A brief look into one of Singapore’s largest gaming firms and a primer into the potential IPO

Garena, Singapore’s largest gaming technology firm is on target for a grant IPO. What does Garena do exactly?

Editorial

In the first quarter of 2017, Garena Online Private Limited “Garena” was rumoured to have picked Goldman Sachs to lead its IPO in the United States that could fetch about US$1 billion. Compared to Uber and Grab, Garena does not make headlines as frequently. This gaming company is known better among the youth than adults given their firmer roots in the gaming industry.

What does Garena do?

Garena primary develops games and social apps for the ASEAN region. Garena has built up an effective ecosystem for digital entertainment in Southeast Asia. The ecosystem combines localised game operations, payments, eSports events, video streaming, content sharing, user chat, and online forums. The digital content sector is highly profitable and put an impetus on other businesses including e-commerce and payments.

Among all the game products operated by Garena, League of Legends (LOL) is the most famous. Garena has an exclusive licence in Southeast Asia and Taiwan for LOL, one of the most popular games now. The number of active player each month of this multiplayer online battle arena game (MOBA) climbed up to over 100 million last September, as eight times as another popular MOBA game, Dota 2’s 13 million.

Shopee, Garena’s e-commerce sector, is reportedly that they have doubled the size in past nine months and the annulised gross merchandise value exceeds US$3 billion. In last September, this figure was US$1.3 billion. Garena launched its payment service AirPay in 2014. It is reported that the AirPay’s annualised transaction volume in August last year was US$510 million.

Other less successful products include TalkTalk a real-time voice and video communication platform and BeeTalk, a mobile application for people to connect and communicate with each other based on locations and interests. The company was founded in 2009 and is based in Singapore.

Garena’s private placement track record

In 2008, Garena received a US$2 million funding from GIC. In 2013, Garena bought an undisclosed stake in RedMart. They seemed to have exited the stake in November 2016 when Lazada took over RedMart. Garena has a credible M&A record. In 2014, they received additional funding from General Atlantic. In 2015, they received another round from the Ontario Teachers’ Pension Plan Board. Garena received their largest funding ever in 2016, amount of US$170 million from Khazanah Nasional Berhad and Tencent.

Garena’s list of existing investors Date
General Atlantic LLC Dec-31-2014
Ontario Teachers’ Pension Plan Board Mar-01-2015
Khazanah Nasional Berhad Mar-31-2016
Hillhouse Capital Management, Ltd. N/A
Keytone Ventures N/A
Seatown Holdings Pte. Ltd. Sep-05-2016
Tencent Holdings Ltd., Investment Arm Mar-31-2016
PT Global Digital Prima Sep-05-2016
Mistletoe, Inc. Sep-05-2016

In an interview conducted by Bloomberg, Nick Nash, the president of Garena Group, described Tencent, one of their biggest shareholders and an early backer, as their “elder brother”. What Tencent offered is not only the money, but also insights on customer data and LOL’s exclusive licence. LOL is developed by Riots Games, an American company and now the company is wholly own by Tencent.Garena rebranded as Sea Ltd. after they received the US$500 million funding from six investors this month. This round of funding will be used mainly in the development of e-commerce business in Indonesia.

Peter Liu, a research director at Gartner, the US consultancy, said, “Tencent is very strong in big data analysis, especially in user behaviour analysis. By leveraging these world-class capabilities, Garena can further strengthen their customer analysis.” According to Financial Times’ source, quoting “one person familiar with the matter”, “Tencent’s thinking is — who’s going to be the me of that market?”

Garena’s leadership

Garena’s CEO and Founder Forrest Li is a well-known entrepreneur in Singapore. Prior to founding Garena, Li worked at Motorola, Corning, and MTV Networks. He was awarded the Ernst & Young Entrepreneur of the Year award in Singapore for Internet and Mobile category in 2015. He has been listed as one of the 21 influential tech people who put Singapore on the world map by Vulcan Post.

What is Garena up to?

In addition to creating social mobile applications and running one of the most successful gaming platforms in Singapore, Garena makes selected investments. One of its portfolio companies is Foody Corporation, a company that operates online restaurant search and user-review portal. The company was founded in 2012 and is based in Ho Chi Min City, Vietnam.