Hanno Stegmann – CEO at Rocket Internet Asia Pacific HQ
Hanno Stegmann from Rocket Internet talks about Startup Ecosystem in Singapore and SEA, strategic alliances of the company in Asia-Pacific region, and how not to be afraid to enter emerging markets
BeFast.TV: Thank you again for being here with BeFast.TV. First question is about Singapore Startup ecosystem. How would you describe it?
Hanno Stegmann: I think it’s fast moving as most of the places here in South East Asia. I was here in Singapore for the first time on a trip in 2001, more than 14 years ago. There was in fact barely anything going on when it comes to start-ups, and entrepreneurial scene, but it has changed so much. So I think Singapore’s startup ecosystem is super, super vibrant. There are a lot of incubators and there are a lot of digital companies.
The whole economy but also the government is doing a lot to attract young entrepreneurial talent, to ensure they connect. So I’m enjoying it since I’m now around one year, and it’s very exciting about what’s happening here. A lot of accelerators, a lot of start-ups, also a lot of successful companies being based in Singapore. Singapore is the perfect place to be because it’s the hub for the whole South East Asia. A lot of investors are here, and all global companies located here as well. It’s very convenient to travel to all places in South East Asia. That’s why we set up Singapore as basically our hub, and our headquarters for
In addition, it’s very convenient to travel to all places in South East Asia. That’s why we set up Singapore as our hub, and our headquarters for Asia Pacific Internet Group. and our presence is in 15 markets. But Singapore is something like the spider on the web when it comes to all these markets, and ecosystem.
BeFast.TV: You have a headquarter here in Singapore, but do you have other representatives in other markets in Asia?
Hanno: We have our headquarter here, but our portfolio of companies – now 17 different companies – are operating in 15 markets. I oversee the portfolio from the regional perspective: the most western market which is part of our portfolio is Pakistan, but we cover the entire region from Myanmar, Thailand, Philippines, Indonesia up to Australia. So, in the end, we cover the whole Asia-Pacific region from Singapore.
BeFast.TV: You mentioned government being quite supportive concerning building the whole startup ecosystem. What would be your relationship between Rocket Internet here, do you cooperate with them at any point?
Hanno: To be fair we don’t have a lot of regular interaction, but we appreciate the support of the government and all partners in the ecosystem a lot.
For Singapore, there is, however, no need for a lot of communication: if you see how easy you can set up a company in Singapore, how smooth everything works. Of course, there are a couple of big government back funds that also invested in some Rocket Internet companies. So Temasek (Temasek Holdings) has invested in Lazada for example, so there are a lot of other positive discussions we are having with our partners and government-related organizations and investors across the region.
BeFast.TV: Do you partner with other accelerators here, or do you work independently?
Hanno: We try to exchange information and best practices with the incubators, and the startup community within Singapore, but I think what’s very critical to understand is that we are not an incubator ourselves, we build companies. Our model is the following: We look for the best business models and concepts we can find around the world, look for market opportunities here in Asia and when we fully believe in the concept, then we find the best talents and execute, and build this company very, very fast. Of course, we’re also looking at what’s happening in the incubators, and what they are doing, and know the managers of all the incubators in Singapore very well. But there’s no such direct collaboration because I would guess that the incubators, may also have some fears sometimes, that APACIG is just picking the ideas and incubating it, and building the companies alone. In fact, we are not doing it, we are trying just to be in touch, and just to see what’s going on. I think there are a lot of smart and capable people in the market, they join the incubators starting their own companies. We also hire good people who started up their ventures in incubators, so there’s a lot of exchange! I always like to see startups presentations, to get inspired, and to be part of evaluation committees for example.
BeFast.TV: I have a question on talents. Have you seen a lot of good teams here in Asia? Do you hire locally, or you would rather bring talent from the West, from Germany for example?
Hanno: No, we very, very much believe in the value of local talents. If you want to build a sustainable company especially here in the region, you always need to build a strong foundation with local talent. So whatever we do and wherever we do it, it’s always about being as local as possible and hiring well-built teams with locals. For me the perfect team or the perfect set up is to bring in an experienced manager, who has already worked for us, it could be somebody from Germany, it could be somebody from the US, who is then teaming up with the local entrepreneurs to build the company together, and bring together best of both worlds.
So for example, and it’s an excellent one. When we set up this company shop.com in Myanmar, the team was built around manager from Colombia – completely different part of the world, South American guy but he was very experienced. He had set up e-commerce companies for us in Latin America very successfully, and we teamed him up with a local manager. And we got a great team, and it was fascinating to see how they could help each other to learn and to fill the gaps. One filled the “local” gaps – what you need to bring into the company to be successful in Myanmar. The other one brought to the table what you need to do in regards to execution to build a great e-commerce company. I think these are the best examples.
