Amazon without the need to physically enter markets from scratch.

So what’s the next step?

Here’s how acquiring Daraz fits in.

First, Chinese companies aren’t averse to following their government’s lead. McKinsey notes that “government policy continues to be the critical shaping force” of the economy, with the state “possessing levers” to dictate the pace of economic growth.

The government’s pivot to Africa is now several years old. Large Chinese firms specializing in energy, construction, and logistics signed a mammoth US$70 billion worth of contracts in Africa in 2014 alone. Followed closely by this was phone maker and telecommunications firm Huawei, which set up a training school in Nigeria in an effort to hone the skills of engineers and strengthen cellphone networks across the continent.

The Chinese want to bypass the congested Straits of Malacca.

But now China’s embarking on a much more ambitious project through which it wants to establish itself as the central hub of global trade. Dubbed “One Belt, One Road”, the project aims to build road and railway links from Chinese industrial hubs to European capitals via Central and South Asia. It’s like a new Silk Road.

Overall, the project, first announced by President Xi Jinping in 2013, will span approximately 65 countries that account for one-third of the world’s GDP and about a quarter of all the goods and services consumed. The Chinese have committed to spend hundreds of billions of dollars to make this a reality, and work is moving forward rapidly.

An important part of this new Silk Road is Chinese investment in Pakistan, Bangladesh, Myanmar, and Sri Lanka. In Pakistan, the Chinese government has committed to spending north of US$50 billion in improving logistics, power generation, communication links, hospitals, and schools. The cornerstone of their effort is access to a deep water port in the southwestern city of Gwadar.

The port, already operational, gives China access to shipping lanes in the Indian Ocean – bypassing their traditional routes via the Straits of Malacca and the South China Sea. The move is important both for strategic and business reasons – shipping corridors in the densely-populated Straits of Malacca are closely watched by the US Navy and the Chinese are desperate to open up alternatives.

The proposed maritime Silk Road. Photo credit: Mantraya.

In Sri Lanka, the Chinese have already built Hambantota port near Colombo to further integrate logistics and secure shipping lanes. Bangladesh formally joined the Belt and Road Initiative in October, after President Xi visited Dhaka to sign a number of agreements in energy, industrial capacity, information technology, and maritime cooperation.

Part of the reason the Chinese government wants to step ahead with this program is access to new markets and utilization of excess domestic industrial capacity. For China to move away from an export-oriented economy towards a service and consumption-oriented one, similar to that of the US, it’ll need access to cheaper labor and modes of production.

Nowhere is that dynamic more prevalent than the frontier markets of Asia.

Where does Jack Ma fit in?

Part of the reason for Alibaba’s success has been the fact that entire Chinese villages have jumped onto the ecommerce bandwagon, helping them escape poverty by selling everything from electronics to toys.

In 2013, Taobao was the 12th most visited site on the internet and sold US$145 billion worth of goods, dwarfing Amazon’s US$88 billion. Sales on Alibaba’s marketplaces rose to US$430 billion in 2015; no comparable Amazon data is available.

China’s ecommerce market is huge, yet it only accounts for 11 percent of total retail sales which means it won’t stagnate anytime soon. But there’s also a tantalizing opportunity to sell goods to the globe – and the new Silk Road initiative means this is more of a reality than ever before.

Lurking in these frontier markets of Pakistan, Bangladesh, Myanmar, and Sri Lanka is Daraz. Alibaba officially doesn’t have a presence in these countries yet – they’re serviced by AliExpress, but that’s about it. But Daraz isn’t letting that prevent it from sourcing Chinese products to sell on its marketplace.

Bjarke Mikkelsen, CEO of Daraz Group, refutes rumors swirling in Pakistan’s tech industry of Alibaba’s interest in acquiring the company, but admits to Tech in Asia they’re “constantly in touch with friends in Lazada.” He’s also spending more and more of his time in China to figure out what products would appeal to local consumers in his markets.

