iBuy listing reinforces value of SEA market to investors: Grove

  • Catcha Group’s inability to raise Series B funding the catalyst for iBuy
  • Grove sees e-commerce momentum in Thailand, Vietnam and Malaysia

iBuy listing reinforces value of SEA market to investors: GrovePATRICK Grove’s fourth Internet company IPO (initial public offering) – iBuy Group Limited on the Australian Securities Exchange (ASX) on Dec 20 last year, has certainly reinforced a key lesson for him: The importance of a South-East Asian scale business.
It all began in Malaysia, Grove’s base for Catcha Group, the investment company through which he is aggressively building an Internet empire, mainly by mergers and acquisitions. “Acquisitions are in our DNA (deoxyribonucleic acid),” he says, speaking recently to Digital News Asia (DNA).
It was when Catcha Group tried to raise Series B funding for Dealmates.com in 2012. A startup that was actually incubated within Catcha Group, Dealmates, a group discount site that Grove (pic) claims was close to profitability, had momentum, and also the Catcha Group and even Intel Capital as its Series A investor.
“Yet, despite all this, we just could not raise any Series B funding … and we met everyone,” Grove says.
The burning lesson from this experience was this: International investors are simply not interested in a single country e-commerce story. “They want an Asean story, someone who has consolidated the region,” he says.
So that’s what Grove went out and did. He and his team scanned the region, including Hong Kong, and realised it was either Groupon or independent discount sites that they could approach. They naturally went with the independent sites.
“We went to the biggest independent sites for each country and made them a proposition: We merge all of them and Catcha will float the company in Australia,” he says.
What’s interesting here is that Grove only approached sites from Hong Kong (www.beecrazy.hk), Singapore (www.deal.com.sg) and Malaysia (Dealmates and mydeal.com.my). They were keen on Thailand but the leading discount e-commerce site there had been acquired by LivingSocial.com in 2011.
It is not exactly a compelling Asean story, yet Grove and his Catcha brand were able to convince investors and the market that they could still build a strong Asean e-commerce presence. Catcha was thus able to run an IPO roadshow in Australia and successfully list the company on Dec 20, 2013 where it closed at A$0.335 and raised A$37 million (RM110 million).
[A$1 = US$0.91]
But the biggest sceptics were the very founders of the companies that eventually merged together to form iBuy, and Intel Ventures. “They were not convinced that Catcha could pull this off and get them all listed under one group. But I thought it could be done,” says Grove, a veteran of the Internet industry since his Catcha.com days in 1998.
So Grove crafted a deal which hinged on the successful listing of iBuy. “I told them we won’t buy their companies and that the merger will only be completed if an IPO happens, and that is the deal we all signed.”
Grove then promptly lived up to his part of the bargain and got iBuy listed, and that was the day that all the four e-commerce sites came together under iBuy.
While all the founders of the sites took some money off the table, all of them remain on board running their respective sites as CEOs, or sitting on the board as it the case with Erman Akinci of Dealmates.
Grove calls them “almost a dream team of entrepreneurs” with combined sales of around US$75 million (RM245.5 million).
By Grove’s estimation, this puts iBuy among the four biggest e-commerce players in South-East Asia, along with Germany’s Rocket Internet, US-based Groupon and Singapore’s Reebonz.
“We are really excited by the momentum we are seeing in e-commerce in the region, with the wave strongest in Thailand, Vietnam and Malaysia,” he says.
While the e-commerce wave may be strong in the region, anyone who knows Grove will tell you that he is not a patient man. Organic growth just does not cut it with him. Could another acquisition in this space be on the cards?
He deflects the question but acknowledges that Catcha Group is among the more aggressive buyers in the space.
Meanwhile, an industry observer notes that Grove has done brilliantly in tapping into the financial markets’ interest in Internet businesses. His various listed entities, from Catcha Media Bhd and iProperty Group Ltd to iCar Asia Ltd, have been listed based on future expectations, not reality.
“But to ensure the bubble does not burst, he needs to fill it up with water,” says the observer, referring to the fact that eventually profits have to start rolling in.
iBUY closed March 13 at A$0.545, just off its record high of A$0.550, giving it a market cap of A$196 million (RM580 million).
Related Stories:
Catcha to invest US$150m in online businesses in Asean
Patrick Grove about to get his hattrick
iProperty market cap crosses RM1bil mark
Disrupt on e-commerce: Big opportunity, intense competition
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