South-east Asia’s most valuable startup Garena running toward US IPO

SINGAPORE — Mr Li Xiaodong was attending a college English class when the American lecturer asked each student to come up with a Western name. Many chose Michael, after the basketball superstar Michael Jordan. When his turn came around, the shy youth picked Forrest — as in Gump.

That alias would come to define the self-professed outlier who now oversees Garena, a gaming and e-commerce empire that is now South-east Asia’s largest startup. Mr Forrest Li, as he’s now known, saw himself in Mr Tom Hanks’ Oscar-winning portrayal of the fictional big-hearted Alabamian who, unbeknownst to most, shaped some of the most momentous events of the 20th century. Mr Li himself is striving to chart a Gump-like course.

Born and raised in the Chinese port city of Tianjin by state-company lifers, he enroled at a Shanghai university in his teens, arriving in a big city teeming with flashy people who spoke an unfamiliar dialect. Shell-shocked, he spent most nights playing games at an Internet cafe till dawn. Fast-forward to today, and Mr Li runs the Singapore-based startup that’s valued at more than US$3.75 billion (S$5 billion). While the self-effacing chief executive endures, he now harbors an outsized ambition.

“Our aspiration is to build Garena into a US$100-billion consumer company in 10 years,” the still soft-spoken Mr Li, 39, said during a rare interview in his office. Garena is shooting for a US initial public offering in two to three years, with possibly a secondary listing somewhere in South-east Asia.

The company bears all the hallmarks of his quiet leadership. Hundreds of employees hunch over flickering screens in library-like silence at the offices of its mobile-shopping division, a cavernous space the size of a football field. People slide into soundproof booths for quick confabs. They seek out solitary sleep pods for a nap or quick massage. And in keeping with the Garena motto “stay humble”, much of what they actually do is kept under wraps.

That’s about to change. Those hushed digs belie the frenetic pace of an entertainment machine modeled on Chinese backer Tencent Holdings, of WeChat fame. Leading that charge is Mr Nick Nash, Mr Li’s gregarious polar opposite and a private equity veteran brought in less than two years ago to assume the company’s public face. Their relationship resembles that between similarly media-shy Tencent founder Ma Huateng, also known as Pony Ma, and his deputy Martin Lau. “Forrest is clearly Pony,” Mr Nash said. “He’s humble and brilliant.”

Established in 2009, Garena found early success in Singapore with the help of investor and mentor Tencent. Starting out as an online gaming company, it quickly grew into one of the biggest companies in regional retail and payments. Garena — a portmanteau of “global arena” — has grown net revenue 13-fold since 2011 to US$270 million in 2015. That’s a compounded annual growth rate of 95 per cent, according to Mr Nash.

Garena’s journey toward a market debut now involves spreading the word. “We’re learning how to do this better,” said Mr Nash, who’s fast becoming a regular on the Asian tech-conference circuit.

Other priorities include shoring up Shopee and AirPay, Garena’s recently introduced mobile marketplace and payments services. They’re targeting a region with 620 million consumers on the cusp of an online shopping boom. That promise has drawn myriad competitors: Tokopedia, Orami, backed by Facebook Inc co-founder Eduardo Saverin, and Carousell, to name a few. Alibaba Group Holding is moving into the region through just-acquired Lazada Group.

One thing in Garena’s favor — few offer the shopping-payments-entertainment composite that’s served Alibaba and Tencent well. Since Shopee debuted in seven languages in June 2015, it’s become the region’s fastest-growing mobile marketplace, according to Mr Nash. Modeled on Alibaba’s Taobao, its annual gross merchandise value, the total of all e-commerce transactions, reached about US$1.13 billion based on a July run rate.

That’s the sort of growth that gets investors’ hearts racing. The company has raised more than US$500 million, most recently a US$170 million series D in March. Mr Dan Kiang, a Hong Kong-based director for the Ontario Teachers’ Pension Plan, asked Mr Li before signing a check in 2015: “Forrest, you sure you’re not going to mess up, right? This is hard-earned pension money of teachers in Canada,” Mr Li recalled. He said he replied: “Don’t worry. We Asians never disappoint teachers.”

Garena, which has raised funds ever year since 2014, isn’t in the market for more financing now, Mr Li said. But he’s nothing if not appreciative. Garena has named some of its 14 conference rooms after its backers. “Antarctica” is a nod to Tencent (its mascot is a penguin) and “Shangri-La”, the owners of the hotel chain. Several members of billionaire Robert Kuok’s family were early backers. Other big-name investors include Keystone Ventures and Khazanah Nasional, Malaysia’s sovereign wealth fund.

“If Garena is able to execute well, as they have in the past, then there is a significant opportunity for the company to capitalise on the growth we’re seeing across the region,” said Mr Anton Levy, global head of Internet and technology at General Atlantic in New York, Mr Nash’s former employer and another Garena backer.

Yet Mr Li, who later became a citizen of Singapore, remains an enigma beyond investment circles. The soccer fanatic is rarely seen in public, and then almost never without a gray Adidas sweatshirt bearing his embroidered initials, even in Singapore’s sweltering climate. That’s because, during a meeting at the W hotel in Taipei in 2014, he and a score of managers were clad in identical attire when they hammered out the company’s mission. Mr Li’s never forgotten the day his team came together, or how Garena subsequently took off.

Mr Li’s own moment of revelation was completely random, in true Gump fashion. After stints at Motorola Solutions and Corning, Mr Li said he thought he couldn’t see himself becoming a corporate manager. He enrolled in Stanford’s MBA program and later attended his then-girlfriend’s graduation ceremony — the same one where the late Steve Jobs gave his now-famous commencement speech. Mr Li replayed the oration every day for more than two months on YouTube, while deciding to set out on his own. “It gave me the courage to do what I am doing now,” he said. He still calls up the speech when he needs motivation.

Mr Li’s journey’s far from over. Garena now has to grapple not just with competitors but a large swath of South-east Asia that lacks a proper logistics and banking infrastructure. Not all of its businesses have panned out. BeeTalk, launched in 2013, hasn’t become the WeChat of the region, though it’s become an important part of gaming and mobile shopping services.

But the company’s making headway elsewhere. In Indonesia, Thailand and Vietnam, it pioneered a “reverse-ATM” network through which consumers can deposit cash into online wallets from cybercafes and mom-and-pop stores. AirPay, which debuted in August 2014, now has an annualised gross transaction value of US$510 million, according to Mr Nash.

In May, Mr Li made his way back to Stanford for his 10-year class reunion as a virtual unknown. Seated on a panel alongside other alumni, Mr Li described Garena’s business. When he was done, Mr Adrian Li, a former classmate and founder of Jakarta-based Convergence Ventures, remembers grabbing the microphone and telling the audience: “By the way, guys, Forrest’s company is most likely the most valuable company any of us created.”

Like his movie hero, Mr Li says he’s going to keep pushing ahead. In his office, there’s an Alabama license plate with the words, “Run, Forrest, Run.” BLOOMBERG