Daraz also recently hired Zain Suharwardy, previously a senior Lazada VP based out of Malaysia, to look after its operations in Pakistan. Bjarke hinted that the move gives him breathing space and the bandwidth to step away from day-to-day operational decisions to concentrate on overall strategy and growth.

Germany-based Rocket Internet made Daraz into one brand across its four nations after the acquisition of Lazada. Did the Samwers foresee a scenario where its smaller ecommerce arm would also come onto Alibaba’s radar? Don’t bet against it.

Another hint of Alibaba’s widening net came in January when Jack Ma met Nawaz Sharif, Pakistan’s Prime Minister, on the sidelines of the World Economic Forum in Davos.

During the meeting, Ma reaffirmed his desire to help small businesses in developing countries and added that executives from his firm were closely monitoring progress in Pakistan’s ecommerce space.

He even declared they’re ready to make a firm investment in the country, which traditionally has been very closely aligned with China.

Jack Ma (right) meets Nawaz Sharif (left) on the sidelines of Davos. Photo credit: Twitter.

Can the deal happen?

Buying Daraz Group would be chump change for the likes of Alibaba. Unlike Lazada, which raised hundreds of millions of dollars from investors such as Temasek, Daraz has publicly announced only one investment round so far – US$55 million from UK’s CDC Group.

If Jack Ma does decide to buy Daraz, it’s likely the value of the transaction would probably be in the range of US$100 to $150 million. That’s a far cry from the US$1 billion for Lazada.

Daraz could be a significant coup for the self-made billionaire. With one swipe of his pen, he would have access to markets that are firmly on the priority list of his government. That’s a good way to maintain close ties with Chinese bureaucrats – and it makes business sense too.

Pakistan, Bangladesh, Sri Lanka, and Myanmar have a combined population of about 450 million – that’s larger than Lazada’s markets. They’re also rapidly growing economies, part of what Barrons calls the “quiet rise of South Asia”.

The opportunity for Alibaba to upsell its products and take advantage of the Chinese government’s fervent desire to improve transport linkages is very real. At the same time, Chinese shoppers can benefit from a wider variety of goods manufactured in countries along the new continental industrial belt.

As China accelerates its shift towards a consumption-driven economy, demand for such goods is likely to pick up. Alibaba would be poised to grab that share too.

China’s total trade with the countries along the One Belt, One Road initiative exceeded US$1 trillion in 2015. It would be foolish to think that Jack Ma doesn’t already have his eyes on a slice of that pie.

This is an opinion piece.

This post Here’s what Jack Ma should buy next appeared first on Tech in Asia.

Photo credit: Zen Rooms.

Zen Rooms, Rocket Internet’s hotel booking platform for cost-conscious travelers, today announced it raised US$4.1 million in series A funding from Redbadge Pacific and SBI Investment Korea. Existing investor Asia Pacific Internet Group, founded by Rocket and Qatari telecoms provider Ooredoo, also participated.

The round brings the startup’s total funding to date to US$8 million and will fuel its expansion across Asia.

Travel is immensely popular in the region but consumers face difficulties in discovering tidy hotels at reasonable rates. The practice is to use Agoda or Booking.com, but many small hotels are not on those platforms. If they are, they get crowded out by the ones with the ability to pay for higher ranking in the results.

Like other Rocket companies, Zen Rooms takes after a proven business concept – India-based Oyo Rooms. It partners with budget hotels to build a network of rooms that it spruces up to provide a standardized service. In exchange, it takes a commission out of each successful booking.

Customers can expect, at the very least, six things: a clean room, comfortable bed, in-room shower, flat-screen TV, air conditioning, and wifi – for as low as US$10 per night. The company says its rates are 30 to 40 percent cheaper than traditional budget hotel chains.

Co-founder Kiren Tanna declines to give detailed information on how the company’s performing, except to say that “our unit economics are healthy, which is why both new and existing investors are investing.”

“Our average order is US$85 which is comparable to ecommerce, but we don’t incur any delivery related costs,” he adds.