When it comes to ideas, it’s a very similar case as well. First, you need to find great ideas, no matter where it originates. It can be from India, it can be from the US, it can be from Europe. But then you need to find the right market and the right spot here in Asia, where you can build and where you can find the right market environment to set it up.
What I like so much about Asia is that all of these 15 markets we are in, they’re all different, but they all provide you with a different set of opportunities. You can look at one thousand different business models, that you find somewhere in the US or Europe. Then you can pick the right one and adapt it to the market where there’s a spot, and where there’s a chance to be successful. What I think is important for us, and it is a part of our success, is we are not afraid of the fact that these markets are also different, and they are sometimes quite challenging. We see that as a great opportunity. So I always advise everyone to take it as a chance, and not be afraid to leave the whole market because you think only about the challenges. You’re missing so many chances here in Asia. If you look at this pioneer markets like Myanmar, Bangladesh, or Pakistan for example, it’s nearly 500 million people living there. So it’s comparable to the US, comparable to Europe and there is a huge potential in them. A lot of other companies are still afraid to enter these markets because they don’t know what’s happening there. I think that’s a big mistake because there are so many opportunities out there.
BeFast.TV:: What would be the challenges that company faces by entering the new markets? Understand that Rocket Internet isn’t afraid to go to these markets, but from your experience what are the major challenges and constraints? Are there difficulties with local regulations, how easy it is to set up a company for instance?
Hanno: True. I think there are a lot of barriers, and of course, regulation is one of them. You mentioned that setting up the company sometimes is difficult; sometimes you have restrictions when it comes to foreign ownership. Sometimes the processes and the bureaucracy takes a long, long time and you need a lot of legal experts just to understand what you need to do. Secondly, of course, infrastructure is a big topic when it comes to payment, but also when it comes to delivery. Then the sheer fact of just lack of internet access, and internet penetration is a big challenge in a lot of emerging markets. But if you look at all these factors one by one, one after the other, you will see that they are actually changing to the good.
For example, the internet penetration rate is increasing a lot, and the market fundamentals are highly attractive for every internet company because the growth is very high. I think also regulation is getting slowly, but surely better and better. Of course, we profit a lot from our best practices, and from our network of companies. Because if you’ve already set up one company in say Pakistan, or Laos or Indonesia, it’s much more easy to set up a second one, and the third one, etc. You just simply leverage based on your previous experience. I think infrastructure is improving as well: we have more third party logistic providers. We also try to roll up our sleeves just to build better delivery ourselves, to build our own delivery network. I think in general it’s getting better, and more and more people are seeing that the markets are changing, and the opportunities are becoming bigger.
BeFast.TV: Rocket Internet is a company builder as you mentioned. You already have a bunch of successful startup companies, what are the next steps for them?
Hanno: In the end we are a financially motivated company, an investor in this sense. We build businesses but at some point, we want them to exit. The best example as always is to get to a successful IPO. Some of the big companies we build in Europe, we IPO them already for a couple of billion US dollars. I think that’s always the dream of every successful company, of every entrepreneur. Firstly, our focus is to build great companies that have a lot of value, do your entrepreneurial work, and only then we think about different exit options, like finding the interest from public markets, but also from strategic investors or somebody else.
BeFast.TV: Thank you, Hanno, for the great comments. Let us come back to the Rocket Internet’s HQ in Singapore. As I understand company’s local operations are backed by Ooredoo, can you tell us more about the partnership?
Hanno: So when we set up this joint venture The Asia Pacific Internet Group (APACIG), we were looking for two things. We were looking for a business partner who would, firstly, help us to create value by investing in early stage companies in Asia. We always support the idea of creating significant funds that enable us to build the companies. Secondly, we were looking for a partnership to leverage the capabilities of both parties, to create a strategic synergy that we can bring to the table.
I mentioned to you they (editor: Ooredoo) own the biggest telecommunication players in Indonesia Indosat, they are massive in Myanmar with their own brand, also one of the biggest telecommunication and mobile network provider in Myanmar. So, of course, that helps our companies in these markets to grow because we can leverage our partnership. What we also did we set up a joint venture with the biggest Philippines telecommunication company (editor: with PLDT). So we are also a sub-holding called Philippines Internet Group. By this, we are leveraging synergies with the Philippines too. At the same time we continue looking for other potential partnerships opportunities within the region, because we find it as a winning model to bring the strengths of Rocket Internet, as a master of execution, and master of fast companies builder together with financial power of big conglomerates and their access to pool of customers in Indonesia, customers in Myanmar. As the result, we create strong strategic alliances.
BeFast.TV: Hanno, thank you so much for your time and the interview!
Hanno: My pleasure!