From its launch in 2015 to date, Kiren says the company has generated tens of millions of dollars of bookings for its partners. “In 2016, we grew 20 times in booking volume and this year we are projected to grow five to eight times.”

Staying ahead

Zen Rooms is working with more than 1,000 properties in the eight markets where it has a footprint: Indonesia, Thailand, Singapore, Hong Kong, Philippines, Malaysia, Sri Lanka, and Brazil. Indonesia, where the company first launched, is its biggest market.

“While these are our focus markets, we are also considering expansion to Australia and New Zealand, North Asia, and Vietnam,” notes Kiren.

Kiren Tanna. Photo credit: Zen Rooms.

It won’t be completely smooth sailing for the Rocket-backed startup though. The market has heated up as more entrepreneurs grasp the potential this niche promises. Tinggal in Indonesia has funding and support from India-based Wudstay. There’s also another Indonesian player called Nida Rooms, which got injected with fresh cash after experiencing financial troubles late last year. Zen Rooms also faces competition from Singapore-headquartered RedDoorz and predecessor Oyo, if the latter decides to expand beyond India.

Nonetheless, Kiren is confident his team will be able to stand out by focusing on innovation. “Our DNA is to pilot new disruptive features that make customer experience great.”

With the new funds, Zen Rooms will further scale its recently rolled out features such as pay-at-hotel, which is a 100 percent card-free booking. “This is a key move to further democratize travel in a context where the majority of the Southeast Asian population is unbanked today. After piloting it with great results, we are currently deploying the option across our franchise base. We are very confident it will do to the hotel sector what cash-on-delivery did to ecommerce adoption.”

Zen Rooms also has self-check-in kiosks and locks. In addition, it’s working on a new version of its mobile app to make the whole process – from booking to checkout – seamless.

This post With $4m new funding, Rocket Internet’s Zen Rooms sets its sights on more markets appeared first on Tech in Asia.

ODoc founders Heshan Fernando, Sohan Dharmaraja, Dr. Janaka Wickremesinghe, and Inshard Naizer. Photo credit: oDoc.

The island nation south of India with its gorgeous beaches, rainforests, and ancient Buddhist ruins just saw one of its startups – medtech app oDoc – score US$1 million seed funding.

This is the largest seed investment round for any startup in Sri Lanka.

The country’s startup ecosystem is still very young with over 50 percent of its entrepreneurs using their personal savings to fund their companies. The seed funding round for oDoc comes at an opportune time as the island’s mass market is embracing tech through new ride-hailing options.

ODoc isn’t going after the mass market though – at least not yet. The app connects patients with doctors for video consultation. Say you wake up in the morning with a nasty rash and fever. Three taps on your smartphone and you can submit your pre-consultation notes, take a picture of your rash, and get a doctor to review those. A doctor will call you and send his prescription with the doctor’s seal and signature right to your phone. All done in 10 minutes.

Many startups around the world have been at it but oDoc’s four founders – with their diverse backgrounds – approached it more from a design perspective than as a tech problem to solve.

“The reason nobody has really cracked it is because they looked at it as a medical problem. They were building it as an Uber for doctors of sorts. But it is really about changing behavior. So it is more of a design problem. It needed a fresh set of eyes,” the founders tell Tech in Asia.

Stalking investors

The credentials of the founders plays a key role in instilling investor confidence, especially in the early stage of a startup when the product usage is yet to take off. That’s true for oDoc as well.

Before turning entrepreneur, oDoc CEO Heshan Fernando was the youngest assistant vice president of Sri Lanka’s largest listed company John Keells Holdings. He holds four majors – in mathematics, statistics, economics, and operations research – from the University of Warwick.

ODoc’s tech head Sohan Dharmaraja – with a PhD in computational applied mathematics from Stanford and masters from MIT – was an algorithmic trader with Goldman Sachs. He had built a braille keyboard app for the blind when was in the US.

Dharmaraja came back to Sri Lanka after his PhD. He tells Tech in Asia that he didn’t want to be just another expat critiquing his home country from afar instead of trying to push change himself.

Back home in Lanka, he started marketing tech startup SocialRoo with data analytics before moving to a consulting business. But he found it tough to convince companies in Sri Lanka what data analytics could do for their business.

Dharmaraja finally found his metier in oDoc, which has two more co-founders: Inshard Naizer, Fernando’s former colleague from John Keells, and Dr. Janaka Wickremesinghe, a general physician who holds three patents. Dr. Wickremesinghe is also the founder of Sri Lanka’s first online medical education platform CorpusMedici – which a third of all doctors in the island nation subscribe to, according to Fernando.

The investors who pumped in the US$1 million are Ajit Gunewardene, deputy chairman of John Keells; Phoenix Ventures, the investment arm of Sri Lankan apparel exporter Brandix; and Loits, the IT arm of conglomerate Lolc.

The oDoc team started the fundraising efforts early this year.

Gunewardene has known Fernando for nine years now, and he was also one of their mentors. “Even with him we walked a very fine line between being persistent and getting a restraining order,” Fernando jokes. “We assumed it would take us three months, but kept a six-month timeline. It ended up taking nine months,” he tells me.

Gunewardene’s endorsement piqued the interest of the other two investors, and finally, the team clinched the deal last week. The money has hit oDoc’s bank account and the team is going to hire more hands and start marketing their product now.

See: 6 years after a bloody civil war, Sri Lanka bets on startups, attracts investors

Photo credit: oDoc.

AI to help doctors diagnose better

The founders spent 12 months designing and building oDoc, which they describe as a “360 degree solution” – providing pre-consultation notes, video calls, and the prescription sent to your smartphone.

They began by building an electronic medical record system that would allow a doctor to document a consultation digitally. “We believe that there is a lot of power and insights that can be gathered from the consultation data which will be passing through our system. We want to collect, store, and analyse that data to provide insights to the doctors, and eventually move into a point where some of the consultation can be automated using AI,” Dharmaraja says.

Tap a button and you can consult a doctor anonymously too but then you won’t get a prescription.

For example, the AI could assist the doctor in diagnosis by reading the patient’s complaints or if the doctor is prescribing a medicine, the system can suggest the right dosage automatically.

“There were nuances in this space that had to be built into the product. Trust between the doctor and the patient, for example. You don’t need to be convinced of the skills of a driver when you are trying to book a cab. But patients will always have a concern about how good a doctor is. We built the app taking such nuances into consideration,” Dharmaraja says.

Patients will be charged a consultation fee, of which oDoc will get a percentage. The startup is mulling a subscription model as well, Fernando adds.

The oDoc app is available in three languages – English, Sinhalese, and Tamil. Its immediate goal is to get product-market fit. In the next five months, they’re aiming for 1,000 successful consultations – where doctor and patient are happy with the experience.

But there are inherent challenges. For instance, although a little over one-third of Sri Lanka’s 20 million people have smartphones, only around four million use the internet. There is 3G coverage in 75 percent of the country, and the big cities have 4G as well.

To begin with, oDoc requires a mindset shift in the users who have to get familiar with the idea of video consultation as an effective form of medical care delivery. “People have doubts like “Is this prescription really valid? Can I go to a pharmacy and show this to them?” Legally, there is nothing wrong with it but not many people know that,” Fernando says.

See: Sri Lanka isn’t synonymous with world class tech. But that might be about to change.

Colombo, Sri Lanka. Photo credit: Andrew Fysh.

Can convenience beat fear?

Telemedicine has been breaking down geographical barriers and bringing access to medical care to remote parts of the world. For years, radiologists in India have been consulting with hospitals in Africa using digital technology. But when it comes to conditions that need immediate attention, even if they are minor, video consultation has not caught on in India or Southeast Asia yet.

To begin with, oDoc requires a mindset shift in the users.

The convenience factor could do the trick though. For example, an app like oDoc could reduce leg work for chronic patients who go to a doctor every month to show a blood report. They could just click a picture of the report and talk to the doctor about it from anywhere.

For patients with mental or sexual health problems, who are hesitant to go to a hospital due to fear of stigma, consulting a doctor anonymously on oDoc is an option. “Tap a button and you can do it on an anonymous mode too but then you won’t get a prescription. The system will not collect or store any of your details either,” Dharmaraja explains.

Currently, the doctor-patient ratio in Sri lanka is 1:1000 – quite similar to India. ODoc has roped in 25 doctors in Colombo, Kandy, and other main cities of the country.

“For a product like oDoc, the easiest way to get more users is when they are at a doctor’s clinic or at a pharmacy. We could get doctors to tell their patients to do the follow-up consultation over oDoc – as a tool of convenience as well as to save their time,” says co-founder Inshard Naizer, who is also oDoc’s chief growth officer.

They are initially going after patients in Colombo. “Then to all other cities of the country, and then other Commonwealth countries. Bangladesh and Maldives, for example, where geography is a barrier and medical care could be improved,” Naizer says.

The nascent Sri Lankan startup ecosystem would get a boost if startups like oDoc gain traction and catch the attention of investors from abroad. The Lankan government’s Information and Communication Technology Agency has been holding an annual Disrupt Asia conference since last year to showcase what the island nation has to offer in tech innovation. But, as the saying goes, nothing succeeds like success on the ground.

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This post You can score a $1m seed round even in Sri Lanka. These founders show how. appeared first on Tech in Asia.

Alibaba founder Jack Ma / Photo credit: Alibaba

China’s online shopping giant Alibaba grew its fledgling worldwide empire today with yet another fresh acquisition.

Alibaba is now the owner of Daraz, an online marketplace startup that covers Pakistan, Bangladesh, Sri Lanka, Myanmar, and Nepal. This afternoon’s joint announcement doesn’t reveal any financial details.

The move comes just over two years after Alibaba expanded into Southeast Asia by buying the region’s top online shopping destination, Lazada. The Chinese firm also runs Singapore’s Redmart, and owns stakes in India’s Paytm and Indonesia’s Tokopedia.

Rocket start

Just like Lazada, Daraz began life as part of Germany’s startup factory, Rocket Internet, which specializes in opening businesses in developing markets. It launched in 2012, initially focusing on Pakistan – arguably the largest relatively untapped market in Asia, with a population just over 200 million.

A model at Pakistan Fashion Week / Photo credit: Farrukh

Daraz’s five markets cover 460 million people, 60 percent of whom are under the age of 35. Although online shopping accounts for a tiny amount of the overall retail market in those nations, each one is poised for growth as more people come online. Pakistan’s online shopping spend is set to grow from the roughly US$100 million mark seen in fiscal year 2015-16 to more than US$1 billion in 2017-18, according to pundits.

“Pakistan is one of the last remaining ecommerce markets which offers large unfulfilled potential,” says Osman Husain, a tech analyst. Last year, when Husain was my colleague at Tech in Asia, he wrote that Daraz is what Alibaba founder Jack Ma should buy next in the billionaire’s increasingly global spending spree.

“Alibaba’s acquisition of Daraz is a vote of confidence in South Asia; China’s One Belt, One Road (OBOR) project impacts all markets where Daraz is present and it’s likely that small businesses across Asia will benefit from this move. It’s a bit sad to see Rocket Internet exit Asia, but there’s no doubt exciting times ahead,” adds Husain.

Jack Ma last year visited Pakistan and met with Prime Minister Nawaz Sharif amid a buzz of rumors about the company making moves into the nation.

Alibaba’s payments wing, Ant Financial, entered Pakistan in March by taking a 45 percent stake in Telenor Microfinance Bank, maker of the popular online banking service Easypaisa.

Updated 6:40pm: Swapped in a more recent projection for Pakistan’s online shopping market, replacing the original “US$1 billion by 2020” figure. Also corrected when Ma met the Prime Minister – it was last year, not this year.